Published November 27, 2012
The record Powerball jackpot is certain to yield mostly losers, but not the states that sell tickets — with a haul that keeps coffers stocked to benefit everything from education to treatment for compulsive gambling.
Swollen by an estimated $289 million in tickets sold since Saturday's drawing yielded no winners, the jackpot has reached $550 million — $327 million for the cash option — for Wednesday night's drawing. It's the highest Powerball ever, and second only to March's $656 million Mega Millions prize among U.S. lottery jackpots. Officials say the fever sparked by huge prizes prompts casual players to buy tickets and hard core players to buy more than usual, with the extra money going to ever-bigger prizes and fat takes for the states that participate.
“Lotteries did around $61 billion in the U.S. last year, and just under 35 percent goes to state causes,” said Charles Strutt, executive director of the Multi-State Lottery Association. “Fifty percent of that goes to the state, but 35 percent is profit and goes to state programs.”
Some 42 states, plus Washington D.C. and the U.S. Virgin Islands, participate in the Powerball lottery, which operates like a 50-50. Half of the proceeds go to the prize pool and half goes to states, which spend about 7 percent to pay retailers and 4 percent for advertising. The rest can be spent by states on a wide variety of programs.
California earmarked more than $21 billion in lottery revenues for education between 1985 and 2009, according to the most recent statistics from the North American Association of State and Provincial Lotteries. Pennsylvania was able to spend nearly $18 billion in lottery proceeds on programs for senior citizens between 1972 and 2009, and Massachusetts took in $16 billion for various causes during that same span, including nearly $11 million for compulsive gambling treatment.
Overall, lotteries typically run about a 35-percent profit, Strutt said.
The current Powerball jackpot has rolled over 16 consecutive times without a top prize winner, said Strutt, who predicts there’s a 60 percent chance someone will win Wednesday’s drawing. He said the bigger the sales, the more states can do with their cut.
“That’s one way to look at it,” he told FoxNews.com. “It means more kids going to college, more drugs for the elderly in Pennsylvania.”
Strutt said the increase in ticket sales — up $140 million from Saturday — shows that big prizes draw in more players hoping to hit it big with a monster prize like the $327 million lump sum for the current jackpot. Strutt said sales largely stayed flat during the peak of the recession in 2008 and 2009 but have since rebounded.
The “trigger point” for most casual players is when the jackpot eclipses the $200 million mark, he said.
“It used to be $50 million,” he said. “And I can remember when $10 million used to drive people crazy. Now it’s about $200 million.”
Meanwhile, the old adage is true: You’re more likely to be struck by lightning than winning the Big One.
Tim Norfolk, a University of Akron mathematics professor, puts the odds of a lightning strike in a person's lifetime at 1 in 5,000. The odds of winning the Powerball jackpot: 1 in 175 million.
Powerball tickets doubled in price in January to $2, and while the number of tickets sold initially dropped, sales revenue has increased by about 35 percent over 2011. Sales for Powerball reached a record $3.96 billion in fiscal 2012 and are expected to reach $5 billion this year, Strutt said.
With soaring jackpots come soaring sales, and for the states playing the game, that means higher revenue.
"The purpose for the lottery is to generate revenue for the respective states and their beneficiary programs," said Norm Lingle, chairman of the Powerball Game Group. "High jackpots certainly help the lottery achieve those goals."
The federal government, meanwhile, keeps 25 percent of the jackpot for federal taxes. Most states withhold between 5 percent and 7 percent. There's no withholding in states without a state income tax such as Alaska, South Dakota and Texas. A New York City winner would pay more than 12 percent since the state takes 8.97 percent and the city keeps 3.6 percent.
Trina Small, manager at the convenience store in Bondurant, Iowa, where a couple bought a $202 million ticket on Sept. 26, said sales have been heavy. She said Monday night Powerball sales were at about $800, at least $200 more than normal. She expects Tuesday and Wednesday sales to be even more.
"It's kind of like Black Friday all over again," she said.
The Associated Press contributed to this report.