First year not as profitable as predicted
Now a year old, the North Carolina Education Lottery is meeting its goal of keeping residents from crossing the border to buy tickets — but failing to reach financial expectations initially touted by lawmakers and Gov. Mike Easley.
The lottery has set aside $220 million in profits for state education programs since the first tickets were sold March 30, 2006, removing North Carolina's label as the only East Coast state without the games.
Easley, who championed passage of an education lottery since taking office in 2001, praised the games Thursday for "providing about $1 million a day to improve education in North Carolina that would not be available otherwise."
But lottery ticket sales are below initial projections because of low prize payouts, particularly for scratch-off games. That means education programs could see only up to $350 million — about $70 million less than expected — from the lottery in its first fiscal year, lottery executive director Tom Shaheen said.
Shaheen said Thursday the lottery will be fortunate to reach $1 billion in sales for the 12-month period that ends June 30. The initial projection was $1.2 billion, which would have resulted in $420 million for education.
North Carolina lottery players are reaping the rewards, however. Winning tickets have been sold in all 100 counties, and a Halifax County woman won a $74.5 million Powerball jackpot.
More than 1,200 people have won prizes of at least $1,000, while others are glad to try their luck at one of 5,700 retailers statewide rather than travel to another state.
"You can't win if you don't play," said Steve Godwin, who dropped by a lunchtime lottery birthday celebration Thursday at a north Raleigh mall. The Clayton resident spends about $10 a week on tickets, saying "you're going to waste that much at a candy store."
Shaheen and Easley are working to raise prize payout rates to encourage more people to play, though critics argue the current interest level proves the lottery wasn't a good idea in the first place. John Rustin with the socially conservative N.C. Family Policy Council said the games lead to corruption and lottery proceeds are replacing general operating funds to pay for existing education programs.
"A lot of things that we have seen have taken place in other states," Rustin said. "It's not all that it's cracked up to be."
Former lottery commission member Kevin Geddings was convicted last fall of federal fraud charges for failing to reveal his work with a lottery service vendor. But no other problems have surfaced in the commission, and operations of the games themselves have run largely without a hitch.
"Overall, it's been a success," said Rep. Bill Owens, D-Pasquotank, the chief lottery proponent in the House for a decade before the games were approved in 2005.
Still, Easley wants to make some changes.
Current law requires at least 35 percent of lottery profits be used to support education-related causes, such as class-size reduction and need-based scholarships. Easley has asked the General Assembly to decrease the sum to 29 percent, saying the difference would help create higher jackpots and more prizes for scratch-off tickets.
The anticipated sales boost would lead to $1.5 billion in sales during the next fiscal year and increase funds for education, Easley said.
"This is the best way we have to get more money for education," he said.
Shaheen said North Carolina's payout on instant-ticket sales are significantly lower than those in surrounding states.
He has already used unclaimed prize money and other savings to increase the odds of winning on some games.
"You always have your core players," Shaheen said. "But to make a lottery hugely successful, you need to bring in other players, like players who buy a Powerball ticket every now and then."
Easley's proposed changes, which also include shifting more lottery profits toward the More at Four prekindergarten program at the expense of school construction and scholarships, are getting a cool reception at the General Assembly.
Lawmakers grappled with funding details for months in 2005 before passing the lottery bill by a slim margin.
"Changing where the money goes is not a move that I agree with," Owens said, though he does support changing the payout percentage to boost sales.
Lottery supporter Sen. David Hoyle, D-Gaston, said he's wary of debating a lottery bill because many legislators remain opposed to the games and an amendment to repeal the entire lottery could be brought to the floor.
"If the (lottery) bill came up again, I'd think a lot of people would think long and hard before voting for it again," said Rep. Jerry Dockham, R-Davidson, a lottery opponent.