NC lottery money an education lifeline, not a jackpot

The WRAL Investigates team went through six state budgets to examine pre-kindergarten through high school spending and scholarships, both from the general fund and lottery revenue.

Ben Matthews, director of school support for the North Carolina Department of Public Instruction, says there's a misconception about the lottery's impact on the classroom. It's just a fraction – between 4 and 5 percent – of the overall school budget this year, he said.

“There was never any conversation that the lottery would completely fund or totally solve the education needs in North Carolina,” Matthews said.

While the vast majority of lottery money goes toward education, WRAL News found evidence that lawmakers have replaced or supplanted lottery dollars over time to help balance the state budget. Language prohibiting supplanting was included in the Lottery Act passed in 2005. However, a budget bill that same year eliminated the language, giving the General Assembly the freedom to move dollars.

In four of the years since the lottery passed in 2005, the percentage increase for the overall state budget was more than education spending. In 2010, state education funding went down, while the overall state budget went up. Federal dollars helped fill some of the education spending holes.

“It concerns me greatly, because I think public education is the baseline for society to move forward. And when we erode the foundation for public education, which public funding provides, then we're putting ourselves in a rather precarious position,” Matthews said.

Lawmakers continue to tinker with the lottery formula. When it first passed, 50 percent of sales went to prizes, 35 percent to education, 8 percent for administrative costs and 7 percent for retailer compensation.

Earlier this year, the formula changed. Now, 60 percent goes to prizes, 29 percent goes to education and 4 percent goes to administration. Retailer compensation has stayed the same.

“Once a quarter, we transfer the money we've made to the state … and that's where our role ends,” said lottery spokesman Van Denton. “Everything after that, in terms of where it goes and how it's spent, is a decision made by the legislature.”

While the percentage for education dropped, the actual money going into the pot keeps going up because lottery sales are soaring, Denton added.

“Think what it would have been like if the state had not had $450 million to support education,” he said.

This year, $230 million of that will pay for an estimated 3,900 teachers in kindergarten through third grade. The lottery will pump about $100 million into building schools, but for counties, that's replacement money. A portion of corporate income taxes used to go toward construction. When the lottery passed, the tax money went away, substituted with lottery revenue.

“This is the last piece of state funding in existence to support capital needs in North Carolina. So, yes it does help,” Matthews said.

Some money can't be supplanted. About $30 million for college scholarships this year wasn't available before the lottery. In Wake County alone, the lottery has paid for nearly 10,000 scholarships

“This is a little bit of icing on the cake to help out with these specific programs,” Matthews said.

Not all the lottery money goes to education. In last year's budget, lawmakers used $26 million to fill a Medicaid gap.