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            Auburn University - University Relations
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4/20/95                                     Bob Lowry

AUBURN STUDY SAYS ALABAMA NOT GOOD CANDIDATE FOR LOTTERY
     AUBURN -- Alabama is not a good candidate for a state-run
lottery because of its relatively low per capita income, its small
population and the strong religious beliefs of its people,
according to a new Auburn University study.
     "When you project those to Alabama, it's not surprising that
Alabama has not adopted a lottery," says AU economist Daniel
Gropper, one of the authors of the study. "And a lottery's not
suddenly going to alleviate all the fiscal problems in the state."
     But Gropper says Alabama might be steered in the direction of
a lottery because of the resistance to new taxes or tax hikes and
the adoption of lotteries in Florida and Georgia.
     The Auburn study, which will be published in the spring issue
of The Journal of Business Forecasting, estimates that Alabama's
net annual take from a lottery would only be between $40 million
and $60 million. Gropper says Florida, for example, collects about
$800 million a year.     
     "What we've done here is to project a broad, overall idea of
what you can expect to get," he says. "If you actually adopt a
lottery, there are ways to fine-tune the estimates and perhaps get
more revenue, by changing advertising, the number of outlets and
adjusting the mix of games.
     "Per capita income also tends to be positively related to how
much revenue is raised in a lottery. The higher the income, the
more money people have to spend on everything, including lottery
tickets."
     Gropper, an associate professor of economics at AU, says a
state's religious makeup -- especially the number of Baptists -- is
also important in projecting how profitable a lottery will be.
     "One variable that we get from the Census Bureau is the number
of people who report themselves to be Baptists, who generally
oppose gambling in any form," he said. "We find that is typically
a negative related to net lottery profits. You get lower lottery
profits when people with strongly held religious views make up a
higher percentage of the population, since the people who oppose
the lottery on moral grounds are the same people who are less
likely to play it."
     Gropper says a state's total population and its population
density also affect the success of a lottery, especially the large
jackpots.
     "What happens as a jackpot gets bigger, people
disproportionately start playing more," he says. "When you get a
couple of rollovers and the jackpot gets very large in Florida,
people who don't normally play, start playing, and people who
usually play buy more tickets. Those big jackpots are more likely
to happen in big states with large populations."
     And in smaller, more rural states, Gropper says the AU study
found that net lottery profits simply tend to be lower.     
      But Gropper says "changing factors," such as the election of
a governor who has vowed not to raise taxes and the implementation
of lotteries in surrounding states, could push Alabama toward
adopting a lottery.
     "One factor is the measure of tax resistance -- how resistance
the state is to new taxes," he says. "It appears with the political
situation in Alabama, there is a great deal of resistance to
raising existing taxes or putting new taxes in place. If there is
a high resistance to new taxes, then it's more likely you're going
to turn to alternative sources, including a lottery."
     And Gropper added, "When your neighboring states adopt a
lottery, your state is more likely to adopt one."
     "If Alabama folks are already driving to Florida or Georgia to
play their lottery, that revenue is flowing out of this state," he
said.  "When the state confronts the fact that people are spending
money on somebody else's lottery, they may want to minimize this
money we're losing. And when we see on TV the numbers drawn for the
daily game in the Georgia lottery, there is a contagious effect."
      If Alabama approves a lottery, Gropper says, "We will
probably not be pulling too many people from Florida or Georgia to
come play our game, but we may recapture that revenue from Alabama
citizens." ----   NOTE: The AU study, "Predicting Net Revenues From
State Supported Lotteries," was written by Steven Caudill,
professor of economics at AU; Ter Chao Peng, associate professor of
economics at Feng Chia University; and Gropper.
 # # # april95:lottery
       CONTACT: Gropper, 334/844-2908; or Caudill,  334/844-2907