The Commonwealth of Pennsylvania just got a little more creative on pushing its lottery, otherwise known in Fooldom as "tax on the math-impaired."
In a novel program, the state is urging companies to reward workers for their hard work by giving them lottery tickets as bonuses. Companies participating in the program to date are Hershey Foods (NYSE:HSY) and a Harley-Davidson (NYSE:HDI) dealership.
We here at the Fool have no moral qualms about gambling, nor lotteries per se -- as long as they are privately run, taxed, and regulated. But we do think that massive state-run lotteries are pretty darn evil. Lotteries are the most regressive sources of state funds. They offer hope where there isn't and, in many cases, supplant financial planning for folks who most need it.
If you think we're just being moralists, think again. When someone who has blown all of his money on lottery tickets hits the skids, who picks up the tab? That's right, you do. Courtesy of your state governments, lotteries help push people deeper into poverty. So, sure, the lottery can be a fun diversion for a buck or two, but it has morphed into multibillion-dollar slush funds for state governments. Who's to say the interests of the lottery aren't superseding those of citizens?
Pennsylvania, like most states, spent like a drunken sailor during the 1990s and is now feeling a severe budget pinch. Rather than do the brave thing and raise taxes -- or do the smart thing and cut spending -- it is turning to the lottery to cure its budget ails. It hopes the program will increase its lottery revenues by 22%, or $460 million per year. Gov. Ed Rendell said yesterday that he hopes this "golden opportunities challenge" will "get more Pennsylvanians... involved with the lottery."
What's interesting is that this program doesn't offer companies a bulk discount -- they buy the tickets at face value. Lottery tickets typically have a payout rate of 50 cents per dollar spent, which means that they are not only among the worst gambling prospects around; they also offer companies one of the worst investing payoffs. This may be exciting and fun for employees, but does that actually double the value of the tickets? We doubt it.
State governments shouldn't be in the gambling business, and they certainly shouldn't be in the gambling promotion business. As for the companies, if you've got the money to hand out lottery tickets, why don't you just give employees cash bonuses? After all, your investment will be worth twice as much the second you make it, and employees can do whatever the heck they want with the money. Save it, for instance.
Any corporate executive who considers this a good investment needs to be separated from control over shareholder resources, and fast.
