Smithfield: Opinion

Lottery is balancing act

For every dollar spent on the N.C. Education Lottery in the latest fiscal year, slightly more than a quarter – 27.3 cents – came back to the state for education.

In this fiscal year, which ends June 30, lottery officials expect that number will creep down to about 26 percent. At the lottery’s launch nearly a decade ago, 36 cents per dollar spent on lottery tickets went to the state to pay for school construction, scholarships and other education needs.

Why has that percentage declined over time?

When the lottery started selling tickets in 2006, the General Assembly mandated that 35 percent of its revenue go toward education. (It is the Education Lottery after all). But after disappointing sales numbers for the first year or so, lawmakers repealed the mandate, giving the lottery more flexibility to dole out more prize money in hopes of selling more tickets.

Since then, the percentage of lottery revenue paid to players in prizes has increased every year, according to a chart provided by the lottery. This past fiscal year, 61.5 percent of revenue went toward prizes, up from 51.7 percent in 2007. Meanwhile, the percentage of lottery revenue going back to the state for education has declined each year.

But because the state is selling more tickets, lottery dollars for education have increased every year. In other words, even though education gets a smaller percentage, it gets more lottery money because the pie is bigger. Last fiscal year, the lottery gave the General Assembly more than $503 million. This year’s lottery budget forecasts more than $520 million coming to state coffers.

During this year’s state budget debate, a top lawmaker suggested that the General Assembly should take a look at the percentage of sales the lottery is returning to the state for education. It’s unclear whether that will happen.

But through the state budget, lawmakers created a special lottery oversight committee with 14 legislators expected to delve into lottery administration, budgeting and policies. The committee also will examine the lottery’s efficiency and review other states’ games to identify ways to maximize contributions to education in North Carolina.

To increase sales, lottery officials recommend more advertising. Today, the lottery is allowed to spend 1 percent of its revenue on ads. But lottery officials would advise against any attempts by lawmakers to once again mandate a percentage of revenue that must go to education because that likely would require a corresponding decrease in prizes.

They pointed to other states, like Texas, that lowered prize payouts in order to give higher percentages back to the state and suffered significant decreases in sales.

In the lottery business, states sell prizes.

“I don’t know of many businesspeople who would say the way to grow sales and profits would be to make … your product less valuable to the consumer,” said lottery spokesman Van Denton.

Creating the proper balance between lottery sales, prize amounts and returns to education is a delicate act that many state lotteries must try to master.

And in North Carolina, it’s a balancing act that lawmakers might soon jump into.

Patrick Gannon is a syndicated columnist who writes about state government and politics.