To go off on a tangent for a moment:

Where the hell is the Oregon Libertarian party on this one? Are they in a coma or something? If there ever was an example of an out-of-control state initiative that could benefit from being privatized, it's the lottery.

Now the arctangent:

Aubrey's post makes the point that the Lottery we know and love today is not the sole fault of the ORA. However, can you imagine any business that would let somebody skim 30% off the top? That's exaclty what we let the businesses that host lottery games do.

Personally I'd rather replace the lottery with less broken tax laws ($10 coporate taxes! WTF?!), but if we have to have it, is it too much to ask that we make it as effiecent as we can?

Kenneth,

The bars hosting lottery games have to compete with Indian casinos, Washington card rooms, the internet and local poker games for gambling revenue.

No recreational gambler with a lick of common sense (and a couple of friends) hasn't figured out that hosting private poker parties (byob + snacks) triples your entertainment dollar.

If Mrs. PanchoPdx was agreeable, I could find a private game four or five days per week with a few phone calls.

Video poker is such a bad wager that it cannot compete for much longer and line games won't make a big difference after the novelty wears off. It's all whistling past the graveyard.

In the meantime, that 30% cut has been one of the primary methods of offsetting one of the nation's highest minimum wages (with the absence of a tip credit) for the restaurant industry.

But go ahead and try to squeeze a little more out of the bars, it will just hasten the collapse of Oregon's House of Cards (aka, the Oregon Lottery Commission).

PS - The libertarian solution involving privatization would increase state revenues AND make for more competitive oddsmaking (better product for consumers) but it would also require opening the floodgates Nevada-style. A curious alliance between the religious right and progressives fuses whenever the topic of expanding gambling is taken seriously, making this solution politically improbable.

Radical political change only occurs when existing institutions fail spectacularly. The lottery will have to go bust before full scale gambling privatization could be entertained. Same sort of dynamic in play with truly reforming Portland Police and Firemans' Retirement Fund & PERS (or ending wasteful urban renewal projects).

Publicly funded political dreams die hard. You gotta watch the status quo fully crash and burn before real change is possible.

When you have gutless legislators and tight-ass citizens unwilling to pay taxes to cover services then go to the path of least resistance. I think Oregon ought to legalize all of it...at least then the tax would fall on those willing to pay it...no complaints here

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Well, I’ve got a series of thoughts here.
While I’m not generally one to spring to the immediate defense of Governor Kulongoski, I will say that at he has accepted reality. This is in contrast to many of the more vocal liberals in Oregon who have not. The voters have made it clear, over and over: we are to do more with less, and then do less with less. I do not like it. I do not agree with it. But it is reality. The voters approved the lottery and have made the conscious choice, repeatedly, to use it to fund public services over. Our Governor is taking advantage of one of the last revenue choices available.
Should he instead rant and campaign against the evils of gambling, or move forward from his personal opinion stated in 1996 and operate within the framework provided him by the voters in 2005? I agree with the concept that the retailer’s take should be reduced. Not only is the current payout in conflict with the state’s constitution, it subsidizes businesses that are otherwise not viable. I’m always surprised when the issue of retailer payouts is discussed. When the ORA makes the argument that businesses will close, no one says “That’s right. If they can’t compete on their own, they aren’t a business. If there is demand for lottery games, then eventually that closed business will be replaced by one that is actually viable at the lower retailer subsidy rate”. Let’s see if the ORA is in favor of capitalism when it’s not subsidized. After all, this is the group that doesn’t believe in the minimum wage.
One immediate change that should be made is to reduce or eliminate the Lottery’s broadcast and print advertising. It vastly overstates the lottery’s contribution to public services. To hear their radio ads, you’d think the lottery was solving all of our problems, all the schools are taken care of and there is surplus salmon habitat. No other element of government gets to oversell itself on the airwaves. Imagine this on your radio: “The Department of Corrections – We are the only reason you haven’t been killed by a deranged psycho. Keep us funded, and you stay alive.” So why does the Lottery get away with it? I will add that Kari is right: the Lottery is a sucker bet like no other. But who cares? If you are playing the lottery regularly, and you don’t know that it’s a sucker bet, you’ve got bigger judgment problems than whether or not to play the lottery. Chances are that’s about the 18th act of questionable judgment you’ve made during the week. Personally, I think people know the odds are bad and make the choice to try and beat those odds. The worst argument I hear from some liberal circles is a paternalistic one that can best be summarized thusly: We must protect people from gambling. All the poor souls who play the lottery don’t know any better.
Bull. Nothing is worse than the paternalistic liberal who is pro choice as long as he/she agrees with the choice that is made; the liberal who is liberal because he/she want to help take care of all of us poor saps who need their divine guidance because we couldn’t possibly make our way through this big world without them. I do not feel cheapened knowing that programs are funded by people who choose to spend their money on the lottery. They made the choice. Finally, the argument that we can’t have Lottery gambling because people will get addicted is another one I just can’t get behind. Some will. Most won’t. If the Lottery didn’t get them, an Indian Casino would. Or online gambling. Or Nevada.
The people of Oregon want gambling. Let them have it. When the voters want to reel it in, they will. The ship has sailed on the lottery.
Personally, I’m still going to Vegas to get my gamble on.

Lottery was originally designed as a revenue-as-you-go thing; a play on the pay-as-you-go pension nomenclature. The legislature could have ended it any time and not had any forward costs.

The state has since issued bonds, revenue bonds, dedicating lottery revenue to pay those bonds. It has already spent the money. If the legislature wants to end the lottery it will end that stream, and with it the money for the bond payments. But, the bond rating folks would jump up and down and threaten downgrades unless the legislature digs into other priorities to cover the bonds.

If, as you say, the restaurateurs and tavern owners are behind the lottery, then would it be safe to say that they are happy that the State Treasurer issued lottery revenue bonds?

Has not the State Treasurer effectively hamstrung the authority of the legislature in performing their constitutionally prescribed role of making such priority decisions in appropriations, and are themselves limited in their authority to issue bonds not otherwise provided for in the Oregon Constitution?

The lottery bondholders could not obtain a court order that requires the legislature to appropriate the money to cover the bond payments. This, to me, sounds remarkably like the PERS beneficiary's powerlessness to obtain a court order to mandate advanced funding of the pay-as-you-go pensions (setting aside the hybid features for this argument here).

I look upon the bond rating folks as goons, and the same goes for anyone siding with those goons. They seem to find a reason to stimulate bonds for either future expenses and future revenue, both at the same time. What kind of game are they playing? They are playing us the same as a Latin American government with a populist leader, that's the game they are playing.

The outsiders only need to feed back enough of their take to respected local figures to keep the game going. This is the real lottery, betting on the ability to extract tax dollars for payment on bonds. They are winning handsomely. (Our state treasurer is like their tavern owner.)

Ted does not have a clue about genuine developmental economics in an international context. Kill the lottery now before the price to kill it gets even higher tomorrow. If we squeeze out a little more lottery revenue then the State Treasurer will, in lock step, use that to issue bonds so that we can spend 20 years of that revenue today.

Duke Shepard says "The worst argument I hear from some liberal circles is a paternalistic (snip) I do not feel cheapened knowing that programs are funded by people who choose to spend their money on the lottery. They made the choice."

Well, aside from a little quibble – many of the folks who find their life savings emptied behind their backs by their addicted spouses, their college funds raided by their addicted parent, didn’t “choose” to be taxed to this extent. Nor did the folks who were robbed… Anyhoo, aside from that little quibble…

Duke, you may not understand the issue for some of us "paternalistic" liberals. I have no objection to people gambling, and, as with most of the "sin" enterprises, I favor legalization.

Legalize, regulate, license, tax. Fine, I've got no problem.

But should the state be in the business of advertising and selling addictive or exploitive experiences/products, for a profit? Should we be purposefully, knowingly, addicting a certain percentage of our citizens for the sole purpose of making money off them?

Shall we, the people, start selling women to keep the schools open? What, after all, is the difference between advocating legalized prostitution, and setting up shop as a pimp? People are right now making money as pimps. How about Meth? Shall we start a state office “of cooking and dealing”? Money to be made, after all, people making “choices” -- We are missing a bet...

I think the state is debased by the choice to become a dealer in these arenas. Not only debased, but inevitably ethically compromised.

Anne asked:

"But should the state be in the business of advertising and selling addictive or exploitive experiences/products, for a profit?"

The answer is no, of course.

But it is curious that I only hear the libertarians and conservatives calling for the end of the state's OLCC wholesale/retail liquor monopoly.

Anne, I love it. There once was a time when my objections were limited to the advertising. Human nature is already predisposed to partaking in games of chance, and the advertising is overkill.

Even though you use the “sin” point there is an amoral objective point from the perspective of an objective economist (studying what is rather than what ought to be, the corollary being normative economics). Consider the uselessness of a chain letter or pyramid scheme. Each is not really immoral but still do not provide any net public benefit.

Any for-profit corporation or non-profit entity must note a valid public purpose in their Articles of Incorporation. If the purpose is to engage in sin then the state can deny the request to form the legal entity. Lottery is sold as entertainment, its purpose is to entertain. A chain letter scheme is entertaining too, The net benefits from a pyramid scheme while negative overall can make the first entrants very very happy and wealthy. Lottery is a net looser in net benefit analysis, no matter how one slices the issues, but does benefit some folks over others. It lacks a positive public purpose overall to the entire community, even if it is not considered sinful . . . that is, even if it merely let's humans do what comes naturally.

A libertarian view ought to focus on protecting the saps who fail to see that the odds are stacked against them, regardless of whether it is the state or a social host providing the venue for the games. I would never reach the merits of the manner of the distribution of profits because I would find that there is no public purpose in generating those profits in the first place.

PanchoPdx writes "But it is curious that I only hear the libertarians and conservatives calling for the end of the state's OLCC wholesale/retail liquor monopoly."

Huh. Move in a small circle, do you? :-)

Actually I don't know anyone, in my own small crowd of largely liberal friends, who likes or supports the OLCC monopoly. Most bewail the costs and restrictions it creates. Yes indeed. Want to get a "turtleneck wearing, pinot-sipping Portland liberal" foaming at the mouth -- just ask them about their last booze shopping expedition to California...

Charlie,

I stand corrected. I do remember Bev Stein supporting OLCC privatization now that you mention it.

Anne,

I'll try to expand my circle a little more.

I've watched the subject get pitched around a little bit over the last four years. A few bills filed every session (by Republicans) but go nowhere (uphill climb against the beer lobby, MADD, churches and unions).

A couple of initiatives that never got going.

Lars brings the subject up a couple times a month and support among his listeners seems near universal (which is rarer than you might expect).

It would be great if a Democrat Senator would buck the unions and the beer lobby to propose it. Lars could shame the Republicans into sticking by it and it might get some traction that way.

But I'm not holding my breath.

The Oregon Lottery takes advantage of its customers by holding 3 Megabucks and 2 Powerball drawings a week. The lottery sells a lot more tickets, but Oregon players win fewer jackpots with odds of winning at 6 million to one in Megabucks and 80 million to one in Powerball.

With a single Megabucks drawing each week, there would be a lot more tickets bought for each drawing and more frequent jackpot winners. With 3 Megabucks drawings a week the lottery and ticket sellers squeeze a lot more revenue out of Oregon players while there are fewer Megabucks winners cashing in much larger jackpots. I would rather see 18 winners of 1 or 2 million dollar jackpots over 6 months than a single 30 million dollar winner. But the larger jackpots encourage more ticket sales.

It is also interesting to note there have been only 2 Oregon Powerball jackpot winners and a handfull winning $100 thousand prizes in over 1,200 Powerball drawings since 1986.

This link shows how poorly Oregon players do in Powerball compared to other states. http://www.lottery.state.mn.us/stat02.html

The lottery commission and ticket sellers get their revenue from Powerball ticket sales while Oregon players get back less than 20% of what they spend on Powerball tickets. Idaho players do much better than Oregon Powerball players.

I have but one comment to make. If the Oregon constitution prohibits gambling casinos, how can Governor Kulongoski approve and authorize casinos in Oregon? It seems to me that he has not honored his oath of office and should be held accountable. To me, this is the important issue!