AZ Lottery players a little older, a little richer

Lucy and Richard Sterba look at Scratchers tickets at their Gold Canyon home. A Cronkite News Service review found that the Sterbas’ ZIP code, 85218, was the hottest spot for lottery players in fiscal 2009. The review suggests that the most frequent Arizona Lottery players are those who are a little older and who have a little more money. (Cronkite News Service Photo by Kristena Hansen)

A Cronkite News Service Special Report

By KRISTENA HANSEN and RYAN VAN VELZER
Cronkite News Service

GOLD CANYON - When retirees Richard and Lucy Sterba moved from Ohio seven years ago, they settled in a gated community just east of the Phoenix metropolitan area and immediately continued their long tradition of buying lottery scratch-off tickets.

They won a few dollars here and there until March 2009, when they were thrilled to hit a $2,500 jackpot. But mostly they’re in it for fun, Richard Sterba said.

“My wife and I play together and pass the cards,” he said. “It’s really more for recreation.”

The Sterbas have plenty of neighbors who try their luck with Scratchers, Powerball, The Pick and other games: A review of Arizona Lottery data found that their ZIP code, 85218, was the hottest spot for lottery players in the 2009 fiscal year.

Cronkite News Service looked at the number of big winners in each ZIP code _ jackpots of at least $599 are public record _ and used population estimates to develop a ranking of winners per capita. The Sterbas’ ZIP code came out on top with 25 big winners per 10,000 residents, suggesting that people there play most frequently.

Demographic information for each ZIP code with 10,000 or more residents also showed that the Sterbas and their area fit the profile of those most likely to play: a little older and with a little more disposable income.

The top 10 ZIP codes for winners per capita had an estimated median income of $57,000 versus a statewide median of $48,000. Those ZIP codes had an estimated median age of 52 versus a statewide median of 37.

Sales figures point to the same trend: While the top two lottery retailers in terms of annual sales were isolated shops near Nevada, which has no lottery, the next four were in Sun City and Sun City West.

Outside the third-ranked retailer, a Fry’s Food Store along Grand Avenue in Sun City, retiree Florence Roholt said she and her husband have been buying tickets once a week for several years. While the chance of winning is part of the appeal, Roholt said they play mostly for entertainment.

“I hope that we’re going to get lucky someday,” Roholt said.

The Appeal

Stephen Happel, an Arizona State University economics professor, said it makes sense that older people would play the lottery more here: They have more time and like to gamble. Younger people, on the other hand, spend their time trying to hit the jackpot in other ways, such as getting a good job, he said.

“When you’re older there aren’t as many ways to win the ‘lottery’,” Happel said. “It gives people hope.”

But those results run counter to investigative reports by media organizations and researchers in states such as Illinois, Florida and Georgia that found lotteries are most popular among those who are poorer, less educated and members of minority groups.

Leslie Bernal, executive director of the national organization Stop Predatory Gambling, said he was surprised to hear that Arizona doesn’t appear to follow those trends.

“It doesn’t fit with anything we’ve ever seen,” Bernal said. “It’s not possible. Middle class people don’t play the lottery.”

Jeff Hatch-Miller, executive director of the Arizona Lottery, said the lottery’s own research suggests that older people especially enjoy playing because it’s low-cost entertainment and a way to socialize.

“These are people who grew up with the lottery,” he said. “The industry as a whole is maturing.”

However, Hatch-Miller added, the lottery’s goal is reaching the broadest possible audience.

Tim James, an ASU economics professor who has worked with the state lottery, said Arizona could be different because it has a large population of retirees, many of whom could afford to move here from out of state.

“We’ve got more seniors and they are wealthier here; therefore, they are destroying the effect that would be in a ‘normal state,’” James said.

Kathleen Waldron, director of the School of Aging and Lifespan Development at ASU, said gambling is one of the most popular recreational activities in older communities. She said although the lottery is relatively inexpensive, those in middle income brackets are probably the most likely to play.

“While they’re reasonably comfortable, they’re also looking at their retirement portfolio going down,” Waldron said.

The Review

Cronkite News Service examined lottery data for all Arizona ZIP codes and drew from 2008 demographic data _ the most recent that was publicly available _ from ESRI, a Redlands, Calif.-based company specializing in geographic information systems.

State law requires that the list of those winning $599 or more in the Arizona Lottery be public record. That list of nearly 7,000 prizes, obtained through a public records request, included winners’ names and home addresses.

Examining the rate of winners per ZIP code, rather than ZIPs’ sales per-capita, provides a sampling of where lottery players live rather than where they buy their tickets.

The review also suggests that Hispanics, Arizona’s largest minority group, are no more likely to play than anyone else. The top 10 ZIP codes for lottery winners per capita, for example, had a median Hispanic population of 13 percent compared to the most recent U.S. Census Bureau estimate of 29.6 percent for all of Arizona.

The only ZIP code in the top 10 with a sizable percentage of Hispanic residents was 85735, covering an area southwest of Tucson along State Route 86. Ranking second in winners per capita, it had an estimated Hispanic population of 42 percent.

An Arizona Lottery study found that Hispanics made up roughly 20 percent of all players in the last four fiscal years.

Deputy Director Karen Emery said the lottery found that Hispanics’ interests as lottery players weren’t all that different from those of other players. Although the lottery does some advertising in Spanish, it isn’t cost-effective to directly market to Hispanics or create games appealing to any specific group, she said.

“Because we have a limited amount of product, because we have a limited amount of advertising money, the product has to appeal to the widest audience possible,” Emery said.

Lottery Reliance

Authorized by voters in 1981, the lottery has provided $2.4 billion over the years to state programs, according to a recent report by the State of Arizona Office of the Auditor General. Besides the general fund, its beneficiaries include the Local Transportation Assistance Fund and the Heritage Fund, which distributes up to $20 million in lottery proceeds each year for parks, trails, historic preservation and wildlife conservation.

Sales have risen 90 percent in the last decade, with fiscal 2009 revenues reaching $485 million. During the legislative session that just ended, lawmakers were so confident in the lottery’s consistent sales that they authorized what amounts to borrowing $450 million against future proceeds by year’s end as a way to close the state’s budget gap.

But the Auditor General pointed out that sales growth has been leveling off in recent years. The case was the same for beneficiary distributions, which dropped 12 percent in fiscal 2009 from the year before, the largest drop in nearly two decades. The audit also said Arizona ranked last out of 28 similar lotteries for retailers per capita and 24th for sales per capita in fiscal 2008.

In a response letter, Hatch-Miller said the lottery was implementing the report’s recommendations to increase the number of retailers, expand its player base and better manage prize expenses and advertising costs.

However, Hatch-Miller said Arizona’s rapid population growth was one factor outside the lottery’s control, especially as it related to sales per capita.

“Second, Arizona also has a relatively high proportion of the general population morally opposed to gambling and by extension, the lottery,” he said in the letter.

Targeting Groups?

Alicia Hansen, a writer for The Tax Foundation, a nonpartisan think tank based in Washington, said regardless of who plays the most the lottery is regressive because it takes a larger share of a poor person’s income. She said lotteries are notorious for targeting the poor, especially because tickets are inexpensive.

“They may think, ‘The lottery is all I have; it’s my only way out,’” Hansen said. “The 10 to 20 bucks adds up though.”

But David Gale, executive director for the North American Association of State and Provincial Lotteries, said it doesn’t make sense that lotteries would prey on the poor because those with lower incomes don’t have the same financial freedom as those with higher incomes.

“It’s just poor business strategy to target the poor,” Gale said. “We’re scrutinized too much to even try something like that.”

Hatch-Miller said the lottery’s objective is simply offering games that attract a wide variety of people in order to provide revenue for the state.

“The money that the lottery earns goes to great things; we distribute 100 percent of the money we make,” he said.

At Fox Tobacco and Liquor in Gold Canyon, owner Mitchell Fox said he’s seen no evidence in three years of selling tickets that the Arizona Lottery targets any particular group. Although he has some low-income customers who play, those who are older and who seem to have more discretionary income play the most, he said.

“Obviously they like that they have the higher income people coming in to get the tickets,” Fox said of the lottery. “They spend more money and it’s more revenue for the state.”

Despite winning $2,500 last year, Richard Sterba said he’ll still buy Scratchers during his weekly trips to the grocery store because it’s something he and his wife can enjoy together in their retirement.

“It’s not an expense we can’t afford,” he said. “And we have a lot of fun.”