Oversight Committee Concerned With Lottery Supplanting

Special Report - August 27, 2008
On Friday, August 22, members of the North Carolina Lottery Oversight Committee met to consider the benefits of North Carolina’s so-called “Education” Lottery, now in its third year of operation. The committee, which is directed to study ways to prevent lottery proceeds from supplanting education funds, discussed concerns over the seeming trend in state government to supplant education funding with lottery dollars, rather than using the funds generated from the lottery to supplement existing education funding. Although a provision to prohibit supplanting was removed from the final version of the Lottery Act enacted by the General Assembly in 2005, the general expectation of the public and many state lawmakers is that lottery funds should add to and not replace existing General Fund appropriations for education.

The committee expressed particular concern with the funding history of the More-at-Four pre-kindergarten program for at-risk four-year-olds and class size reduction initiative, which receive a combined 50 percent of all lottery revenue dedicated to education. In the 2005–06 Budget, More-at-Four received $66.6 million from the General Fund. In 2006–07, the year after the lottery passed, More-at-Four’s entire budget of $84.6 million came from only lottery funds. In 2007–08, More-at-Four received the same $84.6 million in lottery funds in addition to $56 million from the General Fund for a total of $140.6 million. Although this latter amount represents a substantial increase in funding for More at Four, committee members recognized that for the last two years, the General Fund appropriation for More at Four was less than that appropriated in 2005–06, indicating that the expected General Fund appropriations for the program have been supplanted by the lottery.

In addition, North Carolina public schools aim to maintain an 18-to-1 student to teacher ratio in public school classrooms. That goal has been met every year since 2003. The fact that lottery money has been funneled to this effort, yet the ratio has been unchanged since before the enactment of the lottery, has caused some committee members to again ask whether lottery funds are just replacing existing dollars the General Assembly would have otherwise appropriated, and if so, where those General Fund dollars have gone.

North Carolina Family Policy Council vice president and director of government relations John Rustin commented, “The Lottery Oversight Committee is observing what we have warned lawmakers about all along: it is practically inevitable that the lottery will be used to supplant, instead of supplement, education funding. While lottery revenues may be used to directly fund education programs and services, the General Fund dollars that normally would have been dedicated to those programs and services are diverted elsewhere. This is a textbook example of supplanting through the lottery.”

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