Financing Ohio’s Public Schools through the Ohio Lottery: Quantitative and Qualitative Dimensions of the Lottery’s Tax Incidence

DABERKOW, KEVIN, S. , Ph.D., June 2012, Individual Interdisciplinary Program Financing Ohio’s Public Schools through the Ohio Lottery: Quantitative and Qualitative Dimensions of the Lottery’s Tax Incidence Director of Dissertation: Frans H. Doppen For nearly four decades the Ohio lottery has offered its products with the promise of providing a financial benefit to Ohio’s public schools. The purpose of this study was to examine the tax incidence of the Ohio lottery in addition to qualitative aspects of lottery play. Data were collected from Ohio lottery sales and U.S. Census data both aggregated by zip code. Analysis of tax incidence was conducted through Suits Index analysis with confidence intervals in addition to double-log regression analysis creating elasticity coefficients. Qualitative data were collected through interviews. Five qualitative interviews provided data that were analyzed from an adapted grounded theory perspective. Suits Index analysis suggested that the Ohio lottery has been a regressive form of school finance for all of the years covered in this study (1992-2010). The least regressive games were lottery products that offered larger payouts with lower odds of winning. The most regressive games offered significantly smaller jackpots with higher odds of winning. Double-log regression revealed that lottery sales were supported disproportionately by less affluent consumers. Zip codes with higher median ages were found to drive increased lottery sales for all three types of lottery games. Non-African American minorities in Ohio (zip code analysis) were also shown to drive increased Lotto 4 game sales. Increased percentages of males in a zip code resulted in increased Instant game sales. A higher level of education in a zip code reflected increases in lottery product’s sales. Findings of regressivity were confirmed in lottery scholarship; however, demographic representation of lottery play offered mixed results. Qualitative findings of this study revealed avoidance by lottery players to outside interference in their lottery play. Respondents also suggested a strong ability to control the lottery process when they were able to select numbers or tickets based on socially constructed or situationally applicable rules and values. Finally, respondents shared that they have some sense that lottery profits are directed to schools, despite voicing a strong anti-lottery and anti-large school district sentiment. When viewed in the context of sociological theory of stratification, the findings suggested that the lottery acts as a regressive tax on Ohio’s lottery consumers while education fails to receive a financial benefit due to fungibility described in existing literature. The primary research suggestion was to extend benefit incidence research. Policy recommendations that connect lottery regressivity to Ohio’s schools included a commitment to finance Pre-K and Kindergarten initiatives, class size reduction strategies for Ohio’s poorest schools, and a higher education lottery scholarship funded through lottery profits for graduates from Ohio’s poorest high schools. Approved: Frans H. Doppen Associate Professor of Teacher Education