Gambling: State only real winner

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In Colorado, gambling is big business.
During fiscal year 2006, which ended on June 30, Colorado casinos paid $106.1 million in state taxes on a record $765.4 million in adjusted gross proceeds, total revenue less player winnings.
Powerball, Lotto and scratch games generated $113.7 million last year.
Casino tax revenue is allocated to historical preservation grants, cities and counties where casino gambling is permitted and the state’s general fund. Lottery revenue is divided among state parks, the Conservation Trust Fund and Great Outdoors Colorado.
Much of the bounty has flowed to El Paso County.
Since the lottery began in 1983, El Paso County has received $105.5 million in project grants, including $17.7 million for Cheyenne Mountain State Park, $1.4 million for Red Rocks Open Space and $1.8 million for the Gossage Youth Sports Complex.
And thanks to casino gambling, more than $6 million has come to the county in the form of preservation grants from the Colorado Historical Society, $200,000 has been used to fix the City Auditorium, $500,000 has gone to the Carnegie Library Building and dozens of smaller projects have been funded.
As a whole, Colorado residents are on a long winning streak. But individually, do Coloradoans have a reasonable chance of winning when buying a Powerball ticket, or playing Lotto or driving up to Cripple Creek to play the slots?
Let’s start with Powerball. As of Wednesday, Powerball offered a grand prize of $137 million. So what are the odds of matching the six numbers and becoming an overnight millionaire? 146,100,000-1.
Those are incomprehensibly bad odds — so much so that there’s almost no statistical difference between the odds of buying a winning ticket and the odds of finding the winning ticket on the street.
Why are the odds so bad? When the game was created in 1996, the “matrix,” i.e., the range of numbers from which gamblers could pick, was five of 45, and the “powerball” was one of 45. The odds were bad enough then, but the game managers made them even worse when they ratcheted up the matrix to five of 55, and one of 42.
Increasing the odds means that there will be fewer winners — and that jackpots will climb to astronomical levels. Such jackpots attract tens of millions of players, all seduced by the remote chance that they might become overnight centimillionaires. And that makes the game much more profitable — not for the players, but certainly for the 29 states that participate.
Lotto is the in-state jackpot game. Selecting the winning six numbers from a 42-number matrix wins at least $1.5 million. Like Powerball, the game has a rolling jackpot, which grows with each drawing until won. The odds of winning the jackpot? 5,245,786-1.
The lottery also offers “Cash 5” drawings. Players select five numbers from a 32 number matrix for a top payout of $20,000. Drawings are held six days a week. The probability of winning the top prize is one in 201,376 — better than Powerball and better than Lotto, but still not so hot.
Finally, the lottery markets “scratch” games — as many as 30 at any given time. Players buy tickets, which typically cost $1 each, and scratch off an opaque coating to determine whether the ticket is a winner. Most games offer multiple small prizes — $1, $5, $10 and so forth — up to a limited number of top prizes, which can be as much as $500,000.
Scratch games are extraordinarily profitable — to the state of Colorado.
Take “Piggy Bank,” a $2 game that has been on sale since April 7. The state plans to sell 2.64 million tickets, for a total take of $5.28 million. Of that, 64 percent is returned to the players, mostly in the form of $2, $5, and $10 “winners.”
The odds of winning larger prizes are not good — 6,000-1 to win $100, 264,000-1 to win $20,000. The house’s take if all tickets are sold and all prizes claimed — $1.9 million.
And, as if the odds weren’t high enough, the game’s progression can affect the odds of being a winner.
Since winning tickets are randomly distributed, the rate at which winners are claimed determines the odds — and tickets continue to be sold, even after most of the top prizes have been claimed.
“Emerald Green,” for example, offered 15 top prizes of $5,000 when first launched. As of last week, 14 had been claimed. Bad odds — but better than those facing players buying “Hot 7’s” tickets, which offers seven top prizes of $7,777 — all of which had been claimed.
According to Tom Kitts, the Lottery’s deputy director, the state doesn’t make a practice of selling scratch tickets after all the major prizes have been won.
“Rarely do we keep a game on sale when they’re all sold,” he said. “And even when most of the prizes are gone, the odds aren’t significantly different.”
A clerk at a local convenience store said that scratch tickets are big sellers.
“We’ll sell at least 300 every day — and some people will buy $100 worth at a time.”
The best-selling tickets? “Crossword, for sure; it’s very popular-probably because it takes longest to play.”
So, is the would-be gambler any better driving to Cripple Creek and playing the slots?
Retiree Paul Stolz, a frequent casino visitor, was asked whether he’s ahead, even or behind.
“I go there a lot — so of course I’m behind,” he said. “Remember, it’s not how much you win — it’s how much you lose.”
Today’s slot machines are controlled by computer chips which, by state law, are programmed to pay out no less than 80 percent and no more than 100 percent of money played. Does that mean that a machine with a 95 percent payout ratio will pay back $95 for every $100 played?
No. The program governs payouts over the projected service life of the device — usually seven years. During that period, payout amounts and frequencies are the product of a random number generator, which instantly determines the result of each play.
The computer chip is protected by a state-mandated tamperproof seal, which makes it impossible for the casino to alter the machine’s predetermined payout percentage.
In Cripple Creek, most slots have payback ratios between 90 percent and 97 percent, but to be sure of achieving the 97 percent payback ratio, you’d have to play a given machine continuously for its entire service life.
There’s no such thing as a “hot” or “cold” machine — every play has the same probability of winning as any other. But since the house’s “hold” during the life of a machine is as little as 3 percent, slots would seem to offer far better odds than Powerball, Lotto or scratch games.
So which slots offer the best odds? On a casino floor containing literally hundreds of devices, it’s hard to say. One Cripple Creek casino manager, who did not want to be identified, gave an informed opinion.
“The worst odds are on the three-reel nickel slots — you won’t see it on the [state] reports, because they get mixed up with video slots — they hold 12, 13 percent. The $1 and $5 machines are best — they never hold more than 6 percent.”
So, which machine would the casino manager play?
“I’d go for a stand-alone $1 progressive — one that’s not linked to other machines,” he said. “I’d look for a machine where the jackpot has climbed pretty high — it might be ready to hit.”
Modern slots, with hundreds of winning combinations, featuring elaborate electronic displays, are noisy, seductive and designed to amuse patrons and eventually, take their money.
Casinos themselves are designed to convince players that it’s easy to win. Pictures of big winners are posted prominently, and machines that “hit” announce the player’s good fortune with flashing lights and loud beeping.
Human nature helps, too — winners shriek with delight, and losers slink silently away.
But there’s another side to gambling’s surging popularity — the rise in “problem gambling.”
According to Amber Bunch of the Problem Gambling Coalition of Colorado, 2 percent of Coloradoans are problem gamblers — addicts who find it difficult to gamble responsibly.
“Probably a third of our help-line calls are from slot players; and the rest are from everything else — casino card games, internet gambling, sports, lottery, bingo, horses, scratch games, legal or illegal, it doesn’t matter,” she said.
The coalition receives no funding from Colorado gambling taxes, but does receive voluntary contributions from the casino industry.
The final conclusion: of all the state’s gambling opportunities, according to figures reported to the state for the month of July, the casino manager was right — the dollar slots in Cripple Creek came closest to giving gamblers an even break, with the house retaining only 5.15 percent of all money wagered.
John.Hazlehurst@csbj.com