Progressive Voices

March 30^th will mark the two-year anniversary of the first day of ticket sales for the North Carolina Education Lottery.

Controversy and disappointment have plagued the lottery since before the first ticket was ever scratched. Even today, one of former speaker Jim Black’s appointments to the board that oversees the games is in prison for failing to disclose important information about his ties with a company that was bidding on a contract to run the lottery.

Scandals aside, the lottery has also been a disappointment simply because it hasn’t been the jackpot for schools that many had hoped it would be. In part, this is due to lackluster sales, but it’s also because in order to shepherd the lottery through the General Assembly its promoters promised more than a lottery could ever deliver.

The state expects North Carolinians to buy around $1 billion worth of tickets this year. If that target is reached, the lottery should net the state around $350 million. Of that amount, half will go to will go to pay for class size reductions in early grades and high quality preschool for low-income children – both of which were largely in place before the lottery began. Another 40% is distributed to counties to pay for school construction. The remaining 10% is to be spent on higher education scholarships for low-income students.

Last year the state’s “general fund” had to bail out the lottery to the tune of more than $100 million in order to meet spending targets for these education initiatives. This year the official estimates are more reasonable, predicting only $25 million more this year than was actually collected last year.

During the 2007 legislative session, lawmakers weakened the requirement that 35% of lottery proceeds go to education. That number is now considered a “guideline.” The change allows the lottery’s managers to increase prize payouts, thereby enticing more residents to play and, hopefully, increasing the dollars that flow to education. The move may help lottery officials meet revenue targets, but it’s also an example of how the initial bill was designed more for the purpose of attracting votes than actual performance. Its supporters knew quite well that they would have opportunities to rewrite the rules later.

In addition to the percentage of revenues to be earmarked for education, one of the strongest selling points of the lottery was that a large portion of the proceeds would be given to counties to help with school construction needs which are very pronounced in this fast-growing state. About $140 million is designated for this purpose this year. While this sounds like a lot of money, it’s really only one-third of one-percent of the estimated statewide school construction need of $5 billion. 

Adding to the disappointment for many communities is the way school construction dollars are distributed. While the formula that decides how much each school district receives is based partly based on the number of students in each district, it also pays a handsome bonus to counties that have a higher property tax rate than the statewide average. Those counties receive roughly twice as much per student. A legislative study commission is looking into this issue right now, but don’t expect the formula to change any time soon. Exactly half of the counties get twice as much per student – a recipe for political gridlock to be sure.

Other benefits of the lottery are hard to pinpoint. Governor Easley, for instance, has attributed various state investments like teacher pay raises and class size reductions to the lottery, but we’ll never really know whether or not the state would have found other, better ways to fund those investments.    

Indeed, the biggest (and most ironic) disappointment with the lottery is the way it has distracted us from the very thing it was meant to respond to and help focus our attention on – the need to help provide every child with a sound basic education. While recent reports about dropout rates and the persistent racial achievement gap make clear that we have a long way to go to reach this goal, far too many people now think that the lottery has provided us with all the resources we’ll ever need. Anyone who watches nightly television ads featuring happy school children and the Powerball drawings on the nightly news would have reason  to think that schools are well taken care of.

In the end, however, lottery funds have amounted to only a 3% funding increase for public schools. This is not insignificant, but it is clear that as we approach the two-year anniversary of the lottery, it has not been a jackpot for public schools.

In an ideal world, we’d do away with whole mess and chalk it up as a failed experiment. Recognizing that is not likely to happen, let’s at least stop letting this sideshow distract us from our common goals. One way to do that would be to simply rename the games The North Carolina Lottery and leave the “Education” part out of it. If we did that, then advocates for public schools could return to making the case about why schools need more resources and they could stop wasting their time trying to explain why so-called “education lottery” hasn’t paid out.

Elaine Mejia is the Director of the N.C. Budget and Tax Center

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This entry was posted on Friday, March 28th, 2008 at 9:01 am and is filed under Progressive Voices. You can follow any responses to this entry through the RSS 2.0 feed.