Unintended consequences of state lotteries

As many opponents of state run lotteries warned, revenue for North Carolina's lottery that are supposed to fund education may end up being used to offset general operating costs and reduce taxes:

Mecklenburg taxpayers weren't supposed to win the lottery this way.

But the three most powerful men in state politics said Wednesday that's what County Manager Harry Jones proposed when he suggested a property tax cut funded by gaming proceeds.

Gov. Mike Easley, House Speaker Jim Black and Senate President Pro Tem Marc Basnight, all Democrats, swiftly condemned the plan, even though it is legal under legislation they helped pass.

The lottery, supporters have said, was meant to create more dollars for education.

But Easley and others say Jones' plan fulfills the fears of skeptics who said lottery money would just replace dollars already devoted to schools. Before passing the lottery by whisker-thin margins in both the House and Senate last year, lottery proponents reassured opponents that such a diversion wouldn't happen.

Now, they say, Jones' plan could prompt them to take action. "We need to redistribute the funds going to Mecklenburg County. They have more than they need," Basnight said.

Jones proposed a 2006-07 county budget Tuesday that would use $9 million in expected lottery money to pay debt on school construction. Jones said that allowed him to free up county money for a tax cut.

Several other states have drawn criticism for spending lottery money on costs the public would have picked up anyway.

In Virginia, for instance, 60 percent of lottery profits are used to pay for routine operating costs of the state's public schools. In South Carolina, the legislature required lottery profits to support education and said lottery money couldn't replace existing spending. Most of the profits have gone to new programs. But at least some has been spent to assist existing classrooms and to purchase school buses.

There are similar issues in Florida. This was also a concern when Tennessee debated its lottery, but the laws are written and the program is structured to prevent it, so far. Proceeds from the Tennessee lottery provide scholarships only, and are not used for any other K-12 programs, although I believe there was talk of using lottery revenues to fund a new Pre-K program. Georgia's lottery program is similar.

But even in states such as Tennessee and Georgia where the programs are structured to enhance education as opposed to replacing taxpayer funding of education, there are concerns regarding how the funds are distributed. A recent study in Tennessee showed that a disproportinate number of wealthier families were taking advantage of the scholarships, leaving many disadvantaged families behind. Some say this is a tax on the poor for the benefit of the wealthy, prompting conservative foes of public education and gambling and other sinful pursuits to call for replacing the scholarship program with a voucher program.

Regardless of such unanticipated problems, Tennessee's lottery scholarship program has sent thousands of kids to college who otherwise might not have gone. And that seems like a Good Thing. Every state should be careful, though, to make sure lottery funds aren't used to offset taxpayer funding of public education, and to make sure the distribution of funds is fair and equitable.