When voters approved the Georgia Lottery nearly two decades ago, the game was pitched on the premise that about a third of the money gambled away would go to worthy educational programs.
That was true for the first six years as between 36.1 percent and 33 percent of lottery proceeds flowed into the state treasury, funding the HOPE scholarship and pre-k program.
But that percentage has fallen steadily since 1999. Last fiscal year, just 26.1 percent of lottery money went to the reason voters approved state-sanctioned gaming in the first place.
The fluctuation occurs because the law authorizing the lottery has a fudge factor. The statute states that net proceeds of the lottery should be 35 percent of gross revenue “as nearly as practical.”
“The reason they put 35 percent in the original bill is that they thought that’s what they needed to tell people in order to pass it in Georgia,” said state Sen. Jason Carter, D-Decatur.
Earlier this month the freshman senator offered an amendment to the HOPE scholarship bill to gradually increase the percentage of lottery money to the state to 30 percent by 2015.
“That’s the promise that we made as a state and that the people of Georgia accepted when they allowed the lottery,” he told his fellow senators.
The amendment was defeated 35-20 in a party-line vote. Carter was not surprised since legislative leaders had been told that cutting the percentage of money going to prizes would ultimately hurt revenue by decreasing the popularity of the games.
Officials with the Georgia Lottery Corp., the quasi-governmental entity that runs the game, would not comment on the amendment.
Instead, they provided a "fact sheet" supporting higher jackpots, especially on scratch-off or "instant" games. Lower payouts would cut into overall revenue as customers fall away, the lottery claims.
Richard McGowan, a Boston College economics professor who has written critically about state lotteries, said there is something to the argument. Lotteries have life cycles, and Georgia’s mature game needs to reward gamers to keep their interest, he said.
Criag Lutton of Peachtree Corners has one child at the University of Georgia on HOPE and another who is a high school junior. He said he can see both sides of the argument, although he is not entirely convinced more money could not be shifted to education. “I don’t think that lottery buyers have any idea how much money goes into jackpots,” he said.
A state audit of the lottery released just before the HOPE vote in the Senate offers further evidence that less is more. The audit found the Georgia Lottery is fifth-highest among 42 lotteries in the nation for jackpots and still ranked seventh in total money transferred to the state because it had maintained high overall sales.
The auditors found the correlation between the higher or more-frequent jackpots and better sales benefited the lottery-funded programs.
Bre Harris, an auto mechanic from Stone Mountain, was among those drawn to the $244 million jackpot for Tuesday's multistate Mega Millions drawing. Harris said he only plays the lottery "when it gets kind of big."
Harris was not surprised at how relatively little of his dollar finds its way to education. In fact, he guessed it was about 15 percent. But he said he believed it should be higher.
"The money that I give up is going to nothing," he said. "It would be good for it to go to a good cause."
But McGowan said states are competing with other gaming outlets, including casinos in nearby states. That means lottery officials cannot reduce prize money without hurting themselves, he said.
“It’s a tough business to be in because there is so much gambling,” he said. “Even the worst slot machine pays out 90 percent.”
While money for education has fallen as a percentage of total revenue in Georgia's lottery, revenue has grown in actual dollars from $647 million in fiscal 1999 to $884 million last year. Still, it is not enough to fund HOPE and pre-k at the same levels.
Earlier this month, Gov. Nathan Deal signed House Bill 326 into law, requiring high school students to have a 3.7 grade-point average to qualify for a full scholarship. Students with at least a 3.0 will still get HOPE, but those grants will be tied to available revenue instead of the cost of tuition.
The state's lottery-funded pre-k survived the worst cuts but still faces a shorter school year and larger classes.
While prize money and state proceeds have shifted over the years, operating costs have remained relatively stable, between 9 percent and 12 percent.
Paul Mason, an economics professor at the University of North Florida who has studied state lotteries, said the real problem is that state legislatures have used lotteries to replace traditional tax dollars for services. Now states are stuck with lotteries that cannot keep up with the rising cost of their programs, he said.
“It’s a stupid bet that they have made worse by allocating more to prizes," he said.
But McGowan said states already are looking for new gambling sources to supplement the numbers game. Iowa, for example, is tiptoeing toward legalizing Internet gambling.
“The states get more addicted to gambling than any bettor,” McGowan said.
Our findings
- Under the Georgia Lottery for Education Act, "as nearly as practical," at least 35 percent of the lottery proceeds should go to the HOPE scholarship and pre-k.
- In 1997, 35 percent of lottery proceeds went to the pre-k and HOPE scholarship programs.
- Since then, that percentage has declined — while net ticket sales, for the most part, have increased.
- In 2002, about 31 percent went to the scholarship programs; in 2009, it fell to 25.6 percent.
Through the years
Lottery sales (in billions)
1997: $1.65
1998: $1.67
1999: $1.95
2002: $2.32
2005: $2.73
2008: $3.27
2009: $3.40
2010: $3.39
HOPE, pre-k share of lottery revenue
1997: 35%
1998: 33%
1999: 33%
2002: 31.2%
2005: 29.3%
2008: 26.4%
2009: 25.6%
2010: 26.1%
Source: Georgia Department of Audits and Accounts
Source: Georgia Department of Audits and Accounts
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