Local Politics

Shift in lottery funds blows holes in county budgets

Posted July 14, 2010 5:53 p.m. EDT
Updated July 14, 2010 7:38 p.m. EDT

— Lawmakers' recent decision to move North Carolina Education Lottery funds around within the state budget to save teaching jobs has cut the amount of money available to pay for school buildings.

Moving $63 million in lottery funds helped school districts statewide avoid having to lay off a total of 1,600 teachers, but it throws county  budgets for a loop weeks before most schools begin classes for the year.

Distribution of lottery funds is based on a formula that takes into account both enrollment and the property tax rate in each district. The shift in funds for the 2010-11 fiscal year hits counties with higher tax rates harder because they would have received more money for school building expenses under the formula.

Johnston County, for example, will lose almost $2.3 million in lottery money for capital expenses, according to state estimates.

"I think frustrating and disappointment would be the two best words (to describe our situation)," Johnston County Manager Rick Hester said Wednesday.

The county has invested roughly $350 million to build, renovate and expand school buildings over the past 10 years. Much of the building boom was paid for with bonds.

"We have to make that $33 million worth of (bond) payments this fiscal year, no matter what happens," Hester said.

Because school systems across the state have already set their operating budgets for the coming school year, David Thompson, executive director of the North Carolina Association of County Commissioners, said some counties will have a harder time digging out of the unexpected hole than others.

Wake County, for example, loses only $101,835 because of the lottery funds shift. Meanwhile, Cumberland County loses $3.6 million, Durham County loses $2.2 million and Orange County loses $1.3 million.

"The real concern is, what does this mean for the future? Can we count on the lottery funds for school construction?" Thompson said.

Many counties will likely have to postpone school construction projects or find other cuts so they can make their bond payments, he said.

Johnston County officials said they aren't sure how they will balance their budget, but they don't anticipate job losses or tax increases.

"We did not think that on July 14 we'd already be in the process of trying to figure out how to recoup $2 million somewhere," Hester said.