The Source's headline — "Audit of Lottery Finds Mismanagement, Fraud" — told only part of the story. (To see story, click click here).
What was not known then was that no matter how badly managed, state and territorial lotteries outside the Virgin Islands never lose money.
They may turn over less money to their governments than expected; they may even have scandals; but they never lose money.
The Inspector General of the U.S. Department of Interior, as the Source reported, said that "as of Sept. 30, 1999, the Lottery had reported an accumulated account payable [i.e., loss] to the …General Fund totaling $3.3 million."
The expert on such matters is David Gale, executive director of the North American Association of State and Provincial Lotteries. A hard-working Ohioan, he returned my call (and I am a stranger to him) late on Friday afternoon before the Memorial Day weekend.
"The fundamental pattern is that all the state lotteries turn over some money to the states, every year, year after year," Gale told me. Sometimes sales drop and the lotteries have to adjust their approach, and the state's revenues may fall, but they never disappear.
Lotteries are designed, after all, to run at a profit; that's the point of creating and operating them. All one has to do is to see to it that administrative costs are reasonable and that the receipts are enough to pay the staff, pay the prizes and make a substantial profit for the government. And they all have government-provided monopoly powers to do just that.
Gale said that he had no first-hand information about the V.I. Lottery, and although the Virgin Islands is a member of his association, he could not recall having met any of its officials. I told him that the previous administration's lottery czar had been replaced and had subsequently pleaded guilty to federal wire fraud charges.
"I am sure" Gale said, "that the new lottery administrator will have learned from the past and will provide money to the islands' government in the future."
Let's hope he is right.
Editor's note: David North, a semi-retired former federal employee, writes frequently for the Source on government affairs and economics.
