A Small Payout to Classrooms

By Beacon Staff

If you’ve ever wondered where the money goes after you buy a Scratch lottery ticket at the gas station, it’s safe to say not much goes to education, which has long been touted in many states as a foremost beneficiary of the lottery system.

Lotteries have traditionally been marketed to voters as big moneymakers for public education. The reality, however, is lotteries contribute very little to education in any state, and Montana is no different. Of the 42 states that have a lottery, Montana is one of the lowest contributors to education, though this is partly because the state’s lottery generates so little revenue in the first place.

In 1986 voters approved the Montana Lottery with a 69 percent vote to provide a revenue source for the Teachers Retirement Fund, which proponents said would also help hold the line on or reduce property taxes. Montana was the 23rd state to adopt a lottery. In its first year, the lottery contributed $8.4 million to the Teachers Retirement Fund, more than double what it contributed to public education last year.

The Montana Lottery gave a portion of its earnings to the teachers fund for three years until it began handing money directly over to the Office of Public Instruction (OPI) in 1990 for general education spending, said Jo Berg, public relations manager for the Montana Lottery. That lasted for five years until the 1995 Legislature voted to abolish a slew of earmarks, including the lottery’s education earmark, Berg said.

The lottery has since put its profits in the state’s general fund. The general fund gets whatever is left over after the lottery pays for operation and ticket costs, retailer commissions and prizes, which by state law have to total at least 45 percent of the lottery’s total revenue. Legislators disperse the general fund money to a variety of state programs, including education. Because the OPI receives a lump sum from the state’s general fund, it’s difficult to say exactly how much the lottery contributes to public education, said Joe Lamson of the OPI. It’s not much, he said.

The Montana Lottery had its best year ever in the 2007 fiscal year, generating $41.6 million. Berg said the lottery broke records in both sales and transfers to the general fund, handing over $11.4 million to the Legislature. That’s $2.3 million more than the 2006 fiscal year.

“That’s a good way to start out our 21st year,” Berg said.

Montana is one of 42 states and the District of Columbia with a lottery system. Of those 43, only North Dakota’s lottery generates less money than Montana’s.

Berg said Montana has more video gambling machines than any other state, which decreases the popularity of lottery games like Scratch, Powerball and Hot Lotto. Overall, she said, only Nevada, which doesn’t have a lottery, has more gambling statewide. Also, Montana’s low lottery revenue reflects the state’s small population.

“Montana is definitely a unique environment (for a lottery),” Berg said.

Four states are currently considering the privatization of their lotteries through a lease system. California, Florida, Texas and Illinois all are looking at plans that would allow their states to lease out their lotteries to hopefully increase profits. Berg said Montana has never considered privatization.

Many states’ lotteries earmark money specifically for K-12 education, higher learning or both. Other lotteries put profits in a general fund, like Montana’s. New York’s lottery contributes the highest percentage of total public education funding of any state. In 2006, it made up 5.3 percent of all public education revenue, while Montana’s lottery revenue, after being appropriated in the general fund, contributed well under 1 percent to total education funding. Of the $688.5 million the state’s general fund alone contributed to education – about 41 percent of Montana’s total public education bill in 2006 – the lottery provided approximately $4 million. By comparison, New York’s lottery contributed $2.2 billion to education.

“You’re not going to fund education with the lottery,” Lamson said. “Not in Montana.”

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