Lottery Revenue

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Tax Revenue Flows From Lottery, Discontent Arises

Special Report - April 6, 2006
Twenty-four million dollars were gambled on the state lottery during the first five days of play, lottery officials reported in a conference call on April 4. Ticket purchases produced $8.4 million in new tax revenue to the state. Though sales fell just short of projections, the lottery’s executive director, Tom Shaheen, declared the startup a success. Shaheen also announced that new games would likely be released every two to three weeks to keep ticket sales up, culminating in a total of more than 30 games within the next year. Plans are also underway to introduce the multi-state Powerball lottery in North Carolina. Four lottery ticket games are currently available in over 5,000 retail outlets across the state.

Slumping ticket sales are a common occurrence in state lotteries as the novelty of the games wears off. Many states see ticket sales fall over time, forcing lottery officials to continuously introduce new games, advertise more heavily and even increase the amount paid out in prize money—a move that typically cuts into revenues originally earmarked for state programs.

With lottery revenues in North Carolina less than a week old, there is already some discontent among school officials and legislators about how lottery revenues earmarked for school construction are being distributed. According to the Lottery Act passed by the General Assembly, 40 percent of the money the state takes in from ticket sales must be used for school construction. Of this portion, 65 percent is given to school districts based on the number of students in the district, while the remaining 35 percent is given only to districts with property tax rates that are higher than the statewide average. This arrangement has some counties, especially in western North Carolina calling for a change in the law because it disproportionately benefits some school districts over others.

The North Carolina Family Policy Council raised this issue with legislators, along with many others, during the debate over the lottery bill. “When you start making big promises over how much money the lottery will deliver to education, it’s inevitable, though not surprising, that many people will be disappointed with what is delivered,” said North Carolina Family Policy Council president Bill Brooks. “In fact the total revenues raised by state-sponsored gambling amount to a fraction of the more than nine billion dollars the General Assembly has already allocated to education this year alone. It’s unfortunate to see so many millions of dollars taken out of our state’s economy to be spent on gambling.”

To read our policy papers on the negative impacts of the lottery click here.