news-record.com

What does the money received from the N.C. lottery go toward? How is the state lottery held accountable for the money it contributes toward the N.C. educational system?

— Cynthia Spender, Greensboro

When lawmakers wrote the lottery law in 2005, they set out four education-related programs that could get lottery funds:

-- A lottery scholarship program for “needy North Carolina resident students attending eligible colleges and universities located within the state of North Carolina;”

-- School construction funding for the counties;

-- The More-at-Four pre-kindergarten program;

-- Class size reduction.

In addition, the lottery helps to fund a gambling addiction hotline run by the Department of Health and Human Services.
More than half the lottery’s earnings goes toward paying winners. The lottery’s goal is to turn over 35 percent to its education programs. The rest is used by the lottery commission to pay salaries, operate the games and compensate retailers who sell lottery tickets.

While there are sometimes disputes over the lottery’s administrative funds — lottery executives are some of the highest paid in state government — the agency receives regular financial audits. And once it transfers money to the state’s general fund, its responsibility for tracking spending ends.

Back when the state created the lottery, there was a good amount of concern over whether lottery funds would supplant other state spending — that is replace money that would otherwise come from taxpayers.

The idea, at the time, was that the lottery should be new money for education, not merely a new revenue stream. So have lawmakers avoided supplanting?

Yes and maybe.

Because the scholarship and construction programs were new at the time the lottery started, it’s pretty easy to tell where those funds have gone. For example, we can tell that in the past fiscal year 1,962 students from Guilford County alone received a total of $2.1 million in lottery scholarship aid for an average grant of $1,085. About $33.5 million was given out statewide during that year.

Different school districts have handled the money they get for school construction in different ways. In Guilford County, the money mainly goes toward paying off bond debt, according to Sharon Ozment, the county school system’s chief financial officer.

Since the lottery started, the Guilford County Schools has received $21.2 million from the lottery and earned another $820,000 on the interest from that money.

School districts such as Guilford missed out on some of their lottery construction allocations during this calendar year when Gov. Bev Perdue seized the funds to balance the state budget. But pin that on the fiscal crisis rather than the lottery; the governor is required to balance the state’s budget even if it means grabbing “protected” money.

Perdue announced Friday that she would return the money later this month.

The lottery money that goes toward More-at-Four and class-size reduction is a bit harder to parse out. Local school systems don’t directly see the More-at-Four funding or the class-size reduction funding, according to Ozment. Those funds are accounted for in the overall state budget.

For the coming year, the state plans to spend $84.6 million in lottery proceeds along with $86 million in tax dollars on More-at-Four, a pre-Kindergarten program. Worth noting, lawmakers are studying whether to merge the program with Smart Start, another pre-kindergarten program that serves a similar target population.

The state will spend $99.4 million in lottery dollars on teachers for elementary school classrooms. In theory, this money is for class-size reduction, ensuring that the student-to-teacher ratio stays low.

Certainly, keeping those ratios low was a point of debate during this year’s budget discussions, and a place where Perdue made a stand early on. And certainly the lottery money helped the state pay for teachers in a budget year in which Democrats said there was a $4.5 billion spending gap.

However, whether this money is supplanting tax dollars that would otherwise be spent in this area is not a question that we can answer clearly right now. It is among several lottery-related questions we want to look at in a later article.

One final thing to keep in mind: There was a total of $368 million in lottery funds for lawmakers to use in this year’s budget. Public K-12 education costs the state $7.4 billion before the counties chip in their share. That means total lottery funding accounts for less than 5 percent of state K-12 education spending.

Contact Mark Binker at (919) 832-5549 or mark.binker@news-record.com