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News State / Region Lottery funds replace taxpayer dollars in NC's overall education budget

With budget cuts looming within the Macon County School System, taxpayers have begun asking questions about where education funds come from. Local school systems are afforded funding from three sources, the state, federal, and local governments. Each of those funding sources has its own avenue of generating revenues to fund education.

By North Carolina state statute, the state is responsible for the majority of public education funding, with both the federal and local governments acting as a supplement. In addition to taxes collected in North Carolina, the state has also implemented other programs to help fund the state's education system.

Since its inception in 2006, The North Carolina Education Lottery has touted its role as a significant contributor to the state's educational programs. State officials claim to have created the lottery to further support the state's education system and it was intended to provide additional funding to allow North Carolina to be competitive with the rest of the country.

The percentage of lottery funds allocated to the state to be earmarked for education has decreased. When it was first established, the plan was for the lottery to contribute at least 35 percent of the overall revenue to education but now lingers around 30 percent. Despite the increase in revenue available to the state through lottery funds, the state's allocation to individual districts such as Macon County has not changed since the program was first implemented.

Because of misconceptions like this, Macon County interim Superintendent Dr. Jim Duncan recently opined to county commissioners that the “education lottery is the biggest hoax to ever be perpetuated on taxpayers.”

According to Van Denton, communications director for the North Carolina Education Lottery, Macon County has received approximately $7,560,011 in lottery funds since 2006. “We just raise the money, we do not decide where the money goes or how much is spent in each county,” explained Denton. “The Fiscal Research Division of the state General Assembly decides which programs get the lottery money. The state decides where the money goes and how it is spent.”

The state splits lottery funds into five categories — teacher salaries, school construction projects, prekindergarten funding, college scholarships and financial aid. A portion of funds generated each year are designated for each category and then allocated out to counties.

Since 2006, according to Macon County Finance Director Lori Hall, Macon County has received $2,137,842.24 (about $305,400 a year) in lottery funds through the Public School Building Capital Fund. “On an annual basis, the county sends an application requesting a release of funds from the Public School Building Capital Fund,” explained Hall. “These funds are used to make payments on indebtedness incurred for school construction projects.”

The money the county receives has little flexibility in how it can be spent as state statute 115C-546.2 states that, “A county may use the monies in this fund to pay for school construction projects in local school administrative units and to retire indebtedness incurred for school construction projects.”

The school construction money given directly to the county is the only portion of state funds that is specifically identified as lottery funds. While Denton explained that Macon County has, in fact, received about $2.4 million in lottery monies since 2006 to pay for teacher salaries, that money was allocated to the county in the state's budget.

“There is no way for us to tell what portion of the money given to the counties are lottery funds and what are taxpayer dollars,” explained Denton. “We give the money to the state Department of Instruction and they distribute the funds how they see fit.”

According to Alexis Schauss, the director for School Business for North Carolina's Department of Instruction, despite lottery funds, the state's annual allocation to local districts has not changed since 2006.

“Classroom sizes have not changed, so teacher funding continues to be given based on that,” explained Schauss. “It is the same amount of money as before the lottery, it is just different money being used.”

So essentially, the state uses the lottery funds in place of taxpayer money. Lottery funds do not mean more money to school districts, instead, it just means different money is being used than before the lottery was instated.

State legislators who have once supported the lottery, have since withdrawn support because of how the funds have been allocated. Democratic Rep. Rick Glazier of Cumberland County voted in favor of the lottery in 2005 but now says legislators have used lottery proceeds to replace current education funds, instead of supplementing them, and local governments are using the lottery as an excuse not to raise their own revenues for education funding.

Over the last nine years, the state's annual allotment to Macon County has fluctuated between $19,510,928 at the lowest in 2004 to $25,819,994 at the highest in 2008.

Schauss explained that lottery funds are a very small portion of the state's overall educational budget, making up about 3.5 percent or $283 million of the overall $8.1 billion budget. When the lottery was instated, those funds were used in place of other funding sources such as tax dollars.

The lottery stands to undergo changes in this year as Gov. Pat McCrory and members of the General Assembly are pushing to scale back lottery advertising and remove “education” from the title. McCrory spoke out against the lottery in his recent televised State of the State address back in February.

"I'm recommending that we pursue legislation to reallocate a portion of money away from the bloated and frankly annoying advertising and the large administration costs of the lottery commission," McCrory said in the statewide televised speech to legislators. He said he wanted to earmark that money toward school technology.

A bipartisan bill is in the works to remove "education" from the lottery's name. State law already limits advertising to one percent of overall sales. The lottery spent $14.7 million on advertising during the last fiscal year.

Gov. McCrory also wants the lottery monies to be less restrictive. In his State address, he said that he wanted lottery monies to be given to districts to pay for technology improvements. Macon County Commissioners voted this year to fund $1.5 million in technology upgrades to the school system because of computers that were outdated or not working at all.

In addition to lottery monies, the state has also earmarked a portion of money raised through alcohol sales to be given to local school districts. In 1994, the profits from the sale of distilled spirits were designated to be returned back to the community. Each year after operating expenses, money is distributed to the state, local government, law enforcement, and alcohol education initiatives.

The Macon County Board of Education and Macon County DARE share 7 percent of overall alcohol sales for alcohol education. Franklin Police Department receives five percent for law enforcement; with the remaining 88 percent net profit being distributed to the Town of Franklin.

Despite the state's effort to supplement education through alcohol revenues, the funds have not amounted to much. In 2008, Macon County schools received $2,098.44; in 2009, $3302.43; in 2010, $544; in 2011, $46.90 and this past year, $757.77.

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