9 Investigates: Lawmakers demand more oversight on funding of NC Education Lottery

by: Blair Miller Updated:

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Every year, the North Carolina Education Lottery pulls in big money and pays out big prizes.  When the games started in 2006, sales brought in more than $889 million. This year, sales surpassed $1.5 billion.

Some of that money goes to schools. A complicated formula determines which schools and how much.  But Eyewitness News anchor Blair Miller investigated and found the percentage going to schools is less than in years past. Now, some lawmakers say it's time for things to change.  When lawmakers approved the education lottery five years ago, they promised to use 35 percent of the profits to help public schools across the state. The money goes toward teacher salaries, scholarships, classroom construction and pre-K programs.  This fiscal year, according to the North Carolina Education Lottery, that amount statewide was $456 million.

As ticket sales have skyrocketed, the percentage of money going back into the schools has dropped from 35 percent to 29 percent.  In 2007, lawmakers made changes to the formula for lottery distribution and allowed the percentage to change.  “The experience of lotteries in other states has shown that if you reduce the amount of money paid in prizes, your sales will drop, and your return for the good cause you serve will drop,” says lottery spokesman Van Denton.

But Randolph Frierson, head of the Charlotte-Mecklenburg Association of Educators, said it’s wrong to change the percentage.  “I think we've defeated the purpose of the lottery,” Frierson said.

When Eyewitness News looked deeper, we found records with the North Carolina Department of Public Instruction that show a drop in lottery funding for Mecklenburg County from year to year. According to DPI records, the county was getting $16 million a year from the lottery distribution when the lottery started in 2006 but that number dwindled to $9.4 million in 2011.  The North Carolina Education Lottery disputes the numbers and says that only accounts for funding for school construction.  According to the NCEL, Mecklenburg County received $40 million last year, slightly more than the year before.  Lottery officials say their records are more thorough and that DPI records do not account for other areas funded by the lottery including teachers’ salaries.        

“I think that the idea of funding education with a lottery was flawed from the start,” said Mecklenburg County Rep. Bill Brawley.

Brawley looked at what Eyewitness News found and said it's time to consider taking the name “education” out of the lottery because just 29% of the profits go to education.  He would like to see more money go back into schools.

“Because it's the education lottery, you may feel you're spending money on lottery tickets, it's all going to schools. Very little of it does. It's somewhat misleading,” Brawley said.

Alice Garland, the executive director of the lottery, said they take the education portion of lottery revenue, transfer it to the state, and that's the end of their involvement.

“We don't track the money,” Garland said. “We don't have a mechanism for tracking it.  And we really have nothing to do with how the agencies spend that money.”

“So how do you know the money is going exactly where it should be going?” Eyewitness News asked.

“I will tell you honestly, that's not our function,” Garland said.

She said it's up to state lawmakers and state budget writers to distribute that money to schools.

But several lawmakers, like state Rep. Craig Horn, said they have no clear idea how the money is being spent and even suggested it may be ending up in other parts of the budget, not education.

“You've got numbers all over the place,” Horn said. “Every place you go, you get a different story. It's a swamp and it's ridiculous.”

Horn said he now plans to pursue new legislation to change the oversight of lottery education funds.  He said he would like to clear up any confusion over where the money goes by having one agency track the funding to schools.  He believes that’s the only way to know exactly where that money's going and that it's being used only on education. Representative Horn plans to introduce legislation next year to help streamline the oversight.

“We've made a mess of it and so far, we've over-complicated the system,” he said.

Twenty-nine percent of lottery revenue went toward education, but 60 percent went toward prizes, and lawmakers say maybe that needs to change so more money goes to education. That could mean fewer or smaller lottery payouts.