What Ever Happened to the Lottery Money?

Lottery Funds represent a small and declining share of public school funding. Created to “benefit students”, Lottery Funds were earmarked for textbooks and instructional supplies. However, like all revenues streams created to “benefit students”, Legislative action allowed these revenue streams to be converted to the Districts general fund. By 2003 a State study concluded that 80% of Lottery Funds for public education were in fact going to employee salaries, pensions and benefits and not to textbooks, materials and supplies.

In 2015-16 Lottery funds are projected to hit a record $6 billion in revenues and provide $1.4 billion for schools. In 2003; at the time of the study, Lottery Revenues were $2.8 billion with $1 billion in funding going to education. So while lottery revenues have trippeled since 2003, contributions towards education have remained relatively flat.

Background

In 1984, Proposition 37 amended the California Constitution to authorize the establishment of a statewide lottery. As an initiative statute, the California State Lottery Act of 1984 created the California State Lottery Commission and gave it broad powers to oversee the operations of a statewide lottery. The purpose of the Lottery Act was to provide supplemental monies to benefit public education (specifically to provide guaranteed funds for textbooks and supplies) without the imposition of additional or increased taxes. The Lottery is administered by a five-person Commission appointed by the Governor and confirmed by the State Senate.

Revenues:

• 28% to public schools
• 6% to Colleges and Universities
• 50% to Prize winners
• 16% to administrative costs

The Lottery Act initially required that 50 percent of total annual revenues be returned to the public in the form of prizes and at least 34% of total revenues be allocated to the benefit of public education. No more than 16% of total revenues were to be used for administrative costs.

In March 2000, Prop 20 was passed by the Legislature as Assembly Bill 1453 and changed the way Lottery Funds were allocated.

Under Prop 20, K-14 schools received a larger percentage of lottery funds based on the wording of the Proposition which required that 50% of the Statewide growth in the lottery fund will first be distributed to K-14 schools to be earmarked for instructional materials. Then remaining funds would be distributed equally based on ADA. That meant that higher education and other state operated schools would no longer receive a share of the first 50% of growth funds. K-14 schools were getting a much larger slice of the pie under Prop 20.

In 2010 AB 142 Passed which again modified the lottery allocation formula to allow the Lottery flexibility to pay out more money in prizes and reduce the administrative cost limit to 13 percent of total revenues. Along with that flexibility, the new law required the Lottery to meet minimum levels of contribution to public education:

A. Not less than 87 percent (an increase of three percent from current law) of the amount of the total revenues shall be returned to the public as follows:

(1) Not less than 50 percent of the total revenues shall be returned to the public in the form of prizes, as determined by the Commission.

Repeals the requirement that a fixed 50 percent of the total annual revenues shall to be returned to the public in prizes.

(2) The percentage of the total revenues to be allocated for public education shall be established by the Commission at a level designed to maximize the total net revenues for public education.

Repeals the requirement that at least 34 percent of the total annual revenues are to be allocated to the benefit of public education.

B. No more than 13 percent (a decrease of three percent from current law) of the total revenues shall be allocated for the payment of expenses of the Lottery.

Comments

“This bill requires the State Controller to review the amount of revenue that gets allocated to public education at the end of each year for five years, and then repeals the modified allocation formula in this bill if in any of those five years the Controller determines that the revenue to public education fell short of the amount allocated in the last full fiscal year prior to the enactment of this bill (presumably FY 2008-09). Consequently, this bill does leave the allocation to public education vulnerable for one year in the event that a determination is made that funding provided to schools was less than the amount in FY 2008-09 - $1,048,694,000. However, if the modification of the allocation formula does result in additional lottery sales as the Lottery Commission believes, there could be a significant increase in the amount of funding that is allocated to the benefit of public education.

The Lottery currently generates total sales revenue of approximately $2.96 billion annually, with over $1 billion allocated to the benefit of public education. The intent of this bill is to allocate more money to prizes which in turn is expected to generate an increase in total sales revenue, allowing for an increase in the current level of funding allocated to public education. However, the exact impact of these changes will be a result of allocation strategies of the Lottery Commission, incentives to retailers, and other marketing events, all of which may ultimately influence the consumers’ behavior on lottery spending.”

Revenues to education are placed in a special fund, known as the California State Lottery Education Fund, which holds revenues until they are allocated on a per capita basis, using prior year certified average daily attendance data, to the following categories: K-12 education, Community Colleges, the California State University, the University of California, and other educational entities.

Once a quarter, the Lottery sends its educational supplemental dollars to the State Controller’s Office (SCO) who then audits those contributions. The SCO in turn distributes them to County Treasurers who then send the money to County Offices of Education, School Districts and the administrators of higher education. Those entities determine how Lottery funds are distributed and spent within their systems. The Lottery is not involved in this decision-making process.

The following data has been found from a variety of sources with links provided”

Lottery Revenue Paid to CUSD 2007-08 to Present - Source: http://www.sco.ca.gov/Files-ARD-Payments/Lottery/lottery_annual_k12.pdfpage 636 and 637

2014: California Lottery Report to the Public for Fiscal Year Ended June 30, 2014

California Lottery Comprehensive Annual Financial Report for FYE June 30, 2014

Total Revenue: $5,077,977,283

Prizes: $3,082,376,405 (61.2%)

Administration: $625,621,621 (12.4%)

Education: $1,326,663,398 (26.4%)

2015: Source: http://www.cde.ca.gov/fg/aa/lo/lottrevpro1516ltr1.asp

“2015–16 Lottery Revenue Projections

Please note the change in the ADA used for calculation lottery funding. The estimated per ADA rate increase in 2015–16 is largely due to the change in the ADA used to calculate lottery funding. Pursuant to Government Code Section 8880.5(a)(2) for fiscal years 2008–09 through 2014–15, the ADA used for purposes of calculating lottery included the ADA for Adult Education and Regional Occupational Centers and Programs (ROCPs) reported in 2007–08. Beginning in 2015–16, the Adult Education and ROCPs ADA will no longer be included for the purpose of calculating lottery funding which will impact every LEA’s funding. As such, the CDE advises LEAs to be aware of the change and ensure that ADA from the Adult Education and ROCP are not included when estimating the 2015–16 lottery projections.

The California State Lottery Commission is projecting total sales of $6 billion for 2015–16 and estimates that this level of sales would result in $1.4 billion for education. Based on these projections, the CDE estimates that the lottery will provide $181 per ADA ($140 per ADA in unrestricted lottery revenues and $41 per ADA in Proposition 20 revenues) for 2015–16. As noted above, the estimate per ADA rate increase is largely due to the exclusion of Adult Education and ROCP ADA for purposes of calculating lottery funding. We will monitor actual sales each quarter and advise you of any changes to the projection.”

Site Supply Budget for CUSD:

2015-16:

On June 24, 2015, at the adoption of the 2015-16 Budget, CUSD estimated Lottery Revenues $6.7 million $162 per ADA ($128 General Fund Revenues - $34 Restricted Materials/Supplies) and projected ADA of 48,354.76

Source: http://capousd.ca.schoolloop.com/file/1229223560406/1218998864154/1095880305525509113.pdf page 210-211

According to the August 12, 2015 Board of Trustees Meeting, Agenda Item #12 Exhibit #12

CUSD has 24,000 Chrome books on campus.

Technology to be funded and sustained through individual school site gift funds.

For actual Lottery funding data see: People For Student Rights - Count 14

http://peopleforstudentrights.com/index.php/complaint/count-14