When I was in middle school, the General Assembly was discussing a temporary half-cent sales tax increase to build new schools.
I thought this sounded like a worthwhile thing. An extra nickel on a $10 item didn’t seem so bad.
My dad warned that two things would happen: one, the tax won’t be temporary; two, the tax might not be used for what the politicians say it will be.
Since I was just a kid, I can’t speak to what the tax money bought, but I can say that the half-cent increase ended up staying on the books for many years.
When the General Assembly first brought up a state lottery 12 years ago, the first thing I thought about was that half-cent tax.
Now that we’ve had a lottery for more than a decade, how is it doing? Depends on who you listen to.
Since its inception, the lottery has raked in $15.8 billion, and it’s growing much bigger. According to the commission’s annual report for the 2015-16 fiscal year, the lottery recorded a state record $2.38 billion in sales in fiscal year 2015-16 and $636 million in earnings.
The lottery commission boasts that 95 percent of money from ticket sales goes back into North Carolina.
Surry County school systems received $3.96 million for the fiscal year; and for the life of the lottery, the county has received $34.59 million total.
That all sounds good, right?
Not so fast.
First, if all the money collected from the lottery was evenly distributed to the 100 counties, then Surry should have gotten $158 million instead of $34.6 million. Surry only received about 22 percent of the money it could have received.
Sure, it’s a lottery, so a big chunk of the revenue has to be paid out in winnings, so it isn’t 100-percent profit. I get that. According to the lottery commissioner, 62.4 percent of last year’s $2.38 billion was paid back out in prizes.
That still would leave 37.6 percent to go to schools, right? Not 26.5 percent that the commission said was paid out for the past fiscal year.
Where did the other 11 percent go?
Seven percent was given out as commissions to the stores that sell the tickets. The retail stores got a cut to the tune of $167 million. That seems excessive.
Then there’s the 4.1 percent that went to administrative costs, including a bunch of bloated salaries.
There are 243 people working in the lottery commission. Every single one of them makes at least $30,000.
• 106 people make at least $50,000.
• 25 people make at least $90,000.
• 14 people make at least $100,000.
• The executive director makes $213,724.
Those top 14 salaries alone comes to $1,807,777.
The commission pays out some sweet salaries to sales reps. For lottery tickets. You know, something that sells itself and doesn’t need help.
Pilot Mountain’s A.J. Daoud spent two-and-a-half years on the state lottery commission, resigning in November 2015. He said that historically the amount paid to schools was close to 35 percent, but that it had dropped to 28 percent when he left. Now it’s down to 26.5 percent.
Less and less of the money is going to schools.
In fact, the General Assembly even snuck some money out for other projects. This past year, the state directed that $2.1 million in earnings go to the N.C. Alcohol Law Enforcement division.
Reminds me of Congress taking money from Social Security to fund other projects.
Speaking of taking money, the other problem I have with the lottery is that the General Assembly is also pulling money out of the state budget that should have gone to education.
Since the lottery is growing, politicians have decided to give less and less to schools, which has defeated the purpose of creating a lottery to boost schools up.
WRAL TV in Raleigh did a report on the shrinking of education funding. In 1984-85, the state expenditures for education were 43.7 percent of the budget. By the time the lottery started, the slice of the pie had gradually shrunk to 41.1 percent. Over the next decade this rate would drop to 37 percent.
The lottery was promoted as a way to build new schools, buy new equipment and, in general, make school districts better.
Instead, only 19 percent of all education monies went into the public school building fund (which covers repairs and new construction). And that is up from the commission’s own chart that says 17 percent is usually all that goes to the building fund.
Back in 2007, 40 percent of that money went to the building fund — my how things have changed.
For the math challenged, let’s divide this up. A little more than $2.38 billion in sales, but only 26.5 percent to education, which is $634.2 million. Of that total, 19 percent goes to building, which is about $122 million.
That means for every dollar spent on lottery tickets, only a nickel goes into the building fund.
Where is the rest of the education money going? To pay for things the General Assembly used to fund on its own. Things like teacher salaries, preschools and college scholarships.
And the General Assembly has more funds to spend on its pet projects.
The lottery has turned into a tax on the poor and desperate. The better-off families don’t need the lottery; they have investment portfolios. The poor are paying more for education.
And don’t look now, but the national Secretary of Education wants to take that lottery money away from public schools so wealthy families can send their kids to private and charter schools.
Desperate poor people paying for charter schools. Think about that.
Jeff is the associate editor and can be reached at 415-4692.