Lottery growth slows in Tennessee, raising funding questions

For years, the Tennessee Education Lottery has been a steady engine for funding college scholarships, quietly growing alongside the programs it supports. But that balance may be starting to shift. State officials now say revenue is no longer keeping pace with demand, raising early concerns about how long the system can sustain its expanding role and what that could mean for students who rely on it.

Lottery growth slowdown

During a legislative hearing recently, leaders from the Tennessee Education Lottery addressed concerns about funding. Leaders said revenue is still growing, but at a slower pace than in previous years.

For over two decades, we have seen an average annual growth of 4% for Tennessee Lottery revenue. However, that number has now dropped closer to 2%.

Tennessee Education Lottery President and CEO Rebecca Paul said:

We've taken that from 4% a year growth to 2% a year growth.

Struggling with demand

The Tennessee Lottery helps fund scholarships and other education programs for the state. The lottery may soon be struggling to keep up with demand, according to state officials and lawmakers.

Part of that struggle comes from more programs relying on the same funding stream. Lottery officials said the system has expanded significantly since it first launched over 20 years ago. It started with a handful of scholarship programs to around 15 today.

With slower revenue growth and a higher demand for funds, lawmakers are concerned.

During the hearing, Sen. Bo Watson stated:

Members [need] to understand and appreciate that the lottery essentially will no longer in the next couple of years have the capacity to fund all of the programs.

Watson stressed that without any policy changes, the state might be forced to make some difficult decisions soon. Watson added:

Failure to make some policy decisions will result in the lottery either having to spend down their reserves, or those programs will have to be funded through a combination of lottery, sports wagering, [and] perhaps even general funds.

Dipping into reserves

During the hearing, lottery officials confirmed that they had to dip into reserves last year to help cover scholarship costs. Lawmakers are concerned this will become more common without any changes.

The reason for this revenue slowdown? Lottery officials say there are several possible reasons, including the rise of sports betting.

Paul said, “We do believe that sports wagering has had some impact on us.”

Large jackpot swings, like Powerball, can create year-to-year fluctuations in revenue, Paul stated. If there are $1B+ jackpots, then more tickets are going to sell. Paul said this is why it's more important to look at long-term trends than short-term trends.

Possible solutions

Whether looking at long-term or short-term trends, lawmakers are still concerned and think the bigger issue is still there: more programs are relying on a funding source that is no longer growing at the same pace.

During the hearing, there were several possible solutions discussed:

1. Allow Tennesseans to purchase lottery tickets using debit cards. This would be an effort to attract younger players to the lottery.
2. Redirecting revenue from sports betting to help support scholarship programs.

While there are concerns, lawmakers decided no immediate action will be taken. However, this conversation is just getting started.

Watson explained:

The legislature and administration is going to have to take a serious look at what we're using those resources for.

According to lawmakers, this issue will be addressed again during future budget discussions. They will have to weigh how to sustain scholarship funding long-term.

Enjoy playing the Tennessee Lottery, and please remember to play responsibly.