Budgetary raid on lottery funds raises alarm

Raleigh, N.C. — Gov. Beverly Perdue's decision last week to pull $50 million from the Education Lottery Reserve Fund to help cover state operations has met with criticism from both lottery opponents and representatives of North Carolina's counties.

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Education lottery money goes to budget shortfall

With the state facing a projected $2.2 billion budget deficit for the 2008-09 fiscal year, Perdue created a $300 million emergency reserve in case extra money is needed to pay for day-to-day operations until April, when corporate income tax payments are due.

In addition to the lottery fund, she allocated $100 million each from the Clean Water Management Trust Fund and the Public School Building Capital Fund and $50 million from the Public School Textbook Fund to the emergency reserve.

"It is a bit of a breach of good faith with the public," said Bob Orr, a former state Supreme Court justice who has a pending lawsuit challenging the legality of how state lawmakers approved the lottery in 2005.

Perdue, who was lieutenant governor at the time, cast the tie-breaking vote to guarantee the lottery's approval in a controversial special session of the state Senate.

Orr and other critics now point to the pledge lawmakers made in 2005 to dedicate lottery proceeds to education.

"It's one more controversy," Orr said of Perdue's recent reallocation.

Perdue, a former teacher and longtime education advocate, defended her actions, saying North Carolina is in an economic crisis.

"It's my constitutional responsibility to balance the budget, and I'm going to do that," she said. "If I need help doing it, I'm going to have to do what I have to do to make that happen."

State Treasurer Janet Cowell said she worries about Perdue robbing Peter to pay Paul.

"You're not going to get through (the budget deficit) with those sorts of short-term measures," Cowell said. "Make those hard (budgetary) decisions, as opposed to (using) duct tape and smoke and mirrors."

Cowell voted against the lottery as a senator four years ago.

Counties statewide also are worried about the move because they count on lottery funds and other state money for school construction projects, said David Thompson, executive director of the North Carolina Association of County Commissioners.

"It's a high level of concern," Thompson said.

The state held back $43.3 million from state schools last month, including $37.6 million in lottery money, he said. That included about $4.4 million from Wake County, $1 million from Durham County and $1.7 million from Cumberland County.

"I don't think anybody knew that the payments were to debt service and to ongoing construction," Thompson said.

Perdue said she supports a constitutional amendment to dedicate lottery money to education. But, she argues, she still would have the executive authority to use lottery money to balance the state budget, if needed.

"I want to pay the money back. Obviously, I do," she said. "I was assured that (the reallocation) will not affect any capital construction projects."