Who tends to pay for state lottery-funded scholarships? Lower-income families.

A growing number of states are using lottery revenue to fund college scholarships, but because lower-income households purchase an outsized share of lotto tickets, those programs “disproportionately hurt the people they’re often intended to help,” Inside Higher Ed reports.

According to the State Higher Education Executive Officers Association, non-tax state higher education funding, derived mainly from lottery revenues, reached $4.4 billion in fiscal year 2020, after growing by more than 9 percent.

In Georgia alone, the state education lottery has provided $12.6 billion for higher education, pre-K programs, and early childcare since its launch in 1993. The state’s HOPE scholarship, which offsets tuition for in-state students who meet a GPA cutoff and other academic requirements, is funded entirely by lottery revenue.

Who’s providing the funding?

While many college students across the nation are benefitting from state lottery-funded financial aid, low-income families are both contributing disproportionately to the pot of available funds—and receiving relatively few scholarship dollars on the other end.

“Lower-income areas purchase a disproportionate amount of lottery tickets,” said Celeste Carruthers, an associate professor at the University of Tennessee at Knoxville who has studied the Texas lottery. And, because lottery tickets have a set price, a ticket purchase eats up a larger share of income for low earners, compared with higher-earning families.

Experts further note that only a fraction of the lottery ticket price—for instance, 50 percent in Georgia—goes toward the pot of potential winnings; the rest covers administrative costs. That creates an “implicit tax,” one that’s inordinately shouldered by low-income households.

Who’s receiving the aid?

In some states, lower-income students also are less likely to receive lottery-funded financial aid than high-income households. Studying Georgia’s education lottery, Georgia State University professors Ross Rubenstein and David C. Ribar found that students from families with incomes above $100,000 were much more likely to receive the state’s Zell Miller scholarship, a complement to the HOPE scholarship, than students from families with incomes below $30,000. White students, meanwhile, were eight times more likely than Black students to receive the scholarship.

Making lottery-funded scholarships more equitable “is no easy task,” Inside Higher Ed notes. The programs are immensely popular in their current format. Research suggests that even rebranding the lottery as a financial-aid vehicle is unlikely to significantly boost ticket sales among high-income consumers.

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