What does the N.C. Education Lottery do for Chatham County?

Posted 7/12/19

Scratch-offs, Pick-Six, Carolina Keno — the opportunities to win big in the N.C. Education Lottery continue to grow, as do the profits brought in by the various games.

But what does the lottery …

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What does the N.C. Education Lottery do for Chatham County?

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Posted

Scratch-offs, Pick-Six, Carolina Keno — the opportunities to win big in the N.C. Education Lottery continue to grow, as do the profits brought in by the various games.

But what does the lottery bring to Chatham County? Do the numbers back up the claims that it’s, as the lottery’s website claims, “making students in the state of North Carolina the real winners”?

Where did the lottery come from?

The N.C. Education Lottery was approved by the N.C. General Assembly in 2005. Its short title was the “North Carolina State Lottery Act,” but its long title purported to give more clarity as to its purpose — “An Act to Establish a State Lottery to Support School Construction, to Fund College and University Scholarships, and to Generate Funds to Further the Goal of Providing Enhanced Educational Opportunities So That All Students in the Public Schools Can Achieve Their Full Potential, As Recommended by the House Select Committee on the Lottery.”

The final version of the bill, House Bill 1023, was approved August 31, 2005 and signed by Gov. Mike Easley. In the final vote in the state Senate, it received no support from Republicans and required a tie-breaking vote in favor from then-Lt. Gov. Beverly Perdue.

The revenues were to be allocated, “to the extent practicable,” the bill stated, in the following manner: at least 50 percent to the public in the form of prizes; at least 35 percent to educational purposes; no more than 8 percent for expenses, including no more than 1 percent for advertising; and no more than 7 percent for compensation to retailers. The allocation language was changed in 2007 to state the percentages were “guidelines” to which the lottery commission “shall adhere...to the extent practicable.”

How much do people spend on lottery tickets?

In fiscal year 2018, more than $2.6 billion were spent on lottery tickets in North Carolina. More than $14.4 million of that came from Chatham County’s 51 lottery retailers. Not every dollar was spent by Chatham County residents, but that figure averages out to $423.12 per employed person in Chatham over the year. That’s around 0.7 percent of the median household income in the county.

Now that we have that background, what does Chatham get out of it?

In pure dollars and cents, Chatham County education initiatives received $3,845,261 from the N.C. Education Lottery, just less than 27 percent of what customers spent on tickets in the county.

According to data from NCEL, the majority of the funds from fiscal year 2017-2018 went to what was termed “non-instructional support” in Chatham County Schools, a total of $2,172,334. The next highest category of funds was 132 slots in the N.C. Pre-K program at $631,498. Other categories include school transportation, school construction and college scholarships and grants.

Tony Messer, the chief financial officer at Chatham County Schools, told the News + Record that “on an annual basis,” revenue from the lottery “hasn’t really impacted our financial operations.” He said that funds in the past have helped pay off debt for Margaret B. Pollard Middle School in Pittsboro and Virginia Cross Elementary School.

“We sign over all the lottery funds to go to the county to pay debt on schools that were built,” he said. “It’s a small part of the pie in paying, but it does help. We don’t see a day-to-day impact.”

If those capital funds weren’t made available, the county’s board of commissioners would need to find another revenue source to cover those debt payments, according to Hope Tally, Chatham County’s Assistant Finance Officer. The average amount collected each year for debt payment would account for just more than a half-cent of the property tax rate.

The school district handles the funds for school construction — $598,318 last fiscal year — and some of the other revenue, but most of it is administered through the state Department of Public Instruction. Messer said some of the lottery funds over the years have supplanted money previously supplied by the state.

How are ticket sale revenues allocated now?

The original law stated that, as far as was practical, at least 50 percent to prizes, at least 35 percent to education purposes and so on. The 2007 change made those stipulations “guidelines.”

In the first full year of the lottery’s existence, that guideline was stuck to — 51 percent of ticket sales ($451.7 million) went to prize money and 35.6 percent went to education funding ($315.3 million). But as the years have progressed, the percentages have shifted greatly. In fiscal year 2018, 63.2 percent of ticket sales went to prizes and 25.9 percent went to education.

Asked about this shift, Van Denton, the lottery’s director of communications, said the lottery must be thought of as a businesses.

“Prizes are the products of the lottery,” Denton said. “If the lottery strikes the right balance between its investment in prizes and other operating expenses that support sales, it can maximize the amount of money it raises for education. If products are strong, sales and profits are strong too. If a company has a poor product, sales decline and profits decline too.”

He cited the most recent audit of the lottery, which said the NCEL’s “ongoing performance has been exceptional” and that its “exceptional success in consistently growing profits indicates a prudent cost-benefit approach to increasing expenditures.” Denton added that the shift in percentage allocation is one of the reasons revenues have increased over the years.

“The lottery believes if it invested less money in prizes — the product it sells — then sales would fall and less money would be raised for education,” he said. “The goals should be grow sales and to raise more money each year, not less.”

From FY 2007 to FY 2018, the money for prizes distributed per year have increased more than 264 percent — from $451.7 million to $1.647 billion — while funds for education each year have only jumped 114.1 percent — from $315.3 million to $675.4 million.

Reporter Zachary Horner can be reached at zhorner@chathamnr.com or on Twitter at @ZachHornerCNR.

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