Lottery lease plan has fatal flaws EYE ON THE PIE:

Folks I talked to, Democrats and Republicans, liked the governor’s State of the State speech. The fault they found was that the speech was scheduled opposite the Indiana University basketball game with Iowa. Isn’t that an impeachable offense in Indiana?

The part of the speech that intrigued me most was the idea about leasing the rights to the lottery to get money to establish scholarships and endowed chairs at our universities. The idea is to slow or reverse the brain drain.

That’s a heap of different thoughts thrown together in one bold initiative.

First, there is the Hoosier Lottery. A lottery advances the proposition that great rewards in life are distributed by chance. Is that what we want to teach our children? Don’t we want them to learn that life’s rewards are the result of preparation and hard work, not scratching on a piece of paper?

Second, if there is to be a lottery in Indiana, why is it a state-owned monopoly? If we condone lotteries, let them operate like bowling alleys and other forms of recreation. Let the lottery be taxed at the same rate as other forms of recreation. Let competitors come into and exit the industry as they will, as long as they don’t cheat their customers. Don’t we believe in the competitive marketplace?

Third, and this idea President Bush might like, why not make it easy to put part of Social Security money into lotteries? You would have your regular FICA deduction on your paycheck, but some portion (as you choose) would go toward the Hoosier lottery or a fund of lotteries. That way those who want to bet on the lottery would have direct payroll deduction without the nuisance of standing in line to buy tickets. That should be a step toward increasing lottery participation, which, for some reason, seems to be an aim of this leasing scheme.

Fourth, why use the one-time and annual money derived from the lease for scholarships and university-endowed chairs? Are our universities inferior to those in other states? I have never heard any university president bemoan the poor quality of his/her faculty. They may want to retain their best, but that could be done by reducing the number of senior administrative positions on campus.

Scholarships always sound like a good idea. We have the notion that there are many potential students who are denied a college education because of its financial burden. However, Indiana’s economic problems do not stem from the lack of college degrees. It is the lack of adequate high school education that leaves students unprepared for either college or the workplace. If this can be corrected by money, then let’s allow school corporations to raise their property taxes.

The lottery was supposed to help support public education. Has it? Or has it been used as a substitute for other funding, particularly the local property tax? (Unfortunately, a band of bright lights in the Legislature wants to eliminate the property tax, but that’s a subject for another time.)

Fifth, and finally, what’s this about a brain drain? You can read about such problems afflicting virtually every community and state in North America. What it means is that our children move away for greater opportunity; in doing so, they gain experience and perspective. If they stay at home, they will know only the limited standards of Indiana.

We want other people’s energetic, welleducated children to come to Indiana. Let them bring fresh eyes to Terre Haute and Richmond. Let them offer new ideas for Angola and Anderson. In time, some of our own children will return and we will feel blessed by their energy. It is not the state’s job, nor that of any institution, to interfere, by bribery or other inducement, in the free flow of people within the nation.

There is no fundamental difficulty with leasing the lottery. But would leasing generate more money if anyone could have a piece of it? Buy your bank’s lottery tickets online or at your ATM; get BK lottery tickets as change from Burger King. Break the lottery into pieces and the initial rights might not garner upfront as much as the lease to a monopoly. But the opportunity for many to prey upon the ignorant and dispirited has always been worth a bundle in the long run.

Marcus taught economics more than 30 years at Indiana University and is the former director of IU’s Business Research Center. His column appears weekly. To comment on this column, go to IBJ Forum at www.ibj.comor send e-mail to

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