Education Funding

Study Offers New Insights On State Lotteries

By Kathleen Kennedy Manzo — November 01, 2000 3 min read

The debate over South Carolina’s upcoming referendum on an education lottery has mirrored those that have erupted since the first modern state lottery was created more than three decades ago. But proponents’ predictions of a jackpot for schools and critics’ fears of moral degradation and a gambling trap for the poor are not necessarily in line with the evidence, according to a new study.

For More Information

Copies of the October issue of North Carolina Insight containing the Center’s state lottery research are available from the Center for $20.00 by calling (919) 832-2839 or by ordering through the Center’s web site at

Of the 38 states (including the District of Columbia) that run lotteries, 20 earmark a portion of the proceeds for public education.

That practice doesn’t always result in more money for schools, however; some states reduce their appropriations and use lottery proceeds to make up the difference, according to “13 Ways of Looking at a State Lottery,” a study published in last month’s issue of North Carolina Insight.

The journal, published by the North Carolina Center for Public Policy Research, a nonpartisan think tank in Raleigh, found “four pluses [to state lotteries], five minuses, and four questions where the research findings are inconclusive,” according to editor Mike McLaughlin."There are a lot of claims and counterclaims about state lotteries,” he said. “We hoped to shed light on the issue.”

The study found that while lotteries are a small but relatively stable source of income, revenues for the 29 states that had lotteries in 1989 have declined as a percentage of state income, from 3.5 percent that year to 1.9 percent in 1997.

The research is inconclusive on how much lottery revenues benefit schools, but the study found that in at least California, Florida, and Michigan, lottery funds “have merely substituted for normal levels of appropriations, despite the fact that lotteries had been promoted as boosting spending for education.”

Moreover, a 1996 study by Money magazine found that states with lotteries spent a lower percentage of their operating budgets on education than those without a lottery.

Reality Check

Critics’ claims about lotteries may also contradict reality, according to the study. Poor people do not purchase a disproportionate share of lottery tickets, it found. Instead, it says, sales of lottery tickets are spread out fairly evenly among all economic levels. And lotteries do not lead to excessive gambling, the journal concluded.

Several different polls in South Carolina show it may be a close call for the lottery referendum next week. Officials estimate that South Carolina residents cross the state border with Georgia to spend as much as $100 million a year on lottery tickets.

A large proportion of lottery proceeds in Georgia go toward HOPE scholarships, which help students pay for tuition at public colleges in the state.

In North Carolina, lawmakers have proposed and rejected a lottery during every legislative session since 1983. But with tight budgets expected in coming years, and with residents spending an estimated $86 million on ticket purchases in neighboring Virginia, pressure may again mount, according to Mr. McLaughlin.

Attorney General Michael F. Easley, the Democratic candidate for governor in North Carolina, favors a lottery to reduce class sizes and to establish a preschool program for 4-year-olds at risk of academic failure. But Republican nominee Richard Vinroot, a former mayor of Charlotte, N.C., opposes such a measure.

Meanwhile, voters in Washington state and Virginia will decide next week whether a proportion of lottery revenues in those states should be earmarked for education. And a referendum to create a lottery to benefit public education is on the ballot in Arkansas.

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