Not-so-rich buy Texas Lottery's $50 ticket

AUSTIN — When top lottery officials last winter announced the introduction of a $50 scratch-off game — the priciest lottery ticket in the nation — they said they hoped to appeal to a particular type of player: The affluent.

As it turns out, the $50 game, called $130 Million Spectacular, has fared best in middle-income neighborhoods typically not considered affluent, according to six months of sales data analyzed by the Houston Chronicle.

The Chronicle looked at each of the state's ZIP codes with at least 1,000 adult residents, dividing them into groups based on their median household income in the 2000 census.

The analysis found that sales of the $50 Spectacular surged across middle-income ZIP codes, seeing strong per-capita sales in areas both with incomes of just more than $30,000 and in those with earnings upwards of $50,000 and $60,000.

Sales figures dropped off in both rich and poor areas, although the state's poorest ZIP codes — those with median incomes of $20,000 or less — saw stronger per-capita sales than the richest, with incomes of $90,000 or more.

While the analysis is imperfect because it does not account for people who may buy lottery tickets in a ZIP code where they don't live, and whose incomes may differ from the median there, it bolsters numerous other studies indicating that lottery games tend to be most popular among the non-affluent.

"The lottery was never designed for rich people," said Rep. Garnet Coleman, D-Houston. He called the $50 ticket a state-orchestrated scheme to entice people of limited means to spend more. "The people who play are still people who can least afford to spend $50 ... they're people who struggle to live off what they make."

Despite the criticism, the state isn't about to turn its back on its high-priced games.

"The $50 ticket salvaged our entire fiscal year last year," said Robert Tirloni, projects manager for the Texas Lottery Commission, bringing $137 million to state coffers since the game's debut in May and helping the commission close a $93 million gap in revenue between 2006 and 2007.

Texas lottery commission spokesman Robert Heith said the games are voluntary and are designed to entertain. He added that his agency has one overriding mission: to generate revenue for Texas public schools. Last year, more than $1 billion of the $3.8 billion raised from lottery sales went to public education.

Habitual players

The $50 scratch-off game did so well in Texas that the state, without fanfare, launched in November a second $50 game called $130 Million Payout Bonanza. Together, the two games have generated $158 million in revenue.

Of the 25 ZIP codes with the highest per capita sales from the spectacular game, 18 had incomes below the state average of $40,000 in the last census.

And though sales of the $50 ticket dropped off in higher- and lower-income areas, people in poor areas still spent more on the tickets. Average per capita sales were 22 percent higher in ZIP codes with a median household income of $20,000 and below, compared with ZIP codes with median household earnings of $90,000 and above.

Laura Estrada, 33, can't seem to get enough of the high-dollar tickets. She earns just more than $22,000 a year as a customer sales representative for a party store in north Austin but spends anywhere between $100 and $200 a week on scratch-off tickets, including the $50 games. She loves the rush.

"Losing $50 makes you perspire; it makes you nervous. 'Gosh, I shouldn't have bought that.' But then you win and it makes you feel great," she said.

Estrada harbors no illusion: She knows the lottery is a money drain for habitual players like herself. But it's her favorite hobby. So she doesn't calculate the losses; she concentrates on the wins, like the $200 she collected on a $50 ticket. She has to think hard about how many $50 tickets she's bought to win that one — between six and 10, she estimates.

Her reason for continuing to play? "I have to try to get my money back."

State lotteries have always faced charges that the games they promote are regressive in nature because they appeal to those least able to afford them. Critics say that's especially true with scratch-off games.

A 2006 study commissioned by the state of Texas seemed to back that up. Players with a high school education or less spent an average of $20 a month on Texas scratch-off games, twice what college graduates spent. Those earning $12,000 or less spent an average of $16 on scratch-off tickets a month, 45 percent more than players who earned between $75,000 and $100,000.

Gaining in popularity

Lottery officials had said they want to target groups not normally associated with scratch-offs.

"Now, I think the idea of bringing people with higher disposable income into our customer base is a very important one," Commissioner Jim Cox said last year when discussing the launch of the $50 game.

Scratch-offs, with their instant results and catchy themes, have soared in popularity in Texas in recent years, even as the number of people playing lottery games overall has declined.

Texas introduced about 100 instant-ticket games last year; scratch-off games as a whole accounted for close to 76 percent of the commission's revenues. And nearly a third of all scratch-off sales were from high-dollar tickets priced at $10, $20, $25, $30 and $50.

"With scratch-offs, we have the ability to put out new games, with new themes, we have a lot more flexibility to change the product and keep the games alive and fresh," Tirloni said.

The state spends $33 million a year promoting the games that inspire dreams of instant riches, but several years ago eliminated funding for programs to help problem gamblers.

Rob Kohler, a lobbyist with the anti-gambling Christian Life Commission of the Baptist General Convention of Texas, said the lottery may have been harmless when games cost no more than a buck, but not now. He said Texas voters who approved the creation of the state lottery in 1991 could not have fathomed tickets selling for $50 a pop.

"The most expensive lottery ticket has gone from costing no more than a candy bar to now being the most expensive item in convenience stores," Kohler said, adding: "The state should not be in the business of separating the citizens from their dollars. Fifty dollars is a big part of what people spend on groceries, and in some areas, a good percentage of what they spend on rent."

A $100 ticket ahead?

Heith, the lottery spokesman, said it would be impossible to conclude that tickets bought in a particular area were actually purchased by people who live there. "We really don't know until we can actually stand at the door and poll each person exiting a store (with a $50 ticket in hand) where they live," Heith said.

Cliff Spiegelman, a professor of statistics at Texas A&M University, scoffed at that argument and said the state could accurately and fairly easily discern the demographics of people buying the $50 tickets. It would just have to hire a survey company such as Gallup.

"The organizations that track likely voting outcomes can also track likely lottery sales," Spiegelman said.

The Hill Country town of Leakey had the highest per capita sales in the state, and a median household income in the last census of $26,000.

Tristan Elmore, co-manager of the Fuel City store in Leakey, where spending on the $50 game hit a whopping $89 for every adult (1,114) in town, can hardly keep the game in stock.

"I cannot believe how many tickets we sell. It's become a competition among locals, a one-upmanship," she said. "We have people who come in and buy two or three at a time."

James Rinn, a former finance director for the lottery, said the state should have a broader mission than money collection.

"Clearly, there needs to be a social aspect," he said. "Let's generate revenue, but not to the detriment of those who can least afford it."

The state has pondered introducing a $100 ticket and last year ordered up a study to determine whether enough Texans would embrace it. Tirloni called a $100 ticket "the next step, though we're not there yet."

He added, "Whenever we put out a (higher-priced ticket), it's been successful."

Chronicle reporter Chase Davis reported from Houston. San Antonio Express-News researcher Julie Domel contributed to this report.

lsandberg@express-news.net

chase.davis@chron.com