Report Finds Lottery Breaks Promises

Special Report - October 3, 2011

A new study from the North Carolina Justice Center concludes that the North Carolina lottery, which was sold to citizens and legislators as a means to provide additional funding to schools, has not fulfilled it promises to education. The study, “A Failed Experiment: How the Lottery Has Not Helped Fund North Carolina’s Schools,” looks at the size of the state’s education budget and the percentage of it that has come from lottery funds since 2006.

Opponents of the lottery, including the North Carolina Family Policy Council, opposed it partially on the grounds that evidence showed that lotteries that were begun with the intention of supplementing, and not replacing, current education spending, inevitably move away from their commitment to primarily provide education funding, with state governments eventually using lottery funds to replace existing education dollars. According to the N.C. Justice Center report, “what has happened [in North Carolina] in the years since is worse than what critics predicted: North Carolina spent less on K-12 education in the 2010-11 school year than it did the last school year before the lottery came into existence.” In the early years of the lottery’s existence (2007-2009), it did provide a supplemental revenue stream to the state’s education budget, but that bump has now “disappeared completely.” In recent years, as state revenue streams have slowed and budgets have grown tighter, “North Carolina’s legislative leaders have increasingly relied on the lottery to cover up cuts to education,” the report states.

For lottery opponents, arguably the most egregious change in lottery policy is the dramatic drop in the percentage of lottery proceeds that go to education. At its inception, the lottery was required to earmark at least 35 percent of its gross proceeds to various educational programs. As a result of a legislative change to the law in 2007 that allowed lottery officials to distribute lottery revenues to education as close to the 35 percent mark as “practicable,” education programs currently receive only 29 percent of the lottery’s revenues. This new report points out “that growth in lottery sales has outpaced the increase in the amount of lottery money going to education by a rate of 5 to 1 over the past 2 years.”

Traditionally, lottery proceeds have been divided between three areas—50 percent for class-size reduction in early childhood, 40 percent for school construction, and 10 percent for scholarships. The 2011-2012 state budget adjusted lottery allocations—66.8 percent to class-size reduction, 23.5 percent for school construction, and 9.7 percent for university scholarships. The report states that the cuts to school construction represent “an attempt to mitigate the loss of teaching positions that will result from the cuts to K-12 education funding” by allocating more lottery funds to class-size reduction efforts.

“Critics from both sides of the aisle have pointed out that the lottery is a regressive tax that falls mainly on the poor and have warned of the moral and societal ills that accompany gambling,” the report concludes. “The original justification that the lottery would provide a beneficial supplement to education funding that outweighs these evils is no longer valid since the state now spends less on education funding than it did before the lottery was enacted. The lottery is now a tax on the poor that brings gambling into the state’s communities without adding anything to the state’s education system.”

Related resources:
Lottery Funds Transferred - February 1, 2011
Report: NC Should End Lottery - February 10, 2011
Study Says Lottery Entices Poor - January 7, 2011
Lottery Funding Shifts From Education - September 30, 2010
Lottery Revenues Rise With Unemployment - February 2, 2010
Economy Down, Lottery Up - July 11, 2009
Governor Seizes "Education" Lottery Funds - February 27, 2009
Lottery Sales Holding Steady - February 19, 2009
Lottery Revenues Up As Economy Slows - September 18, 2008
Lottery Revenue Fails to Make Significant Impact - September 25, 2007
Easley Recommends Increasing Lottery Prize Payouts - February 23, 2007
A Lottery Education: Dispelling the Education Lottery Myth - [PDF] - Findings - April 2004

Copyright © 2012. North Carolina Family Policy Council. All rights reserved.

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