Charitable Fundraising Through Micro-Lotteries: A Win-Win for the Winners

The marriage of charity and personal gain may seem incongruous, but that may be one of the novel aspects of the Scottish Children’s Lottery.  Although there is nothing novel with directing lottery revenues towards a good cause, the Scottish Children’s Lottery creates a unique microenvironment where players and participating charities alike have greater confidence in the ultimate destination of the money. The Scottish Children’s Lottery is a simple yet effective demonstration that bigger is not always better. Moreover, for nonprofit organizations trying to find new and unique ways to raise funds, the Scottish Children’s Lottery provides an avenue for exploration.

Mega-lotteries draw millions of players and media frenzy as jackpots sometimes creep to hundreds of millions of dollars.  In the United States, the lottery has drawn increasing criticism, not only for its role in society in general, but also more importantly for the illusion of the impact from the revenues on social causes. To understand why the Scottish Children’s Lottery provides a better model, it is necessary to understand the genesis of the underlying critique against lotteries in general.  As previously noted, the idea of lottery revenues supporting the greater good is not in and of itself unique. For decades, lotteries around the country have supported state education funds, veterans programs, the elderly and other good causes with billions of dollars given back. At least that is how the narrative goes.  In reality, there have been many questions about the overall impact that lottery revenues have provided, which is another clear distinction with the Scottish Children’s Lottery.  The reality is that the benefits from lottery revenues have been doubted for quite some time.

Growing up in Ohio, I remember being bombarded by a ridiculous number of television commercials for the state lottery.  The ads gave you the sense that the school systems in Ohio would be flush with more money in their budgets. Revenues from ticket sales were supposed to improve the overall education system statewide. Mega lottery, mega improvement. 2014 marked the 40th year for the Ohio lottery and the provision of revenues to state education. With that milestone came a retrospective review of the revenues produced by ticket sales for education.  Through the years, the educational earmark is indeed impressive; however, in the end, the analysis has not been overwhelmingly favorable. Over $20 billion dollars has been earmarked from the lottery for education in Ohio since 1974.

The Ohio Lottery touts that 100% of the profits from the sale of all Ohio lottery games, after expenses including operating funds, are directed to the “Lottery Profits Education Fund.” The purpose of this fund is to support the education of students from kindergarten through 12th grade, or high school. Critics of this state lottery education earmark are quick to point out that the state, in this case, Ohio plays a shell game with the money. The profits from the Ohio Lottery are indeed provided to an education fund and then are directed from the state department of education to the local school districts. Unfortunately, the state utilizes this money to offset what could be earmarked by the state for education to begin with.  Consequently, the funds do not amount to a net increase in each school’s operating budget but rather a decrease in the amount of money that the state has to spend in the first place. Lottery profits are now directed into the state education fund in Ohio, which is used to support the budget as a whole and not actually inject additional revenues to the schools.  In a time when many districts are struggling to pass school funding levies, the lottery revenues fail to create an impact that helps increase educational capacity. Accordingly, the impact for good from mega lotteries is not only exaggerated, but also more appropriately misleading. In the end, what this does is create negative feelings towards the lottery and those who play.

Ohio is just a microcosm of the overall issue. On the national level, whether mega lottery funds are directed towards education, veterans affairs or the elderly, the overall impact upon the greater good is often lacking. Rather, the funds are utilized as an offset to maintain the budget and lower the amount that the state itself has to provide. In some instances, despite the overall increase in funds that are potentially available through lottery education earmarks for example, state education budgets are being slashed. Thus, with this unfortunate game of three-card Monte, the Scottish Children’s Lottery represents an exciting and transparent fundraising opportunity for nonprofits and those who purchase tickets in the first place.

The Scottish Children’s Lottery establishes a more transparent and manageable model. Rather than a large multistate game, players are seemingly aware that money from their ticket purchase actually will benefit one of just a handful of nonprofit organizations aimed at helping children. In this case though, the charities themselves organized the lottery by appointing a local agent, ostensibly licensed by the proper governmental authorities, and created a fundraising mechanism that just so happens to provide some lucky players a return on their donation/investment. Each week, one of four charities is selected to receive at least 30% of the ticket sales. Thus, players have full knowledge prior to each week’s drawing that they are actually supporting a verifiable charitable cause. One charity, The Yard, was awarded a grant of £31,022 to further its mission helping disabled children. Another children’s charity was about to receive £7,500 to help support operations. Verifiable, transparent, and controlled locally, those who purchase a ticket, although perhaps mainly seeking to win money, know that they are indeed making an impact.

The Scottish Children’s Lottery is not above criticism but this may be borne mainly from my lack of knowledge of the finances overall. The provision of the funds to children’s charities provides sustenance while increasing program capacity. It would be nice of course if there was a manner to increase the overall percentage being directed to the charities so that it is higher than 30% of the ticket sales. If that ultimately means smaller jackpots that may not be a workable solution as I suspect the overall ticket sales would suffer.

Ultimately, what strikes me about the end result for the charities on the receiving end of the Scottish Children’s Lottery is that it is a manner in which to increase funding sources from a segment of the population that may otherwise not donate to that specific cause. Accordingly, it creates a mechanism to provide a product, in this case a lottery ticket with a chance to win money, to those who may not be altruistically motived to the point of mailing a check or going online to send a donation to charity. If this mechanism provides tangible funds for smaller charities, then there is truly nothing but a win involved for everyone.

As the nonprofit space continues to become more and more crowded, and dollars become fewer and fewer, charitable organizations must seek new and unique ways to capture their segment of the market. This is a struggle for me personally with the childhood cancer organizations that I am involved with and the ever-growing number of nonprofits that continue to seek the same pennies. The Scottish Children’s Lottery is a wheel that need not be reinvented but rather can be investigated and copied in a flattering attempt to create new revenue sources. For the charity selected each week and the winner of the jackpot, there is no questioning the overall benefit.