Lotteries are a tax on the stupid, and they tend to be sharply regressive; poor people buy the bulk of lottery tickets. Donald Sensing mentions a lottery scam email he received and then correctly notes that all lotteries are scams.
The California lottery has a rate of return of around 12%. Slot machines in Vegas generally return 98%+ of the money you put into them, and they've got flashing lights and spinning wheels. As you can imagine, state governments make a killing off lotteries... but the money goes towards education, right?
The California lottery raked in $2,910,000,000 in 2002... that's around $100 per California resident -- including children. With a payout of 12%, the education system should have gotten around $2.5 billion from the lottery, right? Well, actually, the law says that only 34% of lottery revenue has to go towards education, and in 2002 that came to around $1.1 billion.
34% to education, 12% to lottery winners, and the rest goes into the irresistable black hole of California's bureacracy. Oh well. At least it's a voluntary tax.
This doesn't even take into account the fact that the state and local governments can reduce regular funding to compensate for the increase in funding from the lottery.
A new state lottery system may initially pour millions of dollars into education, but in time the traditional funding is cut, so the total education budget is the same. This happens even if the lotto funds are earmarked for special purposes, like computers. The schools would have had to buy computers anyway. Now the state money that would have bought computers is used for other, non-educational purposes.
Well that sounds intuitive to me, but the California Lottery website denies it.