Where Does the Powerball Money Go?
The estimated jackpot for Wednesday’s Powerball drawing is a record-breaking $1.4 billion—just think about what you could do with all that money! Actually, don’t think about it. Statistically, it’s essentially impossible for you to win. As Scott A. Norris, an assistant professor of mathematics at Southern Methodist University, told the Associated Press, "It's probably still not going to happen if you buy a hundred tickets or a thousand tickets or even a million tickets."
The chances of winning hover around the one-in-292-million range, and your long shot is getting longer by the minute. According to the executive director of the Texas Lottery, they were “selling more than $1.2 million in Powerball tickets every single minute.” So, at least someone is making money off Powerball—but where, and to whom, does all that cash go?
Forty-seven separate lotteries offer Powerball (it’s played in 44 states, plus D.C., Puerto Rico, and the U.S. Virgin Islands). According to a press document [downloadable file] from the Multi-State Lottery Association (MUSL), the organization that runs Powerball, total sales of Powerball tickets since its inception in April 1992 come to roughly $55.8 billion (through January 9, 2016). Since that time, they have paid jackpot winners a combined $16.5 billion; non-jackpot, tertiary winners have won a combined total of around $11.8 billion. This means that roughly half of the money that has been made from Powerball ticket sales has gone to the winners themselves.
As for the rest? Well, that depends. According to the MUSL, “All profits from the games are kept by the state that sells the ticket.” States must pay for expenses before counting the funds as profit, however. These expenses include advertising, salaries for lotto commission workers, vendor fees, and things like “central accounting and the purchase of government securities to fund annuitized prizes.” Once those are paid for, states can tally their profits—and that's where things get interesting.
Some state-run lottery programs make a pittance. According to a 2012 NBC News story, Rhode Island reported that their lotto program added just 11 cents per dollar of ticket sales to the state's annual budget. Others, however, do much better. Oregon, for example, “generated 50 cents in profits for each dollar of ticket sales” in 2011. These revenues vary for a slew of different reasons, like the number of players in the state and the efficiency of the lotto program itself. According to the NBC report, some states “boost their take…by turning over their lottery operations to private companies.”
Once net profits are totaled, it’s up to the state to decide what they’ll do with the money. A common benefactor of lottery profits are education budgets. (All profits for Virginia Lottery sales, for example, go to a K-12 education fund). Research has also shown that some states count lottery profits as general revenue, or use them to subsidize tax cuts promised by politicians, making them a sort of hidden, “voluntary tax.” For your state, a quick Google search for its annual budget report can help reveal more specific information.
While the $2 spent on a Powerball ticket goes a lot of places, don’t count on it ever coming back to you in full.