Lottery funds in jeopardy?
By Steve Herring
Published in News on September 26, 2014 1:46 PM
A brief sentence crafted in legal jargon and tucked away in the voluminous state budget is raising the alarm that legislators are poised once again to raid state lottery funds.
Translated, the sentence tells counties they no longer can pledge their lottery revenues as collateral for debt service (loan) payment for school construction, Wayne County Manager George Wood said.
"When I look at it I can't think of any reason why you would put that provision in there unless you are setting the stage to possibly take more," Wood said. "That doesn't guarantee that they will take it, but if you weren't looking to take it, you don't need that sentence."
The restriction would make future school construction projects much more difficult and would possibly require property or sales tax increases or some other county revenue to make up for the lost lottery money, he said.
Legislators have been whittling away at the revenues since 2009, and in doing so have cut the counties' lottery funding for school construction by about 48 percent, Wood said.
"The lottery was sold to the people that it had to be used for educational purposes," Wood said. "It didn't say capital outlay or debt service, it says educational purposes."
That wording opened the door for other uses, he said.
For example, the state converted a large portion of the revenues taken from counties into operating money for schools, he said.
That freed up the general fund money that otherwise would have gone into operations allowing them to be used to balance other portions of the budget.
Wood said he understood how that could happen during the throes of the recent recession, but added that those conditions are no longer applicable.
Restoring the lottery revenues is a top legislative goal for the North Carolina Association of County Commissioners, which caught the wording in the budget and alerted counties.
The members of the county's local legislative delegation have pledged to try to get lottery revenues back to pre-2009 levels.
It didn't happen this past legislative session, nor was there a phase-in, as some had suggested, to gradually return the money over time to honor the original promise to use it for school construction, Wood said.
Legislators are well-aware that restoring lottery revenues is a top priority for counties, he said. However, the lottery is an easy target at a time when legislators are under pressure to do more without a tax increase, Wood said.
Rep. John Bell of Goldsboro filed a bill during the recently ended short session to return money already taken. The bill passed one reading before being left in the Committee on Appropriations.
"I didn't know that (restrictive) wording was in (the budget)," Bell said. "I am going to do the bill again in January. I want (the lottery money) used for what it was intended. I think a lot of counties, particularly in my district, made a commitment to build new schools and some have."
Losing the lottery money would put those counties in a "bad situation," he said.
Bell said he has not heard any talk that an effort might be made to take more of the money.
However, in tight economic times using lottery revenues is a Catch-22 situation that allows the state to have additional revenue without having to increase taxes, he said.
An oversight committee is looking at whether to increase what can be spent on advertising the lottery. The idea is that the increase would lead to more sales, and therefore more revenues that could go to the counties, he said.
Also being studied is a way for any surplus lottery revenues to be distributed among counties. It would be money that counties could not depend on, but would have if there is a surplus, he said.
Wood said the restriction is more of an issue for the county than the school board since it is the county's responsibility to fund school construction.
The school board has agreed to fund $2.2 million of the approximately $3 million annual debt service payment for new middle schools in the Grantham and Spring Creek communities.
The schools are using a mix of lottery and sales tax money that is earmarked for schools.
The county is making up the difference.
"So our concern is that if the legislature starts taking more of the lottery money then we are not going to be able to get as much money from the schools," Wood said. "That means we would have to use more local money to pay that debt service.
"There is no question they (legislators) have passed the financial burden down to counties.
"We have it covered the way it is now (for the two new schools), but I see them setting the stage for what are they doing in next year's budget to go with more of a grab."