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N.C. Court of Appeals Hears Lottery Lawsuit

Posted May 22, 2007

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— Is the North Carolina Education Lottery a tax, and was the law making it legal in the Tar Heel state passed unconstitutionally?

State Superior Court Judge Henry Hight, in March 2006, ruled against a lawsuit challenging the lottery's legality, saying the bill was legally passed, because it is not a tax and no one is forced to play the lottery.

But Robert Orr, former executive director of the North Carolina Institute of Constitutional Law and one of the lawyers pressing the challenge to the lottery, that it is indeed a tax, because a portion of the proceeds go to education.

"The fundamental criteria is that the revenue is going to the general benefit of the public," Orr, the taxpayers' lawyer, told the three-judge panel of the state Court of Appeals. "The lottery was sold as a revenue-raising proposition to raise money for education in North Carolina."

At issue in the case is how the General Assembly passed the law and whether it was constitutional. North Carolina law requires votes on separate days for laws that lead to higher taxes or borrow against the state's credit.

Attorneys for the state have argued that the lottery law does neither and that both chambers' votes were legal. (In April 2005, the House approved the lottery bill in a single day by a vote of 61-59. In August of the same year, the Senate needed a tie-breaking vote from Lt. Gov. Beverly Perdue for the measure to pass 25-24.)

The state takes at least 35 percent of ticket revenues -- projected to reach $350 million for the fiscal year ending June 30 -- and earmarks them for education initiatives, including class-size reduction, pre-kindergarten programs, school construction and college scholarships. It's that use of the money -- for such a broad concern as education -- that Orr and his clients consider a tax.

The bigger question, however, for appeals court judges Tuesday was what happens if the lottery, which recently reached the $1 billion sales mark, is ruled unconstitutional.

Court of Appeals Judge James Wynn questioned whether the ruling would harm contracts in place with private businesses to operate the lottery. Sales could stop and winnings could be returned, he theorized.

"How can it be done without having all chaos break out?" Wynn asked.

Orr, who is also a GOP candidate for governor, said the court could delay enforcing the ruling, allowing lottery sales to continue until the General Assembly passes a new lottery law.

The plaintiffs who appealed include the Wake County Taxpayers Association and the North Carolina Family Policy Council. Lawyers for the nonprofit North Carolina Institute for Constitutional Law are representing the taxpayers who sued.

The appeals panel, which also included Judges Ann Marie Calabria and Robert Hunter, didn't say when they would rule, but it likely won't be for a few months.

If the court overturns Hight's decision, it is possible lawmakers would have to vote again on the lottery. If the court upholds the ruling, the case is likely to go to the state Supreme Court.


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  • tarheel1980 May 23, 2007

    You should read the appeal Hockey. It makes a lot of sense. We can only wait to see how the court decides to decide the case. And yes, the court will decide the case again. I am smart enough to understand that. I suspect that either way the Court of Appeals rules, the next stop will be the NC Supreme Court.

    I know that the Superior Court judge ruled in favor of the state. I also read it in each of your numerous posts on this article. Do you really think there is anyone out there that hasn't gotten that message?

    Do you understand that the Court of Appeals will rule on the case and that they are not bound by the decision of the lower court? Have you listened to any of the arguments before the court? Please, I'm begging you, don't answer again that some county judge ruled in favor of the lottery's legality.

  • HockeyRules May 23, 2007

    " but the case is still before the courts."

    And you can be in denial too. The only reason it is still in the courts is because the side you favor, the losing side, appealed the decision. Not because of any questionable ruling...you do know how court cases work and the appeals process work, don't you?

  • andyrey May 23, 2007

    If we follow the concept express by Robert Orr, would a law that changes the fine for a speeding ticket also be a tax law?

    What we need is a law that would force a lawyer to pay the litigation costs for any lawsuit that is totally without merit. That will stop all of the waste of money on things like this because lawyers would have to think twice before taking on the lawsuit.

  • tarheel1980 May 23, 2007

    You guys can be in denial if you like, but the case is still before the courts.

  • HockeyRules May 23, 2007

    "The courts will have to rule in your favor."

    They already have.

  • mulvay8888 May 22, 2007

    Take it out of the lottery fund, it's a tax right?????

  • endlessbs May 22, 2007

    Now just how much of our tax money is going to be used to in this law suite?

  • Me_in_Wendell May 22, 2007

    tarheel_1980, I agree it is a filthy process. It is the same process that has been around for a couple hundred years. There is no way that people in goverment can truly read through a 600 page bill, and find everything that is good or bad. The fact that hundreds of these go across their desks, it is amazing that anything can pass.

    Politics has become a lot like a barter system. You do me a favor (on my bill), and I will help you with yours. Don't get me started on Special Interest Groups.

    NC was the last state on the eastern seaboard to pass a lottery. I know people that would make an "illegal" lottery run, to Virgina or South Carolina. I am glad to see the money being spent, and applied in this state.

  • mulvay8888 May 22, 2007

    tarheel_1980 - But a judge already said it was legal, yet that was still not good enough for some. So really, what is it that you want??? Why don't you just say that you are against the lottery? I'll repost what the JUDGE already said, "State Superior Court Judge Henry Hight, in March 2006, ruled against a lawsuit challenging the lottery's legality, saying the bill was legally passed, because it is not a tax and no one is forced to play the lottery." So if this judge said it was legal what more do you want?

  • tarheel1980 May 22, 2007

    Then don't worry. The courts will have to rule in your favor. It will still be a filthy process, just like the processes that pass the pork.