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Harris Sherline: California Lottery Still a Win-Win?

Sure, a significant dollar amount is allocated for public education, but for what and at what cost?

I was recently asked if I knew how much of the California Lottery’s revenue is actually used for education and what happens to the rest of the money. I didn’t, so I turned to the trusty Google search engine for the answer. What I found was not at all what I expected, namely that the amount of money that goes to schools is a very small, one might say a tiny percentage, of the state’s total education budget.

Harris Sherline
Harris Sherline

However, looking at the California Lottery from different perspectives can be misleading. For example, in the 2006 fiscal year, 34.6 percent of the lottery’s revenue was allocated to public education. Although the dollar amount was a big number, more than $1.2 billion, it was only about 1.6 percent of the state’s education budget.

The California Lottery Act (Proposition 37) was sold to the public in 1985 on the premise that a third of the revenue would be used to support education — and, as promised, it has.

Although the lottery revenue that goes to education accounts for only a small percentage of California’s total education budget, the dollar amounts are significant. For example, in 2006, the lottery’s contribution to the state’s education budget, at 34.6 percent of its total revenue, was allocated as follows: $780 million (65 percent) was spent on educators’ salaries and benefits; $228 million (19 percent) was used to buy instructional materials for the classroom, including textbooks, supplies, computers and software, library books and lab equipment; and $192 million (16 percent) provided support for other programs and services.

In fiscal year 2005-06, in addition to the money that went to the schools, 53.6 percent, or $1.7 billion, of the lottery revenue was paid out for the prizes that were awarded to winners, $223 million paid for retailer bonuses and commissions, $90 million was used for operating expenses and $51 million paid game costs.

The California Lottery Web site, Lottery Funds at Work, notes that fiscal year 2007-08 lottery revenues generated $132.20 per pupil for the schools, “in addition to the $9,488 per pupil, or $59 billion, provided by California’s general fund.”

The Web site also states that “Lottery funds don’t just go to K-12 schools; they support students in all areas of public education. Community colleges, the University of California, the California State University system, adult education, charter schools and even the schools at the Department of Corrections and Rehabilitation, Division of Juvenile Justice receive Lottery funds.”

Just how important is this source of income to the schools? At about 1.5 percent of the education budget, it hardly seems like a major factor. Like most people, I suppose, whenever I thought about it, which was rarely, my understanding of the lottery’s contribution to education was based on a vague recollection that a third of the money goes to the schools. It never occurred to me to see just what percentage of the education budget that might be.

Given that it is such a small percentage, I wonder if the schools could get along without the lottery’s contribution? It’s interesting to note that nearly two-thirds of the money that goes to education is used for salaries and benefits, and I’m curious to know why and who made that decision. Why not more for books and instructional materials? Or for after-school activities, such as sports, band, theater arts and other enrichment programs?

Thinking back to the time when the lottery was put before the voters, I recall it was strongly opposed by many people on the grounds that it is really a form of regressive taxation of those who are considered “low income,” especially seniors. Some voters opposed the lottery on the basis of religious or moral belief.

Considering that over the years there have been a number of complaints about the lottery being poorly managed, that it is a form of regressive taxation, and that I don’t agree with the way the money is used by the state’s education establishment, I’m not at all convinced it should be continued.

I also wonder why the state is in the gambling (gaming) business or if it should be. How about horse racing, card clubs and casinos? If the lottery can generate such large sums for schools, how much money could the government bring in by expanding its role in gambling in the state?
             
All of which puts me in mind of Mark Twain’s oft quoted observation, “Figures don’t lie, but liars figure.” Something about this whole lottery business strikes me as being not right.

— Harris R. Sherline is a retired CPA and former chairman and CEO of Santa Ynez Valley Hospital who has lived in Santa Barbara County for more than 30 years. He stays active writing opinion columns and his blog, Opinionfest.com.

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