Lottery Revenue Funds Education, But Not How You Think

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Past winning powerball

In fiscal year 2016 a record $634 million was raised by the North Carolina Education Lottery to help support educational programs in the state. In the same year, the Texas Lottery transferred $1.373 billion, its single largest annual contribution to date, to its Foundation School Fund. The Florida Lottery stated that it had contributed $1.66 billion to its Educational Enhancement Trust Fund in the same fiscal year.

All of these official lottery announcements support claims that most of their ticket sales fund state-run programs with education leading the 'good causes' on their lists. Recent media coverage suggests, however, that although lottery revenue does fund education, it's not exactly how one would think.

When you play the biggest lotteries in the world, you naturally assume that in addition to paying out prize money, your tickets help support public education, parks, environment protection, veterans, healthcare, and other noteworthy charities. While this is a correct assumption, in many cases lottery revenues do not supplement these programs but rather allow legislators to allocate money elsewhere.

During the rush for Powerball tickets in January when that jackpot hit a record $1.58 billion, Indiana-based political science professor Patrick Pierce said that "Money from the lottery generally substitutes money that would go to education anyway."

 

In many cases, state legislatures consider lottery revenues as a regular source for funding education and therefore see no reason to increase budgets for public schools. In some states, corporate taxes used for new school construction have been replaced by lottery revenues.
 
In the past decade, California, Florida, Michigan and many other states have actually reduced spending on education. The announcement by North Carolina that its lottery had "raised $1.7 million a day on average for education" was met with skepticism by many critics. Despite this contribution, per-pupil spending in the state (adjusted for inflation) has declined steadily over the past decade. North Carolina today allocates a smaller percentage of its budget to education than it did when its Education Lottery was established in 2005.
 
The situation is nothing new. As far back as 2007, CBS News reported on decreased budgeting for education in states that had introduced lotteries. Lottery revenue was sold to the public as a way to increase spending on education when in reality, spending on education went down or didn't increase in most of those states.
 
One exception to this trend is New York, which reportedly allocates funds to education in addition to what is being raised by lotteries. The New York Lottery stated that it had contributed $3.30 billion in fiscal year 2015-2016 to "help support public education in New York State, or 14 percent of total state education funding to local school districts."
 
There is no doubt that lottery revenue supports educational programs in most American states. But increased lottery revenue, such as is the case when Powerball and Mega Millions set record high jackpots, may actually decrease the amount that states budget for education in the long run.
 
 

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