Lottery law tweaking begins

Staff WriterMay 23, 2006 

The new state lottery is less than two months old and legislators already want to tinker with it.

None of the proposed changes would deal with scratch-off games now on store shelves or pick 'em numbers games that are still to come, including Powerball tickets set for sale a week from today.

Instead, lawmakers have floated proposals to rejigger how profits are spent on school construction, increase oversight of the lottery's spending and operations, and direct winners' taxes to community colleges to buy equipment.

But most of the attention is on how to ensure that lottery proceeds are treated as new revenue and that it all goes to education.

Members of both parties have proposed asking voters to decide in November whether they want to amend the state constitution to lock up lottery proceeds for education once and for all.

It's too early to say what the chances are for passage on any of about a dozen lottery bills that have been introduced in the session's first weeks.

"When you start opening the door on this, everybody has different things they'll want," said Rep. Bill Owens, a lottery supporter and Democrat from Elizabeth City. "You open a can of worms.

"We may want to get [the lottery] up and running for a while and then see what's going on with it and deal with it then, later."

The lottery passed last year, after narrow votes, on a pledge it would provide money for specific areas: the state's prekindergarten program for at-risk 4-year-olds, called More at Four; paying for extra teachers to keep class sizes small in kindergarten through third grade; building schools statewide; and paying for college scholarships for the needy.

But critics have worried that North Carolina will follow at least a handful of other states and shift lottery money from its intended purposes to other areas.

Language making it clear that lottery proceeds would be new money -- an addition to other state spending on education -- was in place at first. But it was sliced from the bill that became law.

The subject flared last week when Gov. Mike Easley questioned plans by the county manager in Mecklenburg to offer a tax cut because lottery money coming in for school construction would allow for it.

"That type of activity puts that money in jeopardy for all the counties," said Easley, raising the possibility that the state might take more control over school construction money.

Easley, a Democrat, supports efforts to ensure lottery money does not supplant education spending. But he has drawn criticism for a part of his plans for the lottery proceeds, outlined in his state budget proposal.

In the current fiscal year, which ends June 30, roughly $200 million of state money goes to More at Four and reducing class sizes.

Easley has proposed to shift that money away from those efforts in the coming fiscal year.

Easley says it would be "reprogrammed" to pay instead for teacher pay raises, now proposed at 8 percent.

The resulting gap in funding for More at Four and class-size reduction would then be filled with lottery proceeds.

Some critics say that amounts to supplanting, because the lottery won't add new cash on top of what was going to reducing class size and More at Four.

The governor disagrees. Easley has made no secret that has been his plan all along -- that those programs were being funded with money up front from the state's general fund, hoping the lottery would eventually pass and then cover More at Four and spending to reduce class sizes.

Easley emphasizes that the lottery is adding to overall education spending.

His total education budget would grow from roughly $9.9 billion to roughly $10.7 billion; the actual increase is 8.8 percent. That is less than an overall state budget increase, though, now proposed at 9.6 percent.

It does not include an expected $425 million more from the lottery, which, when added in, would push the state's increase in education spending to more than 13 percent.

"The question is this: Is he spending more on education than he would have spent otherwise, without the lottery?" asked Elaine Mejia, director of budget and tax monitoring for the nonprofit N.C. Justice Center, an anti-poverty organization. "The answer is: We'll never know."

Critics argue that constitutional amendments are a good goal but that they are difficult to enforce in a state where lottery proceeds are going to a variety of areas, some of which existed before the lottery.

Mejia said that studies of other states with lotteries have shown an early bump in education spending that then slows. It might be a decade before anyone can tell whether the lottery added to education spending, she said.

Lottery chairman Charles Sanders, a past lottery critic, said he worries more about the long term, too. He said he is comfortable so far with how Easley wants to direct lottery money.

"To be perfectly honest, it's not about the next two or three years," Sanders said. "It's about five or six or more years from now when political needs arise and ... they want to use it for other things, divert it to other areas. That would be concerning."

(Staff writer Dan Kane contributed to this report.)

Staff writer J. Andrew Curliss can be reached at 829-4840 or acurliss@newsobserver.com.

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