Supreme Court Hears Lottery Appeal

Special Report - September 9, 2008
Six justices of the North Carolina Supreme Court heard arguments of counsel on Monday in an appeal of a suit brought by the North Carolina Family Policy Council and others to challenge the constitutionality of passage of the North Carolina Lottery Act. The seventh justice, Justice Mark Martin, recused himself from the case. The suit was brought after the General Assembly voted on the Lottery Act in 2005 without following a constitutional provision requiring the final two votes on “revenue bills” to be held on two separate days and requiring the votes of each legislator to be recorded. Former Supreme Court Justice Bob Orr along with North Carolina Justice Center attorney Jack Holtzman argued on behalf of the Council and other plaintiffs-appellants that the Lottery Act is invalid because of this procedural failure.

The North Carolina Constitution defines “revenue bills” as those which raise money on the credit of the State, pledge the faith of the State directly or indirectly for the payment of any debt, or impose a tax on the people of the State. Justice Orr argued that the Lottery Act meets all three criteria because it makes the State liable for payment of lottery prizes and directs 35 percent of lottery revenues into the State treasury for a general governmental purpose—funding public education. It is that 35 percent of revenues that are imbedded in the price of every lottery ticket that constitutes the lottery tax, according to Justice Orr. Purchase of the ticket may be voluntary, but payment of the imbedded tax is not. “You can’t buy a 65 cent lottery ticket,” Justice Orr reasoned.

Assistant Attorney General Norma Harrell argued for the State that there was no need for the General Assembly to follow the procedural requirements of Article 2, Section 23 of the State Constitution, because the Lottery Act was not a “revenue bill.” Purchasing a lottery ticket is voluntary, she argued, and confers a direct benefit to purchasers of lottery tickets—the chance to win a prize; that benefit keeps the lottery from being a tax. The State is not liable for the payment of lottery prizes, Harrell argued, because the Lottery Commission is separate from the State and prizes are paid out of revenues.

Justice Orr began and Jack Holtzman closed the plaintiffs-appellants’ case by stating that the primary issue is about fairness and transparency in government. The purpose of Article 2, Section 23 in the State Constitution, both attorneys said, is to allow the citizens of the state the time and opportunity to lobby legislators and change their votes, to allow legislators the time to deliberate and to amend the bill, and to allow the press to publicize the contemplation of a new tax. The purpose of recording the votes is to provide a level of accountability between citizens and those who represent them. According to the brief filed for the plaintiffs-appellants: “Here, not only were the second and third readings in both houses held on the same day, but the important third reading was done by voice vote with no recordation of who voted for or against the bill. In the Senate, the Lieutenant Governor declared the voice vote a tie and ostensibly cast the tie breaking vote.”

North Carolina Family Policy Council Attorney Tami Fitzgerald, who attended the hearing, said, “The Lottery Act clearly must meet the constitutional requirements for two separate recorded votes on two separate days. It imposes an imbedded tax on every purchaser of a lottery ticket, when 35 percent of the price of that ticket goes to fund the State government’s share of public education. In addition, lottery winners can look to the State to guarantee payment of their prizes; thus the lottery raises money on the credit of the State and pledges the faith of the State for payment. To circumvent the process for passing new taxes breaks the trust that the people of the State place in their elected General Assembly members. Expediency is no substitute for what is proper and fair.”

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