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The folks at Bloomberg News have just released their latest “sucker index” in which they rank state lotteries for how much they actually pay out in prizes in comparison ticket sales and state income. 

Interestingly, although North Carolinians spend less per capita on lottery tickets than a lot of the other 42 states with a lottery (we’re 23rd),  the state ranks pretty high on the sucker list — 16th out of 43.  That’s in large measure because the prize payouts here are so low (28th out of 43).

All of this probably explains Read More

Last week, NC Policy Watch published the first report in our new series Policy Watch Investigates. Since that time, lottery spokesperson Van Denton has requested an opportunity to offer an official response.

We’re happy to accommodate this request.

Policy Watch stands by the report, and we look forward to the continued discussion on the lottery, as well as how to best fund education in our state.

Read below for Denton’s statement:

A recent report by the N.C. Policy Watch, “Scratch and Shift: Lottery giving education smaller share,”  is based on a flawed assumption that the amount of money paid out in prizes to players of the N.C. Education Lottery does not have a direct correlation to the amount of overall revenues that is raised. Both the experience here in North Carolina and in other states with successful lotteries demonstrate that higher payout in prizes results in higher sales. In fiscal year 2008, when the instant ticket prize payout changed in North Carolina, instant ticket sales increased by 79 percent from the first to the last half of year. The N.C. Lottery Act directs the N.C. Lottery Commission to allocate its revenues “to increase and maximize the available revenues for educational purposes.” The Policy Watch report assumes that sales do not change with a drop in prize payouts and then applies a 35 percent guideline to revenues resulting from the higher prize payout. The report ignores the correlation between prize payout and sales. The extra $80 million that the report claims for education would not have existed if sales had not grown due to the larger payout in prizes.

In the end you can’t spend percentages on behalf of education. You can spend dollars. The math is actually pretty simple. Which does better for education? Deliver a 35 percent return from $866 million in sales, as we did in fiscal year 2007? Or deliver a 30 percent from $1.424 billion in sales as we did in fiscal year 2010? Here’s another way to look at it. Think of a pie. If you have made a bigger pie, which the Education Lottery has, then the slice is not smaller, it’s larger. We’ve increased the amount of money going to education. That’s what’s important.

House Bill 9 has received much debate in the last couple House Education Committee meetings.  The committee is locked in debate, with the last vote resulting in a 9-9 tie.  The House bill re-structures the lottery revenue proceeds distribution formula to relying solely on the average daily membership (ADM).  The bill differs from the current general statutes formula where only 65% of the revenues are distributed by ADM, while the remaining 35% is based on the county’s tax rate.  The county tax rates percentage is calculated according to the state average tax rate.  For counties to qualify for the funding based on tax rates, the rate must be equal to or exceed the state average.  The controversy lies in the fact that some 60 school districts are poised to lose funds if the bill is passed, and funding is based only on ADM. 

 
The Public School Forum has calculated the per-school district funding changes that the proposed House Bill will affect in today’s– April 13th – issue of their bi-weekly Friday Report.  The report points out several discrepancies highlighted in the current formula with one example that Wake County and Mecklenburg County have comparable student populations, but under the current statute, Wake County receives only half ($9 million) the funds from the lottery revenues that Mecklenburg County does due to its low tax rate.  Most of the counties that have less than the state average tax rate are located mainly west of I-77.  Due to the mountain counties’ lower tax rates, the school districts receive less funding under the current formula.  However, in some cases, if the county commissioners slightly raised the property tax rate, their school districts would qualify for the 35% of the allocation.  The current statute seeks to establish some parity between the counties of different sizes and affluence.

 
The distribution formula debate is about fairness and equity.  Many of the poorest counties in the state, and in the country, are located in the eastern sector of our state.  These counties are struggling with high unemployment rates, low per-capita incomes, “sky-rocketing” Medicaid costs, high property taxes, and schools that drastically need repairing and renovation.  If the proposed formula change is adopted, the majority of these counties lose vital school capital funding, and more pressure is placed on these stressed communities, and ultimately, the ability to provide “sound and basic” education of the children in the school districts suffers. 

 
The current method of subdividing the allocation formula by AMD and tax burden is a fair way of helping poorer counties where the commissioners are simply running out of viable options to pay for school construction.  There is a paradox being formed in many of these counties between low wealth and high taxes. Receiving additional school construction funds (and perhaps Medicaid relief) will provide an avenue for improving their worsening learning conditions, and perhaps relieve some of the poorest people in our state from the highest tax burden.     

 
The graph below is a school district funding distribution comparison between the current formula and the new formula proposed in House Bill 9; adopted from this week’s Friday Report:

Lottery Distribution Comparison

Gain/Loss in Funding Compared w/ Current Lottery Distribution

LEA NAME

Current Lottery Formula

Distribution by Enrollment

Distribution by Enrollment

Alamance County

1,740,224

2,677,268

937,044

Alexander County

453,414

697,561

244,147

Alleghany County

121,943

187,605

65,662

Anson County

639,922

510,440

(129,482)

Ashe County

260,475

400,731

140,256

Avery County

180,281

277,355

97,074

Beaufort County

569,225

875,731

306,506

Bertie County

492,376

392,748

(99,628)

Bladen County

841,603

671,313

(170,290)

Brunswick County

904,942

1,392,218

487,276

Buncombe County

2,028,296

3,120,456

1,092,160

Asheville City

301,752

464,234

162,482

Burke County

1,136,642

1,748,679

612,037

Cabarrus County

3,791,007

3,023,932

(767,075)

Kannapolis City

565,315

450,929

(114,386)

Kannapolis City

171,201

136,561

(34,640)

Caldwell County

1,022,639

1,573,291

550,652

Camden County

292,211

233,085

(59,126)

Carteret County

665,065

1,023,178

358,113

Caswell County

260,318

400,490

140,172

Catawba County

1,357,177

2,087,964

730,787

Hickory City

356,316

548,178

191,862

Newton-Conover City

233,665

359,485

125,820

Chatham County

1,150,495

917,703

(232,792)

Cherokee County

293,418

451,413

157,995

Chowan County

377,888

301,426

(76,462)

Clay County

106,061

163,171

57,110

Cleveland County

2,591,380

2,067,039

(524,341)

Whiteville City

399,573

858,192

(80,851)

Columbus County

1,075,888

318,722

(217,696)

Craven County

1,164,238

1,791,135

626,897

Cumberland County

7,951,713

6,342,757

(1,608,956)

Currituck County

332,336

511,286

178,950

Dare County

391,381

602,125

210,744

Davidson County

1,604,758

2,468,859

864,101

Thomasville City

209,450

371,944

112,780

Lexington City

241,763

322,230

130,181

Davie County

514,897

792,149

277,252

Duplin County

1,375,681

1,097,324

(278,357)

Durham Public

4,817,914

3,843,054

(974,860)

Edgecombe County

1,153,982

920,485

(233,497)

Forsyth County

7,703,933

6,145,113

(1,558,820)

Franklin County

1,230,712

981,689

(249,023)

Gaston County

4,901,165

3,909,460

(991,705)

Gates County

320,264

255,462

(64,802)

Graham County

96,391

148,294

51,903

Granville County

1,335,041

1,064,908

(270,133)

Greene County

500,262

399,038

(101,224)

Guilford County

10,611,635

8,464,469

(2,147,166)

Weldon City

155,432

601,279

(31,451)

Roanoke Rapids City

453,556

361,783

(91,773)

Halifax County

753,804

123,981

(152,525)

Harnett County

2,782,750

2,219,687

(563,063)

Haywood County

620,093

953,990

333,897

Henderson County

1,025,155

1,577,162

552,007

Hertford County

538,475

429,519

(108,956)

Hoke County

1,110,613

885,891

(224,722)

Hyde County

50,240

77,292

27,052

Iredell County

1,653,740

2,544,215

890,475

Mooresville City

395,234

608,052

212,818

Jackson County

292,396

449,840

157,444

Johnston County

4,385,892

3,498,447

(887,445)

Jones County

204,108

162,808

(41,300)

Lee County

1,410,406

1,125,024

(285,382)

Lenoir County

1,503,058

1,198,928

(304,130)

Lincoln County

957,933

1,473,743

515,810

Macon County

344,916

530,640

185,724

Madison County

207,248

318,843

111,595

Martin County

655,844

523,140

(132,704)

McDowell County

510,494

785,376

274,882

Mecklenburg County

19,465,607

15,526,922

(3,938,685)

Mitchell County

179,495

276,145

96,650

Montgomery County

357,417

549,872

192,455

Moore County

957,540

1,473,139

515,599

Nash-Rocky Mount

2,754,546

2,197,189

(557,357)

New Hanover County

1,951,639

3,002,522

1,050,883

Northampton County

470,085

374,968

(95,117)

Onslow County

1,838,817

2,828,949

990,132

Orange County

1,032,064

823,235

(208,829)

Chapel Hill-Carrboro

1,692,608

1,350,125

(342,483)

Pamlico County

243,686

194,378

(49,308)

Pasquotank County

491,389

755,983

264,594

Pender County

599,652

922,541

322,889

Perquimans County

143,407

220,626

77,219

Person County

887,096

707,600

(179,496)

Pitt County

3,411,148

2,720,934

(690,214)

Polk County

198,678

305,659

106,981

Randolph County

1,486,510

2,286,939

800,429

Asheboro City

364,964

561,484

196,520

Richmond County

1,270,139

1,013,138

(257,001)

Robeson County

3,680,309

2,935,633

(744,676)

Rockingham County

2,208,034

1,761,259

(446,775)

Rowan-Salisbury

3,169,282

2,528,007

(641,275)

Rutherford County

785,829

1,208,968

423,139

Sampson County

1,248,303

995,720

(252,583)

Clinton City

474,938

378,838

(96,100)

Scotland County

1,042,982

831,944

(211,038)

Stanly County

1,461,964

1,166,149

(295,815)

Stokes County

1,121,684

894,721

(226,963)

Surry County

1,337,164

1,066,601

(270,563)

Elkin City

189,854

151,439

(38,415)

Mount Airy City

274,014

218,570

(55,444)

Swain County

147,967

227,642

79,675

Transylvania County

303,325

466,653

163,328

Tyrrell County

94,472

75,356

(19,116)

Union County

2,671,740

4,110,370

1,438,630

Vance County

1,236,323

986,165

(250,158)

Wake County

9,993,986

15,375,362

5,381,376

Warren County

442,487

352,953

(89,534)

Washington County

328,908

262,356

(66,552)

Watauga County

355,530

546,969

191,439

Wayne County

2,920,744

2,329,758

(590,986)

Wilkes County

797,229

1,226,507

429,278

Wilson County

1,912,942

1,525,876

(387,066)

Yadkin County

950,178

757,918

(192,260)

Yancey County

203,710

313,400

109,690

 

170,000,000

170,000,000

 

lottery moneyLottery revenues are below what the Governor, legislators and lottery officials had expected. So to boost ticket sales, the state is installing vending machines to make it easier and more convenient for people to play the lottery.

The lottery began installing 500 machines statewide last week. The vending machines sell 24 games costing $1 to $10 each. Many will go into supermarkets including Food Lion and Lowes Foods, said Alice Garland, lottery deputy executive director. Some will land in convenience stores with high ticket sales to free up clerks. (Charlotte Observer)

Remember when soda vending machines were going to be the answer to school funding problems? School districts cut deals with the big beverage companies and vending machines were installed in schools. The schools were supposed to make money on the deal, but instead our kids got fat.

If soda vending machines made our kids fat, what will lottery vending machines do for us? It’s amazing what we do in the name of education.