Lottery funding is risky business

Year after year we are asked why the lottery didn’t save public education. It’s always helpful to revisit the basics.

Trying to finance a school district with the help of lottery funds was bad business from the start. The public perception is that the amounts are very large but in fact they are very limited. Worse than that, the funding is unreliable, varying from year to year.

Certainly there is a values issue involved with gambling for the sake of education. But most important, it is a ploy that enabled the legislature to avoid tackling the issue of adequate base funding for schools. Lottery funds simply supplanted equal amounts previously provided from other funding sources.

1.  The dollars are limited.  By law, 50 percent of the lottery revenues go out in prizes, 9.5 percent goes to administration costs, and 6.5 percent goes to retailers as commissions. Law requires that 34 percent goes to schools. The money cannot be used for facilities.

California has more than six million school-age children this year. Lottery money is dispensed per student, so total funds must be divided by six million to arrive at the per-student funding. During the lottery’s peak in the 1988-89 fiscal year, lottery funds contributed $176 per student. It has never reached that peak again. In 1991-92 it only provided $76 per student. It generally hovers around $100 or $120 per student. 

School funding varies, but on average California spends about $6,000 per student. This means that lottery funds provide about two percent of what schools spend to educate a child.  With multimillion dollar jackpots heavily promoted, however, the public perceives that vast amounts are going to education.  

More to the point, when tough times hit the state budget, the legislature dropped the levels of educational funding by the same amount that the lottery raised, and no one claimed it was coincidence.

2.  The money is unreliable.  Even at its height, when the actual lottery pay-out was $176 per student, the lottery was projecting a pay-out of $l83 per student. For a 5,000-pupil school district, that’s a swing of $36,000. The figure dropped dramatically in subsequent years. Prudent school administrators cannot budget lottery funds without worrying about whether they will actually be generated. If the funds can’t be budgeted reliably, they certainly can’t be designated for critical services or programs.

3.  There is a values incongruity.  We try to teach kids values, and reinforce the dangers of gambling. Yet we encourage adults to do it for the sake of raising money for schools. Here is an incongruity here that is troubling.

4.  It’s not extra money at all.  Lottery money has merely supplanted funding that the legislature designated for public education from the normal state sources—mostly sales taxes and income taxes—so it’s not extra money at all.

Using lottery funds for education is politically expedient, but the fact is that it’s not enough money to make a difference, and it’s unreliable. It gives the public the impression that millions are going to education, and lets the legislature avoid increasing base funding for schools. In the meantime, California slips lower and lower in funding for its educational delivery system and its national standing. 

This is not the way any responsible businessman would choose to operate. Lottery is risky business.