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Lottery isn't always a boon to schools

The selling point for state lotteries was that they would steer money to education. The actual results are a bit more mixed.

By Marjorie CoeymanStaff writer of The Christian Science Monitor / July 15, 2003

This year, millions of dollars of Indiana state lottery proceeds were poured into a teachers' retirement fund, school technology, and public-school tuition support.

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Last year, the Idaho state lottery contributed $9 million to build new roofs on schoolhouses, new bleachers in school stadiums, and to buy new computers and school buses. Two years ago in California the state lottery contributed a record $1.11 billion to public education.

All this sounds good. But the story behind lottery money for education is more complicated, and not as rosy.

"The proceeds from state lotteries are less than you might think," says Molly Burke, researcher at the Education Commission of the States in Denver. "Even if they're all earmarked toward education, it isn't a huge amount. It's never quite as much as states would like the schools and the taxpayers to think."

And the proceeds go to ...

Since the 1970s and 1980s, state lotteries have been popular means of helping to fill state coffers. Today 39 states have lotteries and several more have voted to join the crowd. Many states sell the lottery concept to the public with the promise that a large portion of the proceeds will benefit public schools.

In fact, 22 states earmark portions of lottery earnings for public school spending. States such as New York, Michigan, Missouri, and Vermont plow 100 percent of their lottery gains back into public education.

Yet, while the public may believe that means a net gain for schools, that's not always the case.

Many times, says the Rev. Richard McGowan, a professor at the Carroll School of Management at Boston College, "you're really allowing the state to spend the money in other places rather than the schools. It's not a bonus for the schools but a substitution."

Sometimes what ends up happening is that schools achieve a small gain through the lottery.

"The fact that you vote for a lottery that's going to add $100 million to education doesn't mean that education will get $100 million," says John Augenblick, president of Augenblick, Paliach & Associates, a consulting firm in Denver that specializes in state education-policy finances.

"The government may take back $75 million in property taxes. There's probably a net gain, but it's not large."

Yet in Ohio, pouring lottery proceeds into education actually caused state spending on schools to shrink, according to a study by graduate student Thomas Garnett published by the Buckeye Institute in Dayton, Ohio.

The study demonstrated that, after Ohio's 1974 promise to devote all lottery winnings to public schools, state spending on education dropped from 42 percent of its total budget in 1973 to 29 percent in 1994.

More a question of funneling than of funds

Of course, not all lotteries are equal. Many policymakers praise Georgia's state lottery, which funnels all its proceeds into specific projects related to education.

Instead of pouring money into a general fund, the law in Georgia restricts lottery profits to financing college scholarships, universal prekindergarten, and technology grants for schools.

There is also a danger in such a system, however. Because some of these projects are funded solely through the lottery, if lottery proceeds ever dry up, important programs could find themselves high and dry.

But overall, if all state lotteries were designed like the Georgia model, says Father McGowan, education might receive a genuine benefit.

More states are leaning that way. Texas has already adopted a similar plan, while Tennessee and South Carolina have both approved lotteries based on the Georgia model. [Editor's note: The original version of this story incorrectly included North Carolina in a list of states with approved lotteries.]