by Sarah Curry
Director of Fiscal Policy Studies
The debate over funding North Carolina’s public schools will continue for many lifetimes to come, but the question of how much is funded by the lottery is a relatively new question. Created as a result of unusual legislative circumstances in 2005, the NC lottery was sold to the public as an additional revenue stream for public schools. This past budget year the state lottery made headlines when legislators proposed an increase to the advertising campaign to boost sales and help pay for salary increases for public school personnel.
Saying that lottery revenue supplements public education funding is a claim that leaves a lot to the imagination. When many of us think of education, we think of when we went to school. So in most of our minds the lottery pays for teachers, desks, textbooks, classroom supplies, etc. In fact, the lottery’s stated objective is to "generate funds to further the goal of providing enhanced educational opportunities, support school construction, and fund college and university scholarships" (FY13 Annual Report). Lets take a look at exactly what that means and where the money is being spent.
The NC Lottery website paints a picture of how many dollars have been raised and what programs have been funded through the lottery to help children across the state. Surprisingly, there is a lot of information on the website, ranging from annual reports and simple pie charts to an interactive map showing how many lottery dollars are received by each county. One thing to remember is that it does not all go towards K-12 education, as some of the marketing photos would have you believe.
A portion goes towards the state’s pre-kindergarten program, which is administered by the NC Department of Health and Human Services. Another share goes toward scholarships for students to attend North Carolina colleges, and part of that is sent to the UNC System budget. One of the largest percentages goes towards the Public School Building Capital Fund to assist local school districts with the construction and renovation costs for school buildings. These three major areas have been the focus of the lottery since its inception.
In FY 2012, legislators began to earmark the money for different areas within education, such as teacher assistants, digital learning, and aid to local education areas (LEAs). While in theory lottery revenue eventually reaches all public school students in some way, it is not designed to fund paper, pencils, computers, and instructional supplies often associated with education.
The lottery legislation was enacted in 2005, but it did not begin producing revenue until spring of 2006. Thus for comparison purposes, FY 2007 is the first full year when the lottery was in operation in North Carolina and should be considered as the base year. Sales during FY 2013 were roughly $1.7 billion. The operating expenses for the lottery amounted to about $1.2 billion, the largest of those expenses being the lottery prizes. That left only $467 million for the state to use towards education or 28 percent of total revenues. To compare, in 2007, the state received 35 percent of total lottery revenues, which equated to $315 million. Below is a chart to show the amount of money the lottery has generated for public education since it’s inception compared to its generated revenue.
So while the lottery has grown in size, number of games, and the amount generated for public education, the majority of the money is paid out in prizes. On average the amount of the lottery money sent to education has been between 35 and 28 percent of total revenues, with the smaller percentages being in the most recent years.
While some in North Carolina do not view a state-run lottery as a sound way of funding education, the fact is that the idea of repealing the lottery is a fantasy. The lottery money, as small as it might be compared to other sources of revenue, is supplementing (and some would say supplanting) General Fund money spent on education. One can argue that legislators should be free to use lottery revenue for other purposes in the state’s budget, but such a move would be perceived as cutting education funding. After legislators decided to lean more heavily on lottery funding during last legislative session, we can expect the lottery to play a bigger part in the budgeting process than in years past.
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