Chapter 1 General Government - The California Performance Review

GG 06Increase Lottery Sales andFunding to Public EducationThe California Performance ReviewSummaryThe state’s fiscal crisis and the public’s reluctance to increase taxes requires that the stateconsider all available sources of additional funding for our public schools. The Lottery is oneof these sources. Even though the Lottery generates about $1 billion a year for publiceducation, it ranks at the bottom of the list in per capita sales when compared to the otherlarge state lotteries in the nation. 1 This is because state laws prevent the lottery from offeringthe best lottery products.BackgroundCalifornia’s lottery was created in 1984 when 58 percent of the electorate approvedProposition 37—The California State Lottery Act (The Lottery Act). The Lottery is the only forprofitbusiness run by the state. All of the Lottery’s funding is derived from the sale of lotterytickets, not the state General Fund. The Lottery has two basic products; computer generateddraw games like SuperLOTTO Plus and instant scratch-off games known as Scratchers ® .The lottery’s purpose is to provide supplemental funding for public education. The Lottery Actstates that the Lottery must be run in a manner that makes the most money for education. Inother words, the mandate of the voters is for the lottery to operate at maximum profitability.That mandate has yet to be fully realized.A February 2004 analysis conducted by the world’s largest provider of lottery systemsconcluded that: “The general consensus among national lottery experts is that Californiaoperates an under-producing lottery which currently grosses approximately $3 billion inannual revenues, when it should be earning twice that much or $6 billion annually.” 2Lottery sales have been flat since Fiscal Year 2000–2001. Lottery officials believe that the onlyway to bring the lottery up to its full revenue generating potential and to ensure that revenuesdo not go down, is by changing state laws that prevent the lottery from increasing prizepayouts, operating banked games and selling games with popular themes.A Government for the People for a Change 29