Lottery's fate a perilous one

While money continues to flow out of North Carolina, the General Assembly is stuck.

Stuck balancing a budget. Stuck clinging to morals. Stuck debating a lottery.

The debate is nothing new — every legislature since 1983 has voted down a lottery bill.

When he was elected governor in 2000, Democrat Mike Easley pushed an education lottery as a main part of his platform.

But what makes this year unique is that the bill was passed first by the House instead of the Senate. Since 1983, the Senate has voted in favor of an education lottery three times, only to have the House vote it down.

This year, under the pressure of a $1.3 billion budget deficit and estimates of lost revenue as high as $300 million, the House gave in.

“Educating kids in other states is worse than gambling,” said Rep. Bill Owens, D-Pasquotank, on April 20.

Backed for the first time by House Speaker Jim Black, D-Mecklenburg, the lottery bill narrowly overcame opposition.

Success was found with a delicate balance: Fifty percent of proceeds would go to school construction, 25 percent will go to need-based scholarships, and 25 percent would be used to create a new fund for impoverished schools.

Political pressures

But as the process continues, success could be short-lived.

Vague language has caused senators to fret over the prospect of video poker, a type of gambling the Senate has banned several times, said Amy Fulk, spokeswoman for Senate President Pro Tem Marc Basnight, D-Dare.

“The Senate has made a concentrated effort to make video poker machines illegal,” said Sen. Minority Leader Phil Berger, R-Rockingham, on April 20. “Some people refer to it as the crack cocaine of gambling.”

Though the bill will almost definitely be revised — a special committee appointed by Basnight has been reviewing the legislation for the past two weeks — some fear those revisions will upset the balance found in the House.

“If you change a comma, you won’t pass the bill in the House again,” Fulk said.

In the meantime, the money continues to flow. Every state that borders North Carolina has a lottery, and most estimates show the state’s residents spend about $300 million annually on those games.

An Elon University poll conducted in February showed that 37 percent of those surveyed had bought a lottery ticket from surrounding states during the past year.

The South Carolina lottery, which has brought in $2.7 billion dollars in revenue since its inception more than three years ago, receives an estimated 12 percent of its revenue from North Carolina residents, said Ernie Passailaigue, executive director of the S.C. Education Lottery. That money has gone to fund 400,000 scholarships for South Carolina students.

According to the N.C. Center for Public Policy Research, N.C. residents spend an additional $100 million on the Virginia lottery.

And it is the prospect of these monies in an airtight budget year that has some legislators backing away from personal reservations about state-sponsored gambling.

Black said that even though he has reservations about a lottery in North Carolina, he just can’t see any other way. “We just don’t seem to have the political will to take money out of the General Fund.”

Adding to the revenue flow won’t solve that problem.

“I’m always cautious and simply will not provide another revenue stream for North Carolina,” said Rep. John Rhodes, R-Mecklenburg. “We have plenty of money. It’s a priority of spending crisis.”

Rhodes warned that waiting for the lottery to solve the state’s problems could be dangerous optimism.

“The numbers just simply do not add up on the lottery,” he said. “The numbers based on the governor’s predictions are grossly overrated.”

Rhodes cited deteriorating highways as one example of a pressure that won’t be relieved by a lottery.

Jeff Davies, UNC-system vice president for finance, said that, while beneficial for students, a lottery wouldn’t help the university overcome its budget crisis.

“It’s not general revenue to be added to the state’s coffers for general funding,” he said.

Rhodes also questioned a lottery’s ability to have a meaningful impact within its focus area of school construction.

If the lottery netted $500 million, that would provide $250 million for school construction. Once split among the state’s 100 counties, Rhodes said, the revenue would fund only one-third of an elementary school for each county.

Rhodes said his district’s school system, Charlotte-Mecklenburg, needs about 75 schools.

The price of money

Lucrative revenues are the driving force behind the lottery, but how much revenue will be made and the cost at which it will come remains unclear.

“Estimates are in the hundreds of millions of dollars,” Fulk said.

The center stated in a press release that proponents of the lottery have pushed that number as high as $400 million for the first year.

Wagers Chenault, spokesman for the Georgia Lottery Commission, said revenues have risen constantly since the Georgia lottery began in 1993.

But skeptics doubt that pace can be maintained.

In 1989, lottery revenues constituted 3.5 percent of the total budget of the 29 states running lotteries, according to the center. By 1997, lottery revenues in the same 29 states constituted only 1.9 percent of the budget.

To avoid this, the center says, states must advertise the lottery and introduce new gimmicks.

But Angie Whitener, policy analyst for Black, said the bill passed by the House earlier this month prohibits advertising. The speaker, not entirely able to overcome his past reservations, doesn’t support a bill that would include ads.

Another concern is that the lottery will provide sufficient revenue — so sufficient that the General Assembly shifts sizeable funds away from education.

The fear is that lottery revenues will end up supplanting education funds instead of supplementing them, said Ferrel Guillory, director of UNC’s Program on Southern Politics, Media and Public Life.

Protecting the poor

Another problem for an education lottery is the understanding that it taxes the poor for the benefit of the rich.

While the N.C. Center for Public Policy Research found participation rates across racial and education levels to be relatively equal, they also found that lower-income players used a higher percentage of their income for lottery tickets.

In addition, they found high school dropouts to be the highest spenders, indicating an inherent bias against those less educated.

But Passailaigue pointed to an annual demographic survey performed by the S.C. lottery in 2004 that came to different conclusions.

Seventy percent of the players surveyed made purchases between $1 and $5, and the majority of them played less frequently than once a week, illustrating more of a casual pastime than a lethal addiction.

Passailaigue also said the lottery differs from a regressive tax, such as a sales tax on food, in a major way: It’s voluntary.

“The lottery is something if you want to play, you play; if you don’t, you don’t,” he said. “That’s what America’s all about.”

Contact the State & National Editor at stntdesk@unc.edu.