State Budget Includes Lottery Revenues

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State Budget Includes Lottery Revenues

Special Report - July 10, 2008
On Tuesday, July 8, the North Carolina General Assembly passed a final version of the 2008-2009 budget, which includes over $405 million in estimated funding for public education programs using proceeds from the State Lottery. This appropriation anticipates net lottery revenues of $385.5 million from $1.2 billion in ticket sales and includes a transfer of $19.75 million from the Lottery Reserve Fund. Of these funds: 52.4 percent will be allocated to the More at Four pre-kindergarten program for at-risk four year olds and class size reduction in public schools; 9.5 percent will fund college scholarships for qualified needy students; and 38 percent will go toward public school construction.

According to the Lottery Act passed in 2005, 35 percent of the school construction money is allocated to the public schools based on “average daily membership,” or the average student population of a local school system. The remaining 65 percent of these funds are distributed to school systems in the state that are located in a county with a higher than average county tax rate. Based on data from legislative staff, this distribution formula includes about 48 of the state’s 100 counties, excluding the other 52 counties from this portion of school construction funding. In an attempt to address this discrepancy, the budget bill, HB 2436—Modify Appropriations Act of 2007, allocates an additional $14.2 million in school construction funding for the counties that are deprived a portion of lottery revenues based on the county tax rate formula.

This is the first year the General Assembly has dipped into the Lottery Reserve Fund to supplement anticipated revenue for education funding. Specifically, $19.75 million has been appropriated out of this Reserve Fund for class size reduction in the 2008-09 fiscal year. According to Tami Fitzgerald, staff attorney for the North Carolina Family Policy Council, “The stated purpose of the $50 million Lottery Reserve Fund is to close any unanticipated revenue shortfalls during any given fiscal year. Reserve funds are not intended to be appropriated initially for any other purpose. Once again, the lottery is proving to be an unreliable source of revenue for our state’s public schools.”