The Maryland Lottery was first established in 1973 when Maryland voters approved a constitutional amendment to allow a state-run lottery. Since then, the Maryland Lottery has contributed billions of dollars to the state’s economy through prize payouts to players and contributions to important state programs and services.
Where do lottery ticket sales go?
For every $1 spent on Maryland Lottery tickets, approximately:
- 61 cents goes back to players in prize money
- 29 cents goes to the state of Maryland
- 9 cents goes to retailer commissions and operating expenses
- 1 cent goes to the Maryland Stadium Authority for capital improvements and to support operations
In fiscal year 2022, the Maryland Lottery had $2.2 billion in revenue from ticket sales. Of that $2.2 billion:
- $1.3 billion was paid out in prize money
- $645 million went to the state of Maryland
- $198 million went to retailer commissions and operating expenses
- $26 million went to the Maryland Stadium Authority
Where does the state’s share go?
By law, the state’s share of Maryland Lottery revenue can only be used for three purposes:
- Education: The majority goes to the Maryland Education Trust Fund.
- Small, minority, and women-owned businesses: Some funds go to the Small, Minority, and Women-Owned Businesses Account.
- Public health: Some funds go to the Maryland Veterans Trust Fund.
Here is a breakdown of where the $645 million that went to the state in fiscal year 2022 was allocated:
| Program | Amount (in millions) |
|---|---|
| Maryland Education Trust Fund | $608.4 |
| Small, Minority, and Women-Owned Businesses Account | $30.0 |
| Maryland Veterans Trust Fund | $6.6 |
| Total | $645.0 |
Maryland Education Trust Fund
The majority of the state’s revenue from the Maryland Lottery (over 93% in fiscal year 2022) goes to the Maryland Education Trust Fund. This fund supports educational programs and projects across the state of Maryland.
Some of the key education initiatives supported by the Trust Fund include:
- K-12 public education funding
- College scholarships and grants
- Support for community colleges
- School construction and capital improvements
- Educational technology investments
Without the Maryland Lottery’s contributions, the state would have to find other revenue sources to fund these education programs. So in a sense, playing the lottery helps support Maryland students and schools.
Small, Minority, and Women-Owned Businesses Account
A portion of Maryland Lottery revenue also supports the Small, Minority, and Women-Owned Businesses Account. This program facilitates the participation of small, minority-owned, and women-owned companies in state procurement contracts for construction, services, and commodities.
In fiscal year 2022, this account received $30 million from Lottery contributions. This funding is used for:
- Financing and surety bond assistance
- Project management assistance
- Technical assistance with state procurement procedures
- Outreach efforts to identify and attract eligible companies to state contracting opportunities
The Small, Minority, and Women-Owned Businesses Account aims to promote diversity and economic opportunity in Maryland’s business community.
Maryland Veterans Trust Fund
A small portion of Maryland Lottery revenue goes to the Maryland Veterans Trust Fund. This program provides financial assistance to veterans and their families in need.
In fiscal year 2022, the fund received $6.6 million from Lottery contributions. This money helps support:
- Housing and transitional program grants
- Emergency financial assistance
- Veterans’ home projects
- Veterans’ charitable organizations
So playing the Maryland Lottery helps give back to those who have served our country in the armed forces and their families.
Where does the Stadium Authority’s share go?
A portion of every Maryland Lottery ticket sale (1 cent from each dollar) goes to the Maryland Stadium Authority. In fiscal year 2022, this amounted to $26 million.
The Stadium Authority uses this revenue to help pay for construction and capital improvements to Maryland’s public sports stadiums and arenas. Some of the facilities that receive this Lottery funding include:
- Oriole Park at Camden Yards
- M&T Bank Stadium
- Ocean City Convention Center
- UMBC Event Center Arena
The money also helps support daily operations and maintenance costs for these venues. So in a sense, Maryland Lottery players help maintain Maryland’s world-class sports, entertainment, and convention facilities.
Has Maryland Lottery revenue increased over time?
Over the past decade, Maryland Lottery revenue has increased significantly, allowing greater contributions to education, small businesses, veterans programs, and facilities like stadiums and arenas.
Here is a table showing Maryland Lottery revenue growth between fiscal years 2012 and 2022:
| Fiscal Year | Total Revenue |
|---|---|
| 2022 | $2.2 billion |
| 2021 | $2.1 billion |
| 2020 | $1.9 billion |
| 2019 | $1.9 billion |
| 2018 | $1.7 billion |
| 2017 | $1.6 billion |
| 2016 | $1.5 billion |
| 2015 | $1.4 billion |
| 2014 | $1.3 billion |
| 2013 | $1.3 billion |
| 2012 | $1.2 billion |
As you can see from the table, Maryland Lottery revenue has increased by over 80% in the past 10 years, from $1.2 billion in fiscal year 2012 to $2.2 billion in fiscal year 2022.
This revenue growth has allowed the Maryland Lottery to contribute substantially more money over time to key state programs and services like education, small business assistance, veterans’ programs, and facilities construction and upkeep.
What is responsible for the growth in Maryland Lottery revenue?
There are several key factors that have contributed to the steady growth in Maryland Lottery revenue over the past decade:
- New games and options: The Maryland Lottery has introduced popular new games like Fast Play, Racetrax, Bonus Match 5, and various scratch-off games that have driven player interest and ticket sales.
- Larger jackpots: For multi-state games like Powerball and Mega Millions, larger jackpot amounts tend to stimulate higher ticket sales and revenue.
- Population growth: As Maryland’s population has increased over time, the potential player base and ticket sales pool has grown.
- Economic conditions: For the most part, Maryland has enjoyed a relatively strong economy over the past decade, with low unemployment and rising wages. This provides consumers with disposable income to spend on things like lottery games.
- Marketing and promotions: Effective marketing campaigns, second-chance promotions, and retailer incentives have helped raise awareness and engagement among players.
- Convenience: Expanded retailer networks, self-service lottery machines, and online/mobile play options have made it easier than ever for consumers to play the lottery.
Barring an extended economic downturn, Maryland can likely expect continued steady lottery revenue growth over the next 5-10 years as the state introduces new games, grows its player base, and leverages convenience to drive ticket sales.
What public services compete with the lottery for state funding?
While the Maryland Lottery provides a significant stream of funding to education, small business, veterans programs, and facilities, it competes with other public services for limited state funds each year.
Some of the key areas that compete with the lottery for state funding include:
- Healthcare: Funding Medicaid, community health programs, mental health services, public health initiatives, etc.
- Transportation: Funding roads, bridges, public transit, airports, ports, etc.
- Environment: Funding parks, wildlife protection, bay restoration, recycling, conservation, etc.
- Public safety: Funding law enforcement, courts/corrections, emergency management, etc.
- Economic development: Funding job training, business incentives, infrastructure, etc.
- General government: Funding salaries, pensions, buildings, technology, etc.
State legislators have to carefully balance funding for the lottery versus these other critical public services based on revenue projections and constituent needs and interests.
Has the share of lottery funding changed over time?
While total lottery funding has increased over the past decade, it has largely retained a consistent share of the overall state budget.
Here is a table showing the Maryland Lottery’s education contributions as a percentage of total state education funding over the past 5 years:
| Fiscal Year | Lottery Education Funding | Total State Education Funding | Lottery % of Total |
|---|---|---|---|
| 2022 | $608 million | $8.6 billion | 7% |
| 2021 | $556 million | $8.3 billion | 6.7% |
| 2020 | $549 million | $7.9 billion | 6.9% |
| 2019 | $542 million | $7.2 billion | 7.5% |
| 2018 | $500 million | $6.9 billion | 7.2% |
As the table shows, the Maryland Lottery has accounted for a consistent 6-7% share of total state education funding over the past 5 years. Its share has not materially increased despite rising Lottery revenues.
This indicates that other funding sources like taxes and fees are also being leveraged to fulfill increasing education budget needs in Maryland.
Could Maryland increase its reliance on the lottery versus other taxes?
Rather than raise taxes, some suggest Maryland could bring in more revenue for key programs by further expanding the lottery. However, there are some limitations to over-relying on the lottery compared to taxes.
- Volatility: Lottery revenues tend to be more volatile year-over-year than tax revenue. Large jackpots drive sales, and the lottery is dependent on consumer discretionary spending.
- Regressivity: Lotteries are considered a regressive form of funding, since lower-income groups tend to spend a greater portion of their income on lottery tickets than wealthier groups.
- Substitution effects: Increasing lottery funding could potentially crowd out other forms of state revenue like sales taxes, reducing resources for general needs.
- Oversaturation: At a certain point, there are limits to how many new lottery games a population will take up, limiting revenue growth potential.
These factors likely make it impractical for Maryland to fund more than 10% or so of the state budget through the lottery. A balanced approach using both lottery proceeds and broad-based taxes seems prudent.
Conclusion
In summary, the Maryland Lottery generates significant funding for key state programs and services – especially education. While lottery proceeds support important initiatives, they comprise a fairly small and stable portion of overall state funding. Maryland likely needs to maintain a balanced approach leveraging both lottery revenue and taxes to meet budget needs without over-relying on an unsustainable source of government funds.
