County wants lottery funds back
By Steve Herring
Published in News on August 21, 2016 1:45 AM
Wayne County commissioners on Tuesday morning said they could understand why the state might raid the education lottery fund during a tough budget year, but that does not mean they have to like it.
They also expressed frustration that the state, even though it now has a multimillion-dollar budget surplus, continues to siphon off lottery money originally intended for school construction.
Commissioners said as well that comments from some legislators that they are unsure what to vote on about the lottery funding is just an excuse to do nothing.
Restoring the statutory requirement that 40 percent of the net lottery proceeds be allocated to counties for school capital needs and increasing the annual appropriation of lottery funds until the 40 percent allocation is restored is one of the board's top five legislative goals.
It was among the goals the board discussed during a work session on the legislative goals of the North Carolina Association of County Commissioners.
"I believe currently the state was bragging that they had a surplus in this year's budget of like $400 million, $500 million," Chairman Joe Daughtery said. "So I am not quite understanding why they will not replace the 100 and some odd million (dollars) that they have taken away from it (lottery)."
"I what I think what the association has said is we would be happy with stair stepping if they needed to do it over three years," County Manager George Wood said. "So we are not even looking at the hundred million, if they came up with 30 or 35 million."
Commissioner John Bell said that while attending the association's conference that he had been told that legislators in office now don't know anything about the lottery, were not in office when it was enacted, and do not know how to handle it.
"Even though these are first-time legislators they should know a little something about what they are voting on," Commissioner Ray Mayo said.
Wood said a legislator did not have to have been in office long to understand the legislative intent of something five or six years ago.
"I would kind of suggest we be specific in regards to the stairs step because the way this is worded it says, 'to seek legislation to restore the statutory requirement that 40 percent of the net lottery proceeds be allocated to counties and increase the annual appropriation of lottery funds until the 40 percent allocation is restored.'
"It almost gives them an out by saying, 'Well, we don't know how to do it.' I think the comments of the two commissioners are correct, some of these guys (legislators) don't know how to do it. Maybe we should be specific to state that it be increased by 10 percent or 15 percent per year until."
Wood suggested wording calling for restoring one-third per year for three years.
Commissioners said they liked that suggestion.
Bell asked Wood how the law was stated when approved.
"The way it is stated, and the way it was sold to the public, is that 40 percent of the proceeds be used for public education," Wood said. "They define that broadly in the actual ballot. But all of the advertisement of it and everything was we were going to build schools with that, that this was going to fund capital programs for schools.
"So what happened, I guess, I think it was 2009 when the recession hit, the legislature had trouble balancing the state's budget. So what they said is, 'We are going to grab some of this lottery money,' and they used it to fund teachers' salaries and things like that. Their argument was, 'We are not violating the law because we are using it for education.'"
The wording on the ballot for the lottery that went before the public was worded that 40 percent would be used for public education, he said. That was the argument legislators used.
"But everybody knows that it was sold at the time that it was going to be 40 percent going for capital outlay because of the large backlog in school facilities," Wood said.
The lottery began in 2005 and by 2009 the state was diverting one-half of the proceeds to the state budget, he said.
Typically school projects are so big that counties borrow money instead of paying cash, Wood said.
Several counties that undertook school projects once the lottery was in place only have half the money they had relied on to pay the debt taken by the state.
"It is really, I don't want to use the word fraud, but it was definitely misleading when you are promoting an item and saying it is an education lottery and less than half is going to education," Daughtery said.
The other 60 percent is in the prize payouts, advertising and other expenses, Wood said.
Another issue is that the legislature is not acknowledging that lottery proceeds are growing, he said.
"They have capped us I believe at $100 million," Wood said. "They are getting the gravy. Bear in mind that they took about half of it. The last numbers I saw we were getting about 22 percent instead of 40 percent, and if they keep keeping the growth that number may be even lower. That has been going on now, this is the seventh year.
"It is one thing to help the state out for one or two years during a budget crunch, but it is another thing for this thing to become permanent, and that is where we are."
Legislators think a 5 percent fund balance is good, Wood said.
"But their own Local Government Commission will write you a nasty letter if you get close to 10 percent," he said. "But they think a 5 percent rainy day fund is good. What that does is every time that we go into a recession they have to immediately start cutting back. You are all business people and 5 percent isn't one month's revenue.
"When you live on income tax and sales tax, which is state government's primary thing -- one of the things that stabilize you (county) in a recession is property tax does not change, but sales tax and income tax are totally economy related. So to go down 5 percent in a recession is not unusual at all. Then here we are again with another problem."
When that happens the state automatically looks to where it can start grabbing money, Wood said.
"And lottery was a convenient place to grab it," he said. "It is an unfunded mandate back to counties is what it is."