Tuesday, December 4, 2012

Lottery and Education: Good Odds or Odd Goods?

By Johnathan Miller, Project Associate.  

I will admit it, I bought five Powerball tickets. I fully embraced the fact that the odds of winning were astronomical. And lo and behold, I did not win. In fact, according to CNN.com, I had a better chance of hitting two consecutive hole-in-ones on a par three (looks like I need to spend more time at the range). I also had a better chance of being attacked by a shark or dying from a bee sting. 

But, what’s the point? With all the buzz around the lottery and being a resident of Georgia, it is hard not to think about public education. Lottery proceeds in Georgia, and many other states, fund education programs. In Georgia, proceeds go towards supporting pre-K and the HOPE scholarship.

The HOPE scholarship is one of the most competitive economic development tools for the state of Georgia as it pays for Georgia students to attend college. Prior to 2011, the scholarship paid for 100 percent of tuition at in-state public universities and colleges. However, it became clear that lottery funds were no longer able to keep up with the rising enrollment and tuition increases. In response, the General Assembly passed legislation that raised eligibility standards for those receiving 100 percent tuition, the original promise of the program. The changes in the scholarship program have also come during a time when K-12 education funding is being cut. Between FY 2008 and FY 2012, funding per student in Georgia decreased by 17.6 percent ($805), the eighth highest percent decrease of the 50 states. The inability of the lottery and the state to increase funding for education is concerning.

The impetus in many states for establishing lotteries was that the funds would be a supplement to state education spending. However, funds from lotteries have come to supplant, and not supplement, education spending. For example, in Virginia, the lottery was passed partly under the auspices of being bonus monies that would flow to local school systems. However, as budgets have worsened and even after a constitutional amendment passed to devote all proceeds to local schools, critics argue that the state is using lottery funds for programs it would otherwise fund, thus increasing reliance on the revenue. In Illinois, supporters of the lottery billed it as a windfall for the education system, yet it contributes only one-tenth of total funding. In Texas, lottery proceeds paid for the equivalent of two weeks of schooling in 1996, but in 2010, that figure has fallen to just barely three days.

The ability of lotteries to effectively enhance education spending, in general, has been called into question. In a 2009 study on state revenues from gambling, the Nelson A. Rockefeller Institute of Government concluded that “Expenditures on education and other programs will generally grow more rapidly than gambling revenue over time. Thus, new gambling operations that are intended to pay for normal increases in general state spending may add to, rather than ease, long-term budget imbalances.” Further, a 2011 survey of existing literature on lotteries and education found that, “Studies of the fungibility of lotteries have focused on educational spending and nearly uniformly find that the introduction of a state lottery increases total educational spending by less than the amount of the new earmarked lottery revenue, suggesting at least some degree of fungibility is present when funds are earmarked for specific state and local programs.”

Despite the structural issues with lotteries, it is clear that some mechanism needs to be in place to help fund education. While the mechanism is yet to be perfected, I guess I will continue to do my part and be suckered into lottery purchases, knowing at least some of it is making it to education. Even though Georgians, according to Bloomberg Business News, are the biggest lottery suckers (pay the most, for the least amount of payout), I am planning on hitting the next jackpot (even if it contradicts everything I learned in school)…all in the name of education.