The state lottery is a game of chance operated by state governments. In exchange for an entry fee of a few dollars, players have a chance to win a prize. Typically, a large cash prize is offered for one dollar. In most cases, the number of players is much higher than the prize money that is paid out, ensuring a profit for the sponsoring state. To learn more about the state lottery, read on.
While critics typically cast the lottery as a substitute for taxation, they do not forget that the costs of running a lotteries are high. In the early 1990s, the national lottery revenue rate was 6 percent, while the highest state revenue rate was 29 percent in Montana. In addition to costs incurred in advertising, there is always the risk that lottery players will stray into competing states for tickets or satisfy their gambling urges in other ways. Plus, the revenue generated by lotteries is far less predictable than tax revenues, meaning that the state can easily spend more than what it has planned to.
In the early 1990s, Maryland and California were faced with a budget crisis, so they heavily promoted the El Gordo lottery game. They were expecting to earn between eight and ten million dollars in revenue, but instead, only managed to generate a couple of hundred thousand. Because of a dwindling number of sales, California exceeded its 16 percent administrative expenses limit, resulting in a legal dispute over the interest payments on the state lottery fund.