CA Lottery: State’s cash cow

September 27, 2012 - By admin

Sept. 27, 2012

Katy Grimes: I am not sure why Californians are faced with two tax increase measures this November, ostensibly to help fund California’s starving public educational system.

The California Lottery, which was sold to voters as a way to help fund California’s public education system, is a cash cow, and rakes in billions of dollars every year. But what actually makes it to schools amounts to about $132 per student.

There are Lottery regulars who spend more than that every month on lottery tickets.

While every dollar helps, California’s public schools are in really bad shape; more money will not fix what ails them.

Prop 30 and Prop 38

Gov. Jerry Brown’s Proposition 30 raises sales tax on everyone, and increases the income tax on income of more than $250,000. Prop 30 would only add between $6 and $8 billion in additional tax revenue to the state’s coffers. And only $2.5 billion of that would go to education.

Proposition 38 will increase state income tax rates for nearly all Californians, and is expected to raise tax revenues of about $10 billion a year, according to Ballotpedia.

Lottery dreams

The California Lottery was sold to the state’s voters as a funding source for public education. Ahhh… I remember it well. “Our schools win too!” was the advertising slogan.

It was October of 1985 when the first lottery tickets went on sale. Californians went nuts with delusions of riches. A group of my friends had a lottery party where we had pooled money to purchase $100 worth of lottery tickets. At our “Scratchers Party,” libations flowed while  we celebrated the ridiculousness of the lottery. Several volunteers scratched the 100 tickets to see if we had won.

Zip. Nada. But we had a fun party anyway, especially when the local news channel showed up to film us.

That was the last lottery ticket I ever purchased. I am not a big believer.

Proposition 37

The 1984 passage of Proposition 37, the California State Lottery Act of 1984, authorized the creation of a state lottery. But only  58 percent of California voters approved the initiative.

“Under the measure, we estimate that approximately 80 percent of the state’s share of the lottery revenues would go to K-12 schools, 13 percent would go to community colleges, 5 percent would go to the California State University, and 2 percent would go to the University of California,” The Legislative Analyst’s Office reported.

Is that what has happened?

The California Lottery has a 2012-13 annual budget of $4.83 billion. Of that, they claim that they generate more than $1 billion a year for education. They also claim that 94 percent of all lottery revenue goes back to the public, and 6 percent is used for administrative expenses. If this is accurate, then the lottery is an amazingly tightly run state agency, and should be the model for all state agencies.

“The California Lottery does more than provide our players with fun and excitement by continually offering new and different games to play. We also generate more than $1 billion a year for education,” the Lottery website states.

“The Lottery establishes a 3-year rolling Business Plan that sets goals and objectives to be met each fiscal year. We are continuously reviewing our performance based on short-term targets, throughout the organization, to ensure that we operate at maximum efficiency and can make course corrections during the fiscal period. Like other businesses, our performance review is critical in measuring our success and identifying areas of improvement. With consistent close examination of the Lottery’s performance, we are able to keep our promise to California by maximizing our contribution to education.”

Since its inception in October 1985, the Lottery claims to have provided more than $25 billion to California’s public schools.

At what cost to taxpayers? The agency has become a behemoth with a more than $4 billion annual budget.

The total cumulative contributions to schools 1985 to present:

K-12: $$19.2 billion

Community Colleges: $3.27 billion

California State University: $898 million

University of California: $535 million

Other public colleges and universities: $4.4 million

Misc. educational institutions: $40,138,316

The Certified Annual Financial Report for the Lottery reports the distribution of Revenues (in billions) for October 3, 1985 – June 30, 2011: 

Prizes: $34.1

Retailer Compensation: $4.3

Direct Costs: $1.5

Operating Expenses: $3.0

Contributions to Education:  $24.0

The CAFR also reports:

* The assets of the Lottery exceeded its liabilities at the close of the most recent fi scal year by $103 million.

* The California Lottery’s contribution to education increased $38.8 million over the last fiscal year. This is the eleventh consecutive year the Lottery will transfer over $1 billion to California’s public schools and colleges.

* In addition, the California Lottery paid out more than $1.9 billion in prizes to players and approximately $233.6 million in commissions, cashing bonuses, and other applicable fees to retailers.

* California Lottery sales revenue increased 13.1 percent, or approximately $397.6 million dollars over last fiscal year.

The idea that it takes money to make money may work in fundraising and the private sector. But in the world of government, the goal is rarely to make money or profit, it is to expand, grow, and create a larger agency.

An announcement today in the California Morning Report by the Lottery Commission reports that the commission is considering amending it’s $4.83 billion budget to reflect an additional $11.4 million in profits expected from a $2 billion Powerball game, and from Scratchers tickets.

The Lottery commissioners will be meeting today and tomorrow. The meeting agenda is here.

You can plug in your local school district here to see how much it has received from the lottery.

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  1. Rex the Wonder Dog! says:

    When the lottery was passed it provided a ton of money for schools, and the very first thing Gov Deukmejian did was CUT the K-12 education budget by the exact same amount that the lottery brought in, so the lottery did nothing for schools at all. And Deukmejian was a slim ball for doing that. I remember that like it wa yesterday, but it has now been almost 30 years. You may have been too young to know that Katy, but it is true-check it out.

  2. Jojojo says:

    So Rex the Wonder Dog, Jerry Brown is now the Governor. Deukmejian was Governor over 20 years ago. I am so tried of this politics of blame especially when its against a guy that’s been gone for over two decades and your guy Jerry Brown, the failed mayor of Oakland, is in office and nothing has changed. Vote No on Prop 30.

  3. Trish says:

    In my opinion, the CA Lottery has lost ALL accountability, as it seems they really have no one to be accountable to. The waste is endless. For example, how many people even know the Lottery recently moved into a BRAND NEW state of the art, building? It even has a gym with the same equipment as the white house. This is not your typical business building. It is incredible. Worth taking a tour. They will tout it as being eco-friendly. So eventually, every business needs a new building & it can’t be avoided. So what happens to the OLD building? In a big gesture, the Lottery let the fire dept use the old building for fire practice & when they were done, it would be demolished. Sounds good so far. What the fire dept was not expecting was a completely furnished building that looked like everyone had gotten up & gone home for the day. Computers, desks, chairs etc still in place. Also a full warehouse with BRAND NEW equipment, computers, huge coils of COPPER wire. Kitchen equipment, walk in coolers, gym equip, rugs, copy machines & the list goes on & on. I guess since they decided the new building needed EVERYTHING NEW, they didn’t need any of it, even though much of the waste was new. Sure they told employees the stuff was going to a state liquidation auction. Obviously not. Fire fighters were stunned, the building was demolished & the evidence gone. Oh well, it’s just $ for education!

  4. Bob says:

    Rex, even if Dalmatian would not have done that it would have made no difference.

    No matter how much money the public schools receive, it will never be enough.

    The public school system needs to be abolished. I know that sounds insanely radical but it really is the right solution.

  5. Rex the Wonder Dog! says:

    Bob- I agree with you 100%-it is never enough for K-12 trophies nut it is still a slimeball move, two wrongs don’t make a right.

  6. Bob Smith says:

    That building was demolished, and the wealth therein destroyed, rather than sell the building to a business that could have used it. Who cares, not their money! Disgusting.

  7. Laddie says:

    To be more accurate – Prop 98 funding of K-12 budget for 2012-2013 is $52.5 Billion and increase of $4.9 Billion from the 2011-2012 school year. The lottery under Prop 37 was required to provide at least 34% of its revenues to public education. This was to “supplement” not replace school funding. In 2010-2011 the lottery reported sales of $3.44 Billion. Of that $1.1 Billion was given to the schools to supplement school funding – the lottery is not the savior of the education system – very disappointing….

  8. Anthony says:

    Like many of the people who commented I also was around when the lottery started and was amazed of the amount of money funneled into schools. I do not remember Governor Duekmaijian slashing the school budgets to be replaced by lottery funds. However, many of my friends then are now retiring and I am hearing a different story.
    I have been told that a major percentage of lottery funds go towards…are you ready for this? Towards teachers conventions and weekend workshops in luxury hotels and fun places. I was told that basically it is against the law to use the money to purchase any equipment, not even a pencil, or hire additional staff, or provide needy students with books. So what to do? I guess our educators found a use for it.

  9. Richard says:

    Richard Smith
    Sorry Katy. You have fallen for the misdirection that has become the standard for communications from any associated with governments. They say 96% is returned to the public. And that “public” includes the education system. You see, we think of the Gov’t as an entity but they do not see it that way. When Govt entities shuffle YOUR money back and forth, they count it as a distribution to the taxpayer each time.

    Here are the facts:

    Indian casinos and Las Vegas return about $.94 cents of every dollar to the “gambler” (note the distinction from the “public”). The state lottery only about $.53. The “odds” of breaking even or making anything are $783% greater with a “private” gambling institution than with these mush-mouths.

    And yet Californians spend billions a year on lottery tickets. They must like giving money to schools so that the government can take money from schools to fund entitlements.

    Don’t think so. I just think the Lottery commission spends BILLIONS a year to make it appear you are helping schools for free. It is just another tax because every dollar of lottery money to schools is another dollar the State can take from the schools to spend elsewhere.

    Simply put…It is a fraud.

  10. James Summers says:

    They said 90 something percent was supposed to be funneled back into our schools. The first lie! They said it would go to helping schools buy much need resources such as books and the like. The second lie! They said it would allow for the stopping of overcrowding by aiding us to build more new schools. Well not enough to make a difference. The 3rd lie! They said establishing our school system to hire new teachers to help with the over crowding student per teacher ratio. 4th Lie!!!! Instead of building new schools on a scale as quoted they have simply thrown out a bunch of wood boxes on the what used to be playground space and said ok there you go. Not to mention what has come threw the front door has simply gone out the back door by cutting resources which were in place prior to any such lottery. And now they all work in state of the art buildings. It’s really funny because a lot of cities are doing the same opting for new marble encrusted building to work in with the A/C running full blast all day. And you usually have to wait for help for hours. They just don’t care people… Maybe we as a society should finally stand up and make them care. It all starts with our politicians. And lobbyists should not be our hidden politicians. Stand up or shut up and just take it in the rear. After all they like it that way.

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