Lotteries account for little of schools’ revenue

first_imgFor years, those states have heard complaints that not enough of their lottery revenue is used for education. Now, a New York Times examination of lottery documents, as well as interviews with lottery administrators and analysts, finds that lotteries accounted for less than 1 percent to 5 percent of the total revenue for K-12 education last year in the states that use this money for schools. In reality, most of the money raised by lotteries is used simply to sustain the games themselves, including marketing, prizes and vendor commissions. And as lotteries compete for a small number of core players and try to persuade occasional customers to play more, nearly every state has increased, or is considering increasing, the size of its prizes – further shrinking the percentage of each dollar going to education and other programs. In some states, lottery dollars have merely replaced other money for education. States eager for more players are introducing games that emphasize instant gratification and more potentially addictive forms of gambling. Of course, the question of how much lotteries contribute to education has been around for years. But the debate is particularly timely now that at least 10 states and the District of Columbia are considering privatizing their lotteries, despite assurances decades ago that state involvement would blunt social problems that might emerge from an unregulated expansion of lotteries. These trends fly in the face of marketing campaigns that often emphasize lotteries’ educational benefits, like a South Carolina lottery slogan, “Big Fun, Bright Futures,” or a television advertising campaign in North Carolina featuring a thank-you note passed through schools and signed “The Students.” The New York Lottery’s Web site includes the tagline, “Raising billions to educate millions.” Last year, North Carolina Gov. Mike Easley finally delivered on his promise to start a lottery, making his state the most recent of 42 states and the District of Columbia to cash in on legalized gambling. If some voters in this Bible Belt state frowned on Easley’s push to bring gambling to the state, others were persuaded by his argument that North Carolina’s students were missing out on as much as $500 million in aid annually as residents crossed the border to buy lottery tickets elsewhere. “Our people are playing the lottery,” the governor said in an address two years ago that was a prelude to the creation of the North Carolina Education Lottery. “We just need to decide which schools we should fund, other states’ or ours.” Pitches like this have become popular among lawmakers who, since states began legalizing lotteries more than 40 years ago, have sold gambling as a savior for cash-starved public schools and other government programs. Lotteries have raised billions of dollars, and of the 42 states that have them, 23 earmark all or some of the money for education. Promotions like these have taken root. Surveys and interviews indicate that many Americans in states with lotteries linked to education think their schools are largely supported by lottery funds – so much so that they even mention this when asked to vote for tax increases or bond authorizations to finance their schools. Long a mainstay of American life, lotteries began as raffles in the 1700s to finance the Continental Army, bridges and roads, and Columbia University. But modern lotteries are big businesses, run by streamlined enterprises with managers and consultants from Fortune 500 companies. State lotteries raised more than $56 billion and returned $17 billion to the state governments last year. They spent more than $460 million last year on advertising, making them one of the nation’s largest marketers. The 197,000 retailers that sell lottery products earned $3.3 billion in commissions in 2006. Lottery advocates say the games live up to their public mandate. According to the North American Association of State and Provincial Lotteries, $234 billion has gone into state coffers since the first modern lottery was started in New Hampshire in 1964. “Lotteries bring additional money to states that can be used very effectively to fund special projects without raising taxes,” said Charles Strutt, executive director of the Multi-State Lottery Association, a nonprofit group. But among the states that earmark lottery money for education, lottery dollars accounted for 1 percent or less of the total K-12 education financing (including all state, federal and local revenue) last year in at least five states, including New Jersey. New York had the highest percentage, 5.3 percent. (Five states – Georgia, Kentucky, New Mexico, South Carolina and Tennessee – direct lottery dollars primarily to college scholarships. North Carolina and Florida also give some money to scholarships.) At least five states – California, Missouri, New Jersey, Ohio and Washington – channel lottery money to higher education as well as elementary and secondary schools. In these states, too, lottery proceeds amount to less than 5 percent of the total education financing. In at least four states – California, Illinois, Michigan and Texas – lottery dollars as a percentage of K-12 education money has declined or remained flat over the past decade. In California, for example, the lottery in 1985 accounted for almost 5 percent of all K-12 education dollars. Today, it makes up less than 2 percent, or about $1 billion, of the $54 billion the state spends on K-12 education, according to the California Budget Project, a nonprofit research group in Sacramento. As the California Department of Education noted in its State Fact Book two years ago: “Although the public still perceives the lottery as making a significant difference in the funds available for education, it is a minor source that cannot be expected to provide major improvements in K-12 education.” Some state lotteries have fallen short of projections. In North Carolina, where officials were expecting the lottery to generate $400 million to $500 million a year for education, revenue reached just over $300 million in its first full year of operations. In Oklahoma, officials expected the schools to receive $52 million last year from the lottery, but the finally tally was $15 million less. Also, the portion of lottery money going to state programs is shrinking. When Missouri passed its lottery in 1985, it required that at least 45 percent of all proceeds go to the state, and the number went as high as 52 percent. Legislators revised the law, and the state gets slightly less than 30 percent of proceeds. The Times review of documents from all 42 states with lotteries and the District of Columbia found that nearly all have increased payouts and lowered the percentage going to programs. And those that have not changed their payout formulas are considering it. Lawmakers and lottery officials defend the practices, saying schools and other programs will still benefit from the extra money raised by lotteries. Because legislators in some states decide school budgets well in advance of knowing what lottery revenue will be, lottery money is just another part of the overall budget. If the lottery dollars are below projections, the state makes up the shortfall with money from other sources, or in some cases, simply gives schools less money. If the lottery dollars exceed projections, the state uses some of the money for other programs. “Legislators merely substitute general revenue funds with lottery dollars so the schools don’t really gain any additional funding,” said O. Homer Erekson, dean of the business school at the University of Missouri in Kansas City, who co-wrote a national study on lottery money and school financing. States including Georgia, Oklahoma and South Carolina, have enacted laws that prohibit substituting lottery dollars for general funds that would have otherwise gone to education. But such laws have not stopped legislators. Oklahoma, for example, used lottery money last year for a portion of promised teacher raises that were supposed to come from the general fund. “It makes it harder for us to convince people that they still need to support education,” said Brett McFadden, a budget analyst with the Association of California School Administrators. “They think the lottery is taking care of education. We have to tell them we’re only getting a few sprinkles; we’re not even getting the icing on the cake.”160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!last_img read more