A Life & Lotto Situation

Wayne Schenk of Naples, NY has terminal lung cancer. Schenk's treatments could incur upfront costs of $130,000 along with a requirement for insured follow-up care. As a veteran of the U.S. Marines, Schenk's insurance only covers treatment at a Veteran's Hospital.

Hoping for a bit of luck Mr. Schenk purchased a New York state lottery ticket and scratched off a $1 million winner; one catch - the million dollars will be payed out in $50,000 increments, roughly $34,000 after taxes, over the next 20 years.

Schenk made an appeal to the NYS Lotto commission for upfront payment of his winnings only to be answered with "no exceptions."

Assemblyman Joe Errigo (R-130) flew off the handle and charged to Albany with big dreams of special legislation for Schenk but days later his tune has changed. The Assemblyman now says that he doesn't believe legislation could be passed in time to help Schenk. Thanks for the big ray of sunshine Joe.

The matter really at hand here is the NYS Lotto itself. If Joe would have thought things through maybe he would have seen the Lotto for what it really is: a regressive form of double taxation on the lower wage earners in our state; and, as illustrated in Schenk's case, is a system not designed to provide people with their dreams that their dollar could supposedly provide them.

In all actuality those purchasing the most lottery tickets are not those paying the most taxes. As most never win, this essentially equates to a lower class tax. In the event that someone does win, a large portion of the money is returned to the state in the form of income tax (as we see above, 50,000 becomes 34,000), making the actual payouts a fraction of what is payed into the system.

Let's look at how the funds are divided. It is not that the lottery commissioners are heartless, certainly most people would want to help a dying man, but the funds and the flow of them in and out of the Lotto system are not such to provide Schenk with his winnings all at once.

The distribution is seen in the dollar bill illustration above: 32% is passed on as aid to education, 56% is paid out in prizes and the remaining 12% goes to commissions, fees and operating costs. Of course there is the fine print. The 32% that supposedly goes to education is deposited into the general fund and can legally be spent in any manner and, as previously mentioned, a large portion of the 56% in prizes is returned in tax.

What the state legislation is left with is a large stream of double taxed money which they would otherwise be at a loss to account for if those monies were eliminated from the budget. So the system, actually established by the New York City mafia before the government took control, goes untouched by passive legislators incapable of tackling reform issues. If an exception was made for Schenk the whole structure would crumble as others receiving periodic payments would come out of the woodwork with expenses that needed immediate funding.

Lotto money also supports area businesses but this may be indicative of a larger problem. The New York State Council on Problem Gambling found that 40% of calls to their help hot line were because of lottery games.

On top of everything else the enormous costs of operating a lottery are apparent as the state's take has been below expectations for the last 10 fiscal years.