Legislators should budget realistically
(This editorial originally appeared in The Dispatch of Lexington.)
Winners keep coming forward, but the news hasn’t been completely positive for the North Carolina Education Lottery as 2006 winds down to a close.
First, a little context. The lottery raised more than $63.5 million for education during its first three months of operation, from March through June, according to an audit. Powerball didn’t begin in North Carolina until late May, so most of the revenue for the three months came from sales of scratch-off tickets. The lottery is still projected to raise $350 million for education this fiscal year, money that wasn’t present before the games started up in the state.
However, the projection for fiscal year 2006-07 is coming in $75 million less than anticipated for education. Executive Director Tom Shaheen estimates the lottery will raise $1 billion by the end of the fiscal year, which is $200 million less than forecast. Shaheen wasn’t caught off-guard by this news; he warned legislators their budgeted amount of lottery revenue was too high.
Despite tax revenues running above projections, state budget-writers will face some difficult choices when they convene in Raleigh this month due to spending commitments for 2007-08. The decrease in lottery revenues could make that even more challenging.
That’s the danger in counting on lottery proceeds in a budget: No one really knows how much money will come in. Tax revenues also fluctuate, but the problem with lottery money is the projection came in too high to begin with. At least the budget took a conservative approach to tax revenues.
Shaheen pointed to higher gas prices as one possible cause for lower-than-expected sales. When residents are spending more to fill up their gas tanks, then that leaves less money left over to buy lottery tickets. This points out yet another variable in estimating lottery proceeds. Any unexpected increase in spending in other areas (for heating oil during a cold winter, for example) could put less disposable income in people’s pockets.
Legislators will meet even before the Legislature convenes to examine the lottery and see if adjustments are needed. They must be careful not to dispose of any necessary safeguards in an attempt to drive up revenue. A particular temptation might be to advertise the lottery more aggressively. This could cause some people to spend money buying lottery tickets that should be used on basic necessities and also decrease money available for education.
A better long-term solution would be to get the budget in line with realistic and conservative lottery revenue estimates. That won’t help the 2006-07 budget, but it would remedy the problem for the 2007-08 year and forward. This could force some tough choices in next year’s budget, but it would be better to make sacrifices now rather than push off hard decisions until later, when reductions could be even more difficult.
Some hiccups are to be anticipated during the first year of an operation as massive as the lottery. However, those glitches need quick attention so they don’t end up causing problems down the road when schools suddenly find money designated for educational programs is absent due to lottery sales that fall below expectations.