This is Midday Edition. I am Maureen Cavanaugh. Windy you buy a lottery ticket? When you're feeling lucky? When you want to make big changes in your life? When you just want to take a chance? Or maybe you never play the lottery because chances are, you have almost no chance of winning. The California lottery polls in about $5 billion worth of sales annually. So there are apparently a lot of people who buy lottery tickets. But who are they and why do they do it? A new source investigation looked at those questions here in San Diego and came up with some unlikely winning answers. Joining me is the investigative reporter and data specialist with I-new source. Welcome, Joe. ________________________________________ How are you doing? ________________________________________ Pretty good. ________________________________________ And Nicholas, professor of psychology at San Diego -- the University of California San Diego. Thank you so much. ________________________________________ Pleasure to be here. ________________________________________ Joe, who was the average lottery player in California? ________________________________________ So the lottery actually conducted a survey -- or rather, hired a firm to do a survey of their players. And it actually might surprise you. We have sort of got this typical idea of the lottery players. Nate -- maybe somebody is down on their luck, desperate and four. But in California, the majority of lottery players were employed full-time, and earned between -- most of them earning between 50 and $75,000 a year. ________________________________________ So you did a breakdown of where the lottery sales are coming from in the San Diego County. So what is that break down? ________________________________________ So we found sort of a similar thing when we matched up census data with lottery sales by store. I wanted to look at the income level of all of visit codes in San Diego County and then tally up all of the lottery sales in each of them. As it turned out, about three quarters of all of the lottery sales in San Diego County came from middle-class and moderate income neighborhoods. Only about 1% were from the poorest neighborhoods. ________________________________________ That sort of flies in the face as you are saying, of the national statistics, about he plays the lottery, isn't that right? ________________________________________ That is right. There have been a lot of studies looking at different states, different cities, as well as nationally -- trying to figure out who plays the lottery. In a lot of places, it does seem to be sort of the lower income less wealthy folks who tend to play the most -- to play the lottery the most. That is why it has been criticized in a lot of places as a tax on the poor. Both because in absolute numbers in certain studies have found that folks that make the least, play the lottery the most. As well as does the fact that proportionally, even if somebody who makes $25,000 a year since -- let's say, $1000 a year on lottery tickets and some and he makes $100,000 a year, spends $1000 on lottery tickets -- they both spend the same amount, but proportionally, the person who may $25,000 a year spent a lot more than the one who made $100,000 a year. ________________________________________ When it comes to the breakdown you are talking about -- and in many other ways, California apparently is a little bit different than what would -- than what they are finding nationally. So give us a little background, if you would, about the California lottery. It has been around for about 30 years now. I think we are all familiar with the term, our schools win too. Is this a significant source of funding for our schools in California? ________________________________________ Right. The measure in 1984 that brought the lottery into existence was sold as a revenue source for public education. And it has always been justified up until now, using that rationale. That ultimately a lot of this money goes back to public schools. Last year, the lottery brought in about $5 billion in sales and they returned a little bit about -- returned about $1.4 billion of that to public schools. Most of the rest went to prize-winning, commissions to stores that sell lottery, as well as staff and overhead at the actual lottery. I spoke with the chief financial officer of the San Diego unified school District -- about $70.5 million, from the lottery last year -- that might sound like a lot of money. But in fact, she pointed out that they have a $1 billion plus budget. So that amount only accounts for a little less than 2% of that budget. ________________________________________ As you are saying, there is overhead involved in the lottery. How much does the state actually gets, approximately each year, after you deduct winnings and all of the other amounts of money that you have to pay out? ________________________________________ Everything that the lottery doesn't spend on prize money or commissions to sales, or his staff overhead, they have to return to schools. So that was got him out there. ________________________________________ It doesn't go anywhere else in the state, just to the schools? ________________________________________ That is right. It can go to the state's general fund. It has to go specifically to contributions to public education. ________________________________________ Back to the people who play the lottery. How many lottery games, including scratchers, are available in California right now? ________________________________________ So we've got about three dozen different kinds of scratchers. And I believe six or seven other types of draw games like Powerball, super lotto plus. Were you pick a number and then if they draw that number, you can win a lot of money potentially. The most popular games tended to be the scratch off. Folks spent of the most money on that. Those are the ones you buy it. You spend 1 dollar or $5 or $20 you take out a quarter and you see if you won anything. ________________________________________ And you know immediately. ________________________________________ You know instantly if you are lucky or not. ________________________________________ Apparently there is a new game called hotspot. What is that? ________________________________________ So hotspot is -- at least at the one store that I profile, it is basically key know -- KENO. You take a ticket and you get the numbers the one. You look at a TV screen that every four minutes, picks out a new set of numbers. You can win some money. That is a hot seller. ________________________________________ And pretty instead. ________________________________________ Yes. ________________________________________ What are the actual odds of winning -- let's say, a super lotto drawing? ________________________________________ So for draw games like that -- super lotto plus is interesting. The last drawing they have for that -- the most recent drawing, there were actually know winning tickets for the highest two prize payouts. The highest one of which is tens of millions of dollars. But nobody won that. Nobody won the second level, which is over a million dollars. The most anybody won was about $1700. There were 13 winning tickets for $1700 each. Not great odds. ________________________________________ No. Does not sound so. Let me bring Nicholas into this. The -- writer says, you have the same chance of winning the lottery whether you play or not. So why do seemingly intelligent people play the lottery? ________________________________________ I think a big part of playing the lottery is not winning. It is imagining winning. Your odds are vanishingly -- is not even clear that winning is a good thing. It is a sudden massive confusion -- it disrupts your life and all sorts of ways. You can go out to the debt -- you can go out to dinner with their friends but when the check comes, if you don't pay, you feel taken advantage of. And then lasting happiness is in great things like winning the lottery. But imagining winning the lottery can be a pleasurable experience. I think that is what it is. ________________________________________ What are people looking for when they buy a lottery ticket? ________________________________________ I think it is this license to dream. That you can imagine a heavenly carefree life. All of your earthly problems ourselves. When you hold a ticket, you can imagine that. It is a cheap price here for a dollar, you can have that fantasy. Until the number is pulled and it goes away. ________________________________________ So basically, if people are not doing this for any desperate reason -- if they are not spending huge amounts of money on lottery tickets, the lottery can actually make people happy, at least for a short period of time? ________________________________________ Clearly, the fact that they buy it means that in some way, they think it is worthwhile to do so. It is an interesting question. From an economic standpoint, it doesn't make sense. If you gave your retirement portfolio to somebody to manage and said, I will put all of your money and lottery tickets, you would find another person before they did that. Clearly from an economic standpoint, it is a terrible investment. The expected value of your ticket is vastly less than the value of your ticket. You're better off going to Las Vegas and playing roulette. Clearly, the value is not the right metric there. The expected economic value. Dislike if you buy ice cream and the next day you don't have ice cream. But you still enjoyed the experience. Same thing with that -- same with a lottery ticket. ________________________________________ I think it is same -- safe to say that more people play lottery then go to Las Vegas or to any casino. Do you find the same motivation -- the same drive behind -- maybe spending 1 dollar for that super lotto ticket once a week as going and playing more advanced kind of gambling games? ________________________________________ I'm not sure. They differ in a couple of important ways. The lottery ticket can be an impulse item. You have to spend time getting to Las Vegas. In Las Vegas, what you want is the thrill of uncertainty. And having something painful waiting -- adding so much to the thrill. Like Cliff diving or bungee jumping. Whether thought that things could go very wrong as part of what you want. Living on the edge. And with a lottery ticket, you're not focusing on the downside. When you put in the dollar, you are not thinking -- that dollar could be gone forever. Basically you think, that dollar is gone. And it is all upside potential. They could win. I'm certainly not going to. But I could. That is a pleasure. ________________________________________ So it is really gambling like? ________________________________________ Or barely gambling at all. People are risk-averse and most economic situations. That is why people buy insurance -- which is not economically rational necessarily. ________________________________________ Is there a time -- when playing the lottery can signal that someone is dealing with significant problems -- even financially were psychologically? ________________________________________ Certainly there is that. Las Vegas has a sigh us -- has the highest suicide rate of any County. In the country. And that suggests that bit -- that gambling is not all fun and games. Someone can go there as a last desperate bid for solvency or reduction and feel. Or someone can go there full of hope and in-depth desperate and failed. I think that can work with all of these. But doing that for entertainment -- knowing that the odds of winning are relatively tiny. But as the data suggests, this is not the way the average lottery player is. It is pretty much the average person. It is this brief fantasy that you have. With umbrella drinks in Tahiti. ________________________________________ You went to Kings liquor store at Paradise sales for part of the story to talk to the store's owner. What did you find out? ________________________________________ I found out a few things. From the owner Mike. And also Don, who is a regular at the store. What I really found out is that there are two types of people who tend to come into the store. One are the folks who are always asking, what is the latest game? Which one has the best odds? Which are the ones with more prizes out there? Of the other kind was the one who -- you would see them come in and you knew exactly what they would purchase. Very habitual is Dick -- almost like a ritual. Every day. And speaking with Don, one of the regulars, asking him -- why do you come in -- he would say, it is basically something to do. Something to pass the time. He says he has been doing at 422 years, I believe he said. Plays the same game every time. I think he also said it is great because they keep them from the casinos. ________________________________________ What got you interested in crunching the numbers on this? ________________________________________ Lotteries are always -- to me, a very fascinating thing. They bring in a lot of money. Certainly that is the case here in California. They are very controversial. There is this criticism that has existed for a long time. And some people are very vocal about it. That it contributes to things like problem gambling, for example, and financial issues. At the same time, it is something that does have clear benefits and does go to public education with money from it. It was sort of this controversy around it. This dichotomy of -- it is his public agency and -- it is running this service that can have some negative effects. But the outcome ultimately is a good thing. It gets money to public schools. So this kind of controversy -- I thought was very interesting. And I was very curious to see -- locally here in San Diego, any of these assumptions about who plays. ________________________________________ So the findings you have -- the findings that the state came up with -- at least to a smaller extent, is really sort of breaking that stereotype. ________________________________________ I think so. I want to be a little hesitant just about forming any certain conclusions just locally from looking at what I looked at. Because I looked at the types of neighborhoods in which the most tickets were sold. It is possible that -- the very poorest people in these middle-class people -- neighborhoods but the tickets. I feel confident in saying that if you look at the data, it certainly suggests that at least in San Diego County, the types of people who Pat -- play the lottery, tend to be the types of people who live there. The distributions seem to be pretty regular. ________________________________________ Finally, do you play the lottery, Joe? ________________________________________ The first time I played the lottery was for this story when I went down to Kings liquor. I bought a $3 scratch off ticket and I won $4 on it. 25% return on investment. ________________________________________ Do you play the lottery? ________________________________________ I have never bought a ticket. Even if I saw a ticket laying on the ground, I might pick it up -- it is essentially worth nothing. ________________________________________ Two sides of the same coin. You can see Jo's full story on the lottery including graphs and more data on I-news source.com. Do, your audience -- thank you both very much. ________________________________________ Thanks, Maureen Cavanaugh.
King’s Liquor looks unremarkable from the outside. It’s nestled next to a Ralph’s supermarket in a strip mall in Paradise Hills, a southeastern San Diego neighborhood east of I-805.
But on a balmy Thursday afternoon in mid April, the incessant beep-beep-beep of the store’s scanner hints that there’s something more at work.
It’s a frequent and regular reminder of the brisk business that the store does — much of it in sales from the California State Lottery.
King’s Liquor sold almost $1.1 million in lottery tickets between July 1, 2013 and June 30, 2014, the most recent dates for which sales figures are available. That’s more than almost every other location in the county.
Mike Zeidan has managed the store along with his brother Frank for 20 years. They’ve sold lottery tickets that whole time, at least 15,000 each week, he said.
Zeidan offers a full compliment of lottery games, from Scratchers offering payouts as low as $1 to multi-state draw games that promise prizes of hundreds of millions of dollars. Stores that wish to sell lottery tickets are contractually obligated to offer all the games, though the lottery allows smaller stores to start small and gradually introduce the full set of Scratchers games, about three dozen.
Zeidan says the best seller at the moment is Hot Spot, a Keno-like game where players buy a ticket, choose the numbers they wish to play and watch a television screen where the numbers are drawn every four minutes.
“People like to come over and hang out and play that game and win instant money,” Zeidan said.
Zeidan breaks his customers down into two groups: those who stick to the same games and those who are on the hunt for the latest offerings.
“Most of my customers are regulars, everyday customers,” Zeidan said.
One of those regulars is Don McCrady.
McCrady, a 67-year-old retiree who lives in the neighborhood, has been playing the lottery for 22 years. “Same store every day,” McCrady said.
The most McCrady says he has ever won on a single ticket is $1,400. “Not real big but enough to play back,” he said.
McCrady describes the lottery as “just something to do….keeps me from the casinos.”
In San Diego County, nearly half of all lottery tickets — accounting for some $137 million in sales last fiscal year — were sold at stores in middle-class neighborhoods.
The data suggests that, in contrast to national trends, it is middle-income earners locally who purchase the greatest number of lottery tickets.
According to an inewsource analysis of data from the California State Lottery and the U.S. Census Bureau, in San Diego County, 45 percent of lottery sales during the 2013-2014 fiscal year were concentrated in middle-income neighborhoods; 32 percent in moderate-income neighborhoods and 22 percent in high-income neighborhoods. Just 1 percent of sales were concentrated in low-income neighborhoods.
According to the Census Bureau, about 45 percent of the county’s population lives in middle-income neighborhoods; 28 percent in high-income neighborhoods; 24 percent in moderate-income neighborhoods and 2 percent in low-income neighborhoods.
Meanwhile, a survey conducted on behalf of the California Lottery found that half of lottery players have full-time jobs, a figure higher than that of the state’s overall adult population. So, why this group?
Part of the answer may lie in the psychological drivers of playing a lottery.
Nicholas Christenfeld, a professor of psychology at UC San Diego, says the image of a down-on-his-luck lottery player “spending his last dime in a desperate effort to get out of poverty” can give the wrong impression for why people play lotteries.
A 2005 Brookings Institute report found that “...average annual lottery spending in dollar amounts is roughly equal across the lowest, middle, and highest income groups” while also pointing out that this means the poor do spend a higher proportional amount of their income on lottery products.
“What a lottery ticket gives you isn’t a great life if you win,” Christenfeld said. “What it gives you is a license to dream. So, while you hold that ticket, essentially what you’ve won already is the opportunity to imagine your life transformed."
Christenfeld, who’s studied everything from why people look like their dogs to which day of the month carries the greatest risk of death, is quick to point out that even if one does win a large amount of money playing the lottery, that’s far from a guarantee of happiness. He notes that the news is filled with stories of folks whose lives were turned upside down because they won.
It’s the government, of course, that pockets the profits from those dreams, pulling in more than $5 billion in sales last fiscal year. The 1984 ballot measure that birthed the lottery was sold to voters as a revenue stream for public schools. After paying out prize money and operating expenses like staff salaries, the lottery returned over $1.35 billion to schools last fiscal year.
Some $86 million of that found its way into the coffers of school districts in San Diego County.
The funds are meted out based on districts’ average daily attendance. San Diego Unified received the most last fiscal year, more than $17.5 million, according to the State Lottery.
Jenny Salkeld, the district’s chief financial officer, says that while that figure might seem like a lot out of context, it represents less than two percent of the district’s $1 billion-plus annual budget.
“In comparison to the overall budget, this is a small amount,” Salkeld said.
A portion of the funds — a little less than $4 million — must be used to buy instructional materials such as textbooks. Salkeld said the district has used the remaining funds on a wide variety of expenses, including salaries for teacher and student aides.
“It may be a small amount but when you’re looking at $17 million, that helps a lot of the initiatives in our district,” Salkeld said.
The California State Lottery declined to make anyone from its marketing team available for comment but a general spokesman for the agency said the lottery is entertainment.
“Marketing is an integral part of our business,” said Russ Lopez, the deputy director for corporate communications at the lottery. “What we want to do is really appeal to the entertainment mentality of our players rather than the gambling mentality.”
Still, Mike Zeidan, the manager at King’s Liquor, thinks the gambling aspect of it all is too much to ignore.
“I think they all know about the odds,” Zeidan said, referring to his players, “but it’s a dream and everybody’s going after it.”
How We Analyzed The Data
Through a public records act request with the California State Lottery, inewsource received data on ticket sales by retailer. We then mapped those retailers by ZIP codes that we had previously combined with data on median household incomes from the U.S. Census Bureau to calculate the sales by the income level of each ZIP code.
ZIP codes’ income levels were based on the $62,962 median household income of San Diego County between 2009 and 2013. Low = ZIPs with median household incomes less than 50 percent of the county average; moderate = ZIPs with median household incomes of 50 percent up to 80 percent of the county median household income; middle = ZIPs with median household incomes of 80 percent up to 120 percent of the county median household income; high = ZIPs with median household incomes of 120 percent of the county median household income and higher.
