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Lottery Sales Still Behind Projections

Special Report - February 22, 2008

State Lottery Director Tom Shaheen reported that for the first seven months of the lottery’s fiscal year (July, 2007 through January, 2008), lottery sales have fallen below budget projections. If not reversed, this trend will result in a $62.4 million deficit for the year. Shaheen noted that instant ticket sales have sharply increased since January 8 when a new game began being offered. He expects sales to rise in the coming months.

At the urging of lottery officials, last summer the General Assembly authorized reducing the percentage of sales revenues going to education in order to increase the percentage of sales revenues diverted to prizes. Lottery officials insisted that such a move would increase overall sales, resulting in an increase of the dollars that go to education, even though those dollars constitute a smaller percentage of overall sales. The original State Lottery Act required 35% of sales to go to education. Currently, for the month of January 2008, 30-31% of revenues are going to education.

Lottery revenues going to education fell from the first quarter of 2007-08 (when the percentage going to education was 35%) to the second quarter (when the percentage going to education was lowered), so the projected increase in education funding has not occurred. Lottery officials had projected monthly education revenues would be $28.4 million, but the actual receipts for education have been averaging $24.2 million.

Lottery officials reported the lag in sales in the monthly meeting of the State Lottery Commission on February 20, 2008. They also reported that there is substantially no increase in the number of vendors selling lottery tickets, because many vendors have either decided to stop selling lottery tickets or have been slow to pay lottery revenues to the State.

Meanwhile, a lawsuit filed in state court by the North Carolina Family Policy Council and others to challenge the constitutionality of the lottery languishes in the Court of Appeals, where it has waited for a decision for nine months. The case was first filed in Wake County Superior Court on December 15, 2005. The lottery was launched in March of 2006. Superior Court Judge Henry Hight dismissed the complaint on March 21, 2006, ruling that the lottery was not a tax and did not, therefore, have to comply with constitutional provisions that required both houses of the General Assembly to vote on the enacting legislation twice on two separate days. A motion to bypass the Court of Appeals and appeal the case directly to the Supreme Court failed, and the appeal proceeded in the Court of Appeals. Oral arguments were heard in the case by the Court of Appeals on May 22, 2007, but the Court has not issued a ruling in the case since that time.

NCFPC President Bill Brooks stated: “The lottery is and has been bad public policy. As the lagging lottery sales show, the lottery tax is an unpredictable source of revenue, as well as a transfer of wealth from poor individuals to middle- and upper-income individuals. It creates addicted gamblers, destroys families, and should be abolished.”