Carolina Journal News Reports

Lottery Funds Continue To Be Diverted For Unauthorized Purposes

Few safeguards to prevent raids by General Assembly, governor

Aug. 25th, 2010
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RALEIGH — North Carolina created the state's Education Lottery in 2005 amid promises that the money would be used solely to supplement current funds for education. Before passage, then-Gov. Mike Easley assured state residents that money from the Education Lottery would “supplement, not supplant existing spending for education,” and he would “not recommend nor sign legislation that reduces the state’s spending for education.”

That promise has not been kept. To help balance the 2008-09 budget, Gov. Bev Perdue emptied $50 million from lottery reserves. The 2009-10 budget diverted to the General Fund $69 million in lottery money slated initially for school construction.

Every other state that has created an education lottery has implemented safeguards limiting and even outlawing raids by the legislature or the governor. Many have protected their lottery funding by making such diversions a violation of the state constitution. North Carolina lacks those protections.

Although the stated intent of the lottery was to supplement education funds, the language of the bill changed before passage, allowing the option to replace existing education money.

Even where lottery funds theoretically are supplanting other education spending, some money is being misused. WRAL-TV reported in May that spending meant to reduce class size instead kept student-teacher ratios in K-3 schools constant. And though General Fund spending on education has increased since the lottery was created, the percentage of the General Fund dedicated to education has dropped.

'Bev’s piggybank'

Tracing a single lottery dollar is difficult, says Terry Stoops, director of education policy at the John Locke Foundation. All the money goes into a pool for education, he says, but at that point it’s difficult to isolate General Fund dollars from lottery funds.

Outrage over redirected lottery money rose last year, when Perdue withdrew money from school construction projects, which she later returned, and emptied the Lottery Reserve of $50 million, which she did not return, to help balance the state budget.

Perdue justified pulling the lottery money into the General Fund because over half of the general fund relates to public schools and teachers.

While Perdue has said she is open to legislation securing lottery funds for education, she also contends that such legislation would not prevent her from using funding from the lottery to balance the budget, as she did when she permanently diverted $50 million last year.

The lack of any safeguards to protect the lottery funds led Stoops to call the lottery “Bev’s piggybank.” Other critics suggest that the legislature should be honest and remove the term “education” from the lottery’s official title.

Perdue cast the tiebreaking vote bringing the lottery into existence, notes Bill Brooks, president of the North Carolina Family Policy Council. Now she “takes from the lottery whenever she feels the need to do so, but it’s within her right and power [as governor] to do this.”

Brooks is concerned that lottery funds are defrauding education funds in more ways than mentioned. “Everyone knows coupling ‘education’ with ‘lottery’ was a shell game to get it passed ... but it doesn’t help education.”

The lottery makes it harder for the public to approve education bond issues, Brooks says, because “people see the signs that say ‘$83 million lottery’ and they think lots of money is going toward education, so they wonder why they should vote on bonds.”

The lottery routinely uses funds inappropriately, Brooks says, but the General Assembly didn’t “write into the law that you can’t use the funds for things other than education, so you can’t stop the ‘misuse’ of funds.”

Amanda Vuke is an editorial intern at Carolina Journal.