California’s Government by Lottery

LotteryCalifornians can now “Play at the Pump.”

Under a new California Lottery initiative being rolled out across the state, we can purchase lottery tickets while buying gas, without even going inside. Presented with the options of “Play Lotto” or “Gas Only,” we’ll actually have to decline the opportunity to play before fueling our vehicles.

As a matter of principle, this intrusion of the lottery into our most routine of daily activities is hard to justify. Conservatives should balk at a state-run monopoly. Liberals should recoil at a regressive source of revenue. Californians of all political stripes should wonder why exactly our government is encouraging us to gamble. Morally dubious as it is, there is one argument for expanding the lottery: it generated $5.5 billion last year, $1.3 billion of which went to education. But a well-governed state should not have to fund its schools by enticing citizens – usually the poorest of citizens – into irrational economic decisions. That 10 percent of players accounts for 80 percent of sales lays bare the hidden social cost of the lottery.

What is more troubling, though, is that the California Lottery is not California’s only lottery.

Fiscal policy in our state is itself a grand game of chance. Every year, California’s politicians effectively buy a ticket and hope that the right numbers come up. Our tax system depends so deeply on capital gains and income from high earners that state revenue fluctuates wildly from year to year, and in an unpredictable fashion. A strong stock market performance or a well-timed IPO can mean the difference between a windfall surplus and unmanageable deficits. The result is not just budgetary chaos, but sluggish economic growth, diminished opportunity, and an uncertain future.

In a similar vein, the state’s largest manager of assets, CalPERS, has effectively thrown California’s long-term solvency into the POWERBALL. Entrusted with more than $300 billion and the benefits of 1.7 million employees, the agency minimizes both the amount of pension contributions and the reported size of liabilities by assuming a 7.5 percent investment return – a figure it must beat or unfunded liabilities will grow. Last year, the actual rate of return was 2.4 percent. This means that unless CalPERS hits the jackpot again and again, future debt will reach staggering levels, with taxpayers bearing all liability.

As a state, we can no longer afford to leave our future to chance. Just as buying reams of scratchers is poor financial planning for a person, lottery-like public policy is leading our state down an unsustainable path. A change of course is urgently needed. We must begin the hard work of reforming California’s core governing institutions in line with some basic guideposts: math, common sense, and an awareness of the future.

To start with, this means reforming our tax structure to produce stable revenue from a broad base, instead of relying on the stock market returns of the rich or the sale of lottery tickets to the poor. It means reforming our pension system to institute professional accounting and realistic projections, in place of gimmicks and can-kicking. And it means reforming the budget process to eradicate the rigid formulas and one-way ratchets that have caused state spending to double over the last 15 years.

Californians are not asking for the chance to Play at the Pump. We are asking for legislators to stop gambling with our state’s future.

Kevin Kiley is a candidate for the California State Legislature.

Originally published by Fox and Hounds Daily