Report on the Expenditure of Lottery Funds Fiscal Year 1997
Introduction: The Georgia Lottery for Education
The Georgia Lottery for Education has been "touted as a national model by television news shows, news weeklies, and the trade press" (Mantius, 1997). Programs funded by the Georgia Lottery have received national recognition. Georgians also give the lottery and its educational programs rave reviews. In fact, each year the lottery has enjoyed increasing approval by Georgia adults. More of them are likely to say that they approve of the lottery and that the programs made possible by the lottery are a good use of lottery funds.
By most accounts, the Georgia Lottery for Education has been deemed a success. Steadily increasing ticket sales have resulted in higher net proceeds. Since Georgia’s net lottery proceeds are used for education, the lottery has been a boon to education. "Because of its education funding and steady sales growth, the Georgia lottery is widely regarded as one of the nation’s best" (Mantius, 1997).
The Georgia Lottery for Education enjoys widespread and increasing public approval. The Georgia State poll conducted by the Applied Research Center has tracked approval ratings for the lottery over the past five years, and has found that each year more Georgia adults approve of the lottery and the programs funded by the lottery. Before the lottery was in operation, about 59% of Georgia adults said they would favor a lottery in Georgia. In Summer 1993, after the lottery in operation, 62% of Georgia adults said they would vote to keep the lottery. By Winter 1997, 65% said they agreed with the statement, "I supported the lottery for Georgia."
When asked about the particular programs that the lottery funds, Georgia adults are even more likely to give favorable ratings. As of Fall 1996, almost 93% said that providing HOPE scholarships to students with a "B" or better average is a good use of lottery funds, up from 91% two years earlier. In Winter 1997, nearly 85% said they agreed with the statement, "I support the use of lottery funds for pre-k."
Two programs – the HOPE Scholarship Program and the Georgia Prekindergarten Program –, which were made possible by lottery funds, have enjoyed significant national media attention. But these programs have done more than provide positive public relations for Georgia, recent evaluations by the Council for School Performance have demonstrated that these programs have made a difference in the lives of Georgia students.
Another Council for School Performance evaluation looked at the use of instructional technology in Georgia public schools and found that the lottery funds have allowed many schools to purchase technology equipment that they otherwise would not have. The infusion of funds for technology has brought technology into the classroom and has given students access to technology.
History of the Georgia Lottery for Education
The history of the Georgia Lottery for Education begins in 1991, when the Georgia General Assembly proposed a constitutional amendment to allow a state-run lottery. The ‘nuts and bolts’ legislation outlining how lottery proceeds would be spent and how the lottery would be operated was passed in the 1992 Session of the General Assembly. In November 1992, the proposed constitutional amendment appeared on the general election ballot. Fifty-two percent of Georgia citizens voting approved the amendment. Seven months later, the first lottery tickets were sold in Georgia.
The Georgia Lottery for Education Act provides specific guidelines on the expenditure of lottery proceeds. Georgia law specifies that "as nearly as practical, for each fiscal year, net proceeds shall equal at least 35 percent of the lottery proceeds." The net proceeds are to be used "to support improvements and enhancements for educational purposes and programs." Also included in the act is a provision that lottery receipts must be used to enhance, not supplant, state funding for education.
The Georgia Lottery for Education has raised nearly $2 billion for education by the end of the fourth fiscal year. The lottery has enjoyed increasing ticket sales each year, from $1.1 billion the first year to $1.7 billion in fiscal year 1997. Lottery ticket sales have grossed nearly $5.9 billion in the four years of operation.
As ticket sales increase, the net lottery proceeds increase. Each year the legislature appropriates net lottery proceeds to education. Figure 1, which shows lottery appropriations by fiscal year, illustrates the increasing lottery money that is available for education. The supplemental appropriation shows that each year lottery proceeds have exceeded the original amount appropriated in the original budget.
Figure 1. Lottery Appropriations by Fiscal Year
As other states receive criticism from voters and educators and experience slumping ticket sales, the Council for School Performance looked at what distinguishes the Georgia lottery as one of the nation’s best.
Georgia has continued to experience an increase in ticket sales. As mentioned previously, ticket sales have increased every year that the lottery has been in operation. However, Georgia’s lottery is relatively young, having been in operation for a little over four years. Georgia has sought to find ways to counter the trend found in other states, lottery revenues peak and then begin to decrease.
As protection against the possibility of declining sales, the Georgia Lottery for Education Act called for the creation of two reserve shortfall accounts. Governor Miller said these accounts were established to carry the state "across the dips and swells in proceeds." Each year an amount equal to 10 percent of the total amount of net lottery proceeds is deposited in the Shortfall Reserve Account. An amount equal to ten percent of the amount of lottery funds spent during the preceding fiscal year on scholarships is deposited into the Scholarship Shortfall Reserve Account. Deposits into this account will continue until the amount equals 50 percent of the amount of lottery funds spent annually on scholarships. As of the end of fiscal year 1997, the Scholarship Shortfall Reserve Account had deposits totaling $77.7 million, and the Shortfall Reserve Account had $54.3 million. While these provisions cannot keep Georgia from experiencing declining ticket sales, it can help to insulate the educational programs funded by the lottery from unexpected drops in lottery revenue.
In California, Illinois and Florida, the lottery has supplanted rather than supplemented educational spending. Evidence from these states show that "lottery dollars have replaced previously allocated funding, with the end result being that, at least in the case of education, funding in those states with lotteries is comparatively inferior to funding in those states that have resisted the gambling tax bug" (Borg et al., 1991, 12). In Florida, the percentage of the state’s total budget (excluding lottery dollars) that went to education has dropped in the years since the lottery has been in operation. In the years before the lottery was started, education received an average of 60 percent of the state budget. Five years after the lottery began, the average had fallen to 51percent (Nasser, 1997). Another study showed similar results in Illinois (Laschober, as cited in Borg et al., 1991, 13). An analysis by the California Department of Education found that $4 of every $5 of lottery funds for education are supplanting rather than supplementing general funds (Ingwerson, 1989).
While evidence from other states shows that lottery dollars have replaced previously allocated funding for education, Georgia’s lottery remains dedicated to funding supplemental educational programs. Evidence suggests that Georgia Lottery for Education funds have supplemented rather than supplanted money for education. The percentage of the state’s budget (excluding lottery funds) has remained stable and has even increased in the years since the lottery was introduced. Table 1 shows percentage of the state’s budget (excluding lottery funds) from fiscal year 1990 to fiscal year 1997.
Table 1. Education Budget as
a Percentage of Georgia’s Total Budget
(Excluding Lottery Funds)
|
FY90 |
FY91 |
FY92 |
FY93 |
FY94 |
FY95 |
FY96 |
FY97 |
FY98 |
|
50.39% |
51.35% |
50.94% |
50.09% |
49.69% |
50.35% |
50.66% |
52.5% |
54.5% |
Lottery Appropriations by Program
Section 50-27-3 of the Georgia code specifies that lottery receipts are to be used for four purposes: (1) tuition grants and scholarships, (2) construction of educational facilities, (3) technology for educational facilities, and (4) prekindergarten for four-year-olds. Table 2 shows how lottery appropriations were distributed to each of the four categories.
Table 2. Total Lottery Appropriations for Fiscal Years 1994-1997 by Program
| Scholarships | $449,769,284 |
| Prekindergarten | $501,923,530 |
| Technology | $478,755,088 |
| Construction | $442,952,424 |
| TOTAL | $1,873,400,326 |
In the four years that the Georgia Lottery for Education has been in existence, most of the net lottery proceeds have been allocated to the prekindergarten program. Table 2 shows that each the distribution of money has been roughly equal across spending categories. However, each year spending priorities shift, as illustrated in Table 3 and Figure 2, which show the distribution of net lottery proceeds by year.
Table 3. Lottery Appropriations by Program
|
FUNDING CLASS |
FY94 |
FY95 |
FY96 |
FY97 |
| Scholarships |
$46,699,010 |
$78,001,941 |
$162,440,172 |
$162,628,161 |
| Prekindergarten |
$37,100,000 |
$78,215,000 |
$181,626,245 |
$204,982,285 |
| Technology |
$152,716,478 |
$161,672,589 |
$60,915,253 |
$103,450,768 |
| Construction |
$5,501,512 |
$157,341,607 |
$71,101,071 |
$209,008,234 |
| TOTAL |
$242,017,000 |
$475,231,137 |
$476,082,741 |
$680,069,448 |
In fiscal year 1997, construction (at $209 million) and the prekindergarten program (at $204 million) were the largest spending categories. In the first two years, technology was the category with the highest expenditure. In fact, in fiscal year 1994, the money spent on technology ($152 million) far exceeded spending in any other category by over $100 million. The next year, construction expenditures ($161 million) were a close second to technology expenditures ($157 million). For the past two fiscal years, technology expenditures have been lower than they were in the first two fiscal years, and have been the spending category with the lowest expenditure. In fiscal year 1996, most of the net lottery proceeds went to scholarships ($162 million) and the prekindergarten program ($181 million).
Figure 2. Lottery Appropriations for Fiscal Years 1994-1997 by Program
The next four sections of the report will describe lottery expenditures for the four lottery program areas: