Lottery and Gaming Taxes

States use lottery and gaming revenues to fund a variety of public programs and services, including education and economic development, and as a supplement to general funds. Many states also employ a portion of gaming revenue to counteract the negative effects of gaming. Out of 24 states with commercial gaming, 23 fund treatment and research on gambling addiction. The National Council on Problem Gambling estimates that 2 million (1%) of adults are estimated to have a gambling addiction and another 4-6 million (2 to 3%) are considered problem gamblers.

Some states use lottery and gaming proceeds to fund the arts. Seven state arts agencies receive funds from lottery and gaming revenues, comprising on average 27% of these agencies’ state funding in fiscal year 2022. Lottery and gaming funds are significant sources of income for state arts agencies in Colorado, Iowa, Kansas and West Virginia (20 to 90% of state funding); they provide modest funding in Wisconsin. The newest programs include Maryland, which started to receive revenue from the state’s admission and amusement tax (on electronic bingo and electronic tip jars) in 2016; Oregon, where arts and culture began receiving funds from the state lottery in 2020; and Massachusetts where, since 2021, casino gaming revenue has supported the arts council’s arts and education programs.

For more information and detailed data on lottery or gaming taxes or other dedicated revenue strategies, contact NASAA Research Manager Mohja Rhoads.

States Receiving Funding from Lottery or Gaming Taxes

Colorado
Mechanism: Gaming Tax
Statute: CO Rev Stat § 12-47.1-701
All revenues generated from the gaming tax, along with license and application fees, are placed in the Limited Gaming Fund. Annually, $2 million has been allocated to Colorado Creative Industries through the creative industries cash fund. The Creative Industries was not supported through this mechanism in FY2022; instead, the agency received an unencumbered cash fund (1% of the State’s capital construction funds) for the Art in Public Places program.

Iowa
Mechanism: Gaming Tax
Statute: Iowa Code §99F.11
Revenue from a tax imposed on authorized gambling is appropriated each fiscal year to the Department of Cultural Affairs, with one-half of the funds allocated for operational support grants and the remaining one-half allocated for the community cultural grants program. In FY2022, the Iowa Arts Council received a little more than one-fifth of all state funds through this mechanism.

Kansas
Mechanism: Lottery Tax
Statute: K.S.A. 79-4804
Eighty-five percent of state gaming revenue goes to the state economic development initiatives fund. This fund is designated for programs and projects that contribute to economic development in Kansas, including the Creative Arts Industries Commission. In FY2022, the agency received 89% of all its state funding from this mechanism.

Maryland
Mechanism: Admissions and Amusement Tax
Statute: Article – Tax – General §2–202
Five percent of the revenue from taxes levied on electronic bingo and electronic tip jars is distributed to the Special Fund for Preservation of Cultural Arts in Maryland (up to $1 million), with the remainder allocated directly to the Maryland State Arts Council. In FY2022, the agency received about 4% of its total state funding from this mechanism.

Massachusetts
Mechanism: Gaming Tax
Statute: MGL Section 59, Chapter 23K
The Massachusetts Expanded Gaming Law imposed a 25% tax on Gross Gaming Revenue, of which 2% is allocated to the Massachusetts Cultural Council to mitigate a direct threat to the sustainability of nonprofit and municipal performing arts centers. The Mass Cultural Council administers the Gaming Mitigation Program, established by MGL Section 59, Chapter 23K, at the direction of the state legislature. In FY2022, the agency received about 20% of its total state funding from this mechanism.

Oregon
Mechanism: Lottery Bonds
Statute: 461.010, et seq.; Art. XV §4 Oregon Constitution
In the 2019-2021 legislative session, Business Oregon received $10 million in tax-exempt lottery bond funds. The first bond issue provided $5 million in funding in spring 2022, with the remaining $5 million available in spring 2023. Each biennium, 10 to 15 Oregon Arts Commission projects will be funded through state lottery bonds. Lottery bonds are unavailable until the end of the biennium, and are subject to specific restrictions and permitted expenditures. In FY2022, the agency received 4.7% of all its state funding from this mechanism.

West Virginia
Mechanism: Lottery Tax
Statute: §29-22-18
The West Virginia Commission on the Arts receives a portion of a lottery tax through funds dedicated to the Education, Arts, Sciences and Tourism Debt Service Fund. In FY2022, the West Virginia Commission on the Arts received 50% of its state funding from this mechanism.

Wisconsin
Mechanism: Tribal Gaming Tax
Statute: 14.035
The state of Wisconsin has entered into gaming compact agreements with tribal nations as permitted by the Indian Gaming Regulatory Act of 1988, 25 U.S.C. §2701. Revenue from tribal gaming had been used to fund state agency programs since FY2000. In FY2022, the Wisconsin Arts Board received 3% of total state funds from this mechanism.