By Amber Hsiao
Originally published in the2x2project.org
If you’ve ever played the state lottery, you’ve probably seen the advertisements reassuring you that your lucky dollars are going toward education, a fundamental component of socioeconomic status and determinant of population health. But where do lottery winnings really go?
With the exception of seven states, state lotteries have been around for decades and act as a substantial cash generator. In fact, many states rely on the revenues generated from the lottery in years of budget shortfalls to meet their financial obligations for public goods—including education, health care and economic development. Less than half of states dedicate revenues specifically to education.
Part of the variance in state spending on budget items like education, however, is due to differences in the role of state versus local governments. And unlike the federal government, states often operate under stricter revenue-expenditure constraints, as the majority of states require their governors and legislatures to submit and pass balanced budgets at the end of each fiscal year. Funding sources for state operations include federal funds, bonds (often for capital projects), “other” state funds (e.g. from gasoline taxes) and “general funds” that are the source of most state expenditures, including education, public assistance and Medicaid (see a state-by-state breakdown of general fund expenditures).
Based on the latest 2012 Census release on lottery revenues, New York, California and Florida raked in the largest dollar amounts in profits. Much of these revenues go toward education—and in fact, all three of these states mandate their lotteries to fund education.
New York’s Lottery contributed $3.17 billion in FY 2013-14 to public education. In California, as of 2010 when the CA Lottery Act was amended, at least 87 percent of revenues were required to go back to the public in the form of prizes and public education. In the fourth quarter of FY 2012-13, this amounted to $1.28 billion for public education, accounting for approximately 1.3 percent of all education funding in the state. In Florida, between 30 to 40 percent go toward the Educational Enhancement Trust Fund, which funds the state’s college system, state universities, public schools and financial aid.
Because the lottery profits are often used to bolster budgets, rather than supplement them, it’s difficult to pin down how much these revenues are actually helping to improve, say, social determinants of health that are often linked to educational attainment.
Other states, however, are more diverse in their funding allocations. In Minnesota, $11.1 million in unclaimed lotto prize monies went to the state’s general fund, with the largest portion going to education, but also 27 percent toward health and human services programs and 15 percent toward other programs including criminal justice and transportation.
Public education funding is only part of the story, however. Because the lottery profits are often used to bolster budgets, rather than supplement them, it’s difficult to pin down how much these revenues are actually helping to improve, say, social determinants of health that are often linked to educational attainment. Furthermore, high spending per pupil doesn’t necessarily determine education quality, although under-spending could point to a number of issues and challenges, such as the need for hiring special education staff or establishing universal preschool programs, which have been correlated with increased high school graduation and decreased incarceration rates.
Based on the latest 2012 data on elementary-secondary school spending per pupil by state, New York spends the most at $19,552 per pupil. The Northeast states rank among the top in spending per pupil, and the South and West spend the least. According to the American Legislative Exchange Council, Florida is one of the top four states investing in education with the biggest bang for the buck (thanks in part to funding from lottery profits), helping it achieve some of the highest gains in its National Assessment of Educational Progress scores. New York, on the other hand, had one of the highest increases in per-pupil spending with only average academic gains.
Playing the Numbers for Public Health Initiatives
Guessing how much of lottery profits get appropriated for public health initiatives, however, is more of a gamble. States without an explicit mandate to fund only education vary widely in how much they allocate in their budgets for prevention programs and the like—and the funding is often pooled into the general fund.
For example, in Arizona in 2013, $19.6 million has gone toward teen pregnancy prevention and food assistance for children and mothers. In Virginia, lottery funding was pitched to taxpayers as bonus funding, but much of the funding is used to meet budget shortfalls—often in education, but sometimes even to fill gaps in programs such as school breakfast and foster care.
While it might be difficult to track the trail of money, public health investments could benefit greatly from a boost in funding—or even some legislative rewriting of lottery mandates for where profits go to ensure that public health is a priority. Based on FY 2009 data, state investments in public health varied from $3.55 per person in Nevada to $169.92 per person in Hawaii—a far cry from what would be needed for state governments to support and sustain public health. Increased transparency and earmarking lottery funds for public health programs beyond education would be a win for health policy planning.
Edited by Dana March