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The John Locke Foundation
is a501(c)(3) nonprot, nonpartisan researchinstitute dedicated to improving public policy debate in North Carolina. Viewpoints expressed by authors do not necessarilyrefect those o the sta or board o the Locke Foundation.
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ax:
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spot
light
No. 405 – February 2, 2011
J
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W
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The NC Education Lottery’s many problems have a common solution
key acts:• th Norh crolin eduion Lor w old w o boo duion pnding in hi , bu rrh how h hhiorill bn l promi o lori. s wihou duion lo-ri minind nd inrd duion pnding mor hn wihlori.• N.c. h h m problm ound in ohr lor : dlining r o pnding or duion, pill in omprion wih h r o h budg.• Lor und rpling rhr hn upplmning duion pndingh bn problm in Norh crolin in bor h fr lor i wvn old.• Povr, unmplomn, nd propr x r rmin h b prdioro oun’ lor l.• eigh o h op n ouni in lor l pr dul wr mong hmo onomill dird ouni in h .• th lor i unding our h mn Norh crolinin fnd im-morl ou o ihr rligiou bli or onrn or oil jui or boh.•In h lor, h h rd vr ol m o puring monrom iizn h onvr ju mll porion o i ino duion unding.• th b poibl rorm o ddr ll ho onrn would b o nd h lor nd rurn o mor hon, dir orm o duion unding.th ’ dir fnnil piur i lrion ll or roo-nd-brnh rorm,nd hr r vrl duion rorm h ould b urd.• anohr rorm, drguld gmbling, would llow induri o dvlopnd omp in h , ring job, buring h onom, nd on-ribuing hrough rponibl xion o duion pnding nd h Gn-rl und.• a h vr l, polimr hould rorm h lor o o uduion prod mor ivl.
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he North Carolina Education Lottery was created in August 2005 and began selling Scratch-O tickets in 2006.Over the next ew months and years, the lottery quickly added games, including the multi-state Powerball andMega Millions.
Who bnf rom h Norh crolin eduion Lor?
The nominal purpose o the lottery is to raise money or public education. Fity percent o lottery proceeds goestoward class-size reduction and the More at Four program, 40 percent goes toward school construction, and the re-maining 10 percent goes toward college scholarships.
1
The lottery was sold as a way to boost education spending in North Carolina,
2
but that has historically been a“alse promise” o education lotteries to their states. In their study o 11 state education lotteries in the 1980s and ‘90s,associate proessor o mathematics Donald E. Miller and associate proessor o political science Patrick A. Pierce o St.Mary’s College ound thatThe popularity o lotteries and legalized gambling is based in part on their claim to painlesslyprovide additional revenue to needed state unctions. The most popular purpose to which theserevenues have been devoted is education. However, we have demonstrated that these are alsepromises or education. States are likely to
decrease
their growth o spending or educationupon operating a lottery designated or that purpose. Furthermore, the decrease in the rate o growth is a long-term unction o lottery adoption that occurs regardless o revenue generatedby the lottery.
3
(Emphasis in original.)On closer examination o the lotteries’ impact on education spending, Miller and Pierce ound what they called“an even more perverse portrait”: this long-term decline in education spending ollowed an immediate initial spikein spending growth. Education spending spikes initially, citizens and policymakers iner the lottery is delivering aspromised, and education spending overall declines in the ollowing years.
4
igur 1. annul Growh in unding, Publi shool v. h R o h Gnrl und, y 1996-2010
3
Most revealing, Miller and Pierce fnd thatRegardless o the state or the time at which its lottery operated, educational spending declinedonce a state put a lottery into operation. Hence, the pattern o a declining rate o spending isnot simply an artiact o state fscal problems in the 1980s. The present analysis indicates thatstates
without
lotteries maintained and increased their educational spending more than states
with
lotteries.
6
(Emphasis in original.)Miller and Pierce conclude that lottery revenue is not used to increase education spending, and as to where thoserevenues go, they note that “lottery revenue constitutes a very small percentage o total revenue” and posit that theunds replace general revenue. In short, they fnd thatTo conclude, lottery revenue is unlikely to materially increase unding or education--and per-haps any other purpose. However, such revenue has political returns or governors that aresignifcant.
7
Lottery unds going to replace general revenue (also called supplanting) rather than supplement education spend-ing is a problem that has overtly dogged the NC Education Lottery rom its onset, just as critics predicted.
8
In early2006, beore the frst lottery ticket was even sold, Gov. Mike Easley announced that hal o the expected $400 millionrevenues would go to replace current education spending.
9
In 2009 Gov. Bev Perdue transerred $50 million rom theLottery Reserve into the General Fund, as well as $37.6 million intended or school construction (later returned).
10
By 2009 the problem had gotten so bad that some state legislators sponsored legislation to remove “Education”rom the name o the North Carolina Education Lottery, out o concern or truth in advertising.
11
In 2010, WRAL pub-
igur 2. componn o h Gnrl und, y 1996-2010
5
Public education, lottery transers, stimulus unds, and the rest
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Spotlight 405 Just Not Worth the Gamble: The NC Education Lottery's many problems have a common solution
Key facts:
• The North Carolina Education Lottery was sold as a way to boost education spending in this state, but research shows that has been a false promise of education lotteries: states without education lotteries… (More)
• The North Carolina Education Lottery was sold as a way to boost education spending in this state, but research shows that has been a false promise of education lotteries: states without education lotteries… (More)
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