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Episode #2022
An Education Lottery: Whose Gamble?
F: Overcrowded classrooms, test scores, and the academic achievement gap are just a few factors that continue to make the state of education a top concern among North Carolinians and its leadership. Would a state-run lottery to help fund public school construction, programs, and more, calm some of these educational concerns, or create new issues. We'll talk about it next on Black Issues Forum.
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Voiceover: Funding for this program is made possible in part by UNC-TV members.
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Brown: Good evening everyone and welcome to Black Issues Forum. I am Natalie Bullock Brown. Tonight we bring you a discussion on a topic of immediate concern and debate within our state legislature, the question of instituting a state-run lottery system. There are currently several variations of an education lottery bill but most of the debate and the tension have focused on two bills, House Bill 1023, which passed in the House on April 6th of this year, and the Senate's budget bill, Senate Bill 622, which contains provisions for a lottery. Both bills provide for the institution of a state-run lottery system with certain line-item variation, which we'll briefly discuss later in the program. Now 40 other states in the union have lotteries, including all of the states surrounding North Carolina. This evening we'll give you an opportunity to hear some of the viewpoints surrounding the lottery issue as expressed by our guests. Right now I'd like to introduce those guests. First, we have Representative Bernard Allen, a Democrat representing Wake County who is a co-sponsor of the House Bill for a lottery. Representative Paul Stam, a Republican also representing Wake County. Eddie Davis, President of the North Carolina Association of Educators, and David Mills, executive director of the Common Sense Foundation. Welcome to all of you.
I'd like to start out by getting just a brief explanation from each of you about what your actual opinion about a lottery is. I'll start with you, Representative Stam.
Stam: Well, it's about the most regressive tax possible on people who are bad at arithmetic. To sustain a lottery you have to have massive amounts of advertising, which if I did as a lawyer, would get me indicted and disbarred. It does absolutely nothing for education when you actually look at the numbers, and it creates an atmosphere which is conducive to organized crime, and I'll briefly explain that. When you gamble with the mob, you only lose six cents on the dollar, and they don't report you to the IRS, but with the lottery, your effective loss is you lose-
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M: And there are other problems with the lottery, and it's something that is really targeted towards the poor in general; the poor play vastly more often than the rich. Lotteries are also notoriously unreliable sources of money in other states; we're seeing wide fluctuations in the amount of revenue that lotteries bring in. It really makes clear, and in most other states, it's not good public policy to have a state-run lottery.
Brown: Okay, Mr. Davis.
Davis: Well, I believe very strongly that North Carolina is already playing the lottery. All of the states around us, as your promo talked about, we know that they have lotteries and the states in the 40s, in terms of the number of them, have lotteries, and I believe that there is money that can help public education. The poor need this help, the Leandro [ph] situation that we had the challenge that we have there. A lot of money could go there. Scholarships, students could get that money. So a lot of people, particularly in the African American community could benefit from the proceeds that would come from a lottery and since we are already playing a lottery, we're giving it to Tennessee, Virginia, Georgia and South Carolina; I think that money needs to stay in North Carolina.
Brown: And Representative Allen.
Allen: Yes. I believe strongly in the lottery. People have choices to make, and you heard someone reference 40 states already-well, 40 certainly is greater than one, and obviously those states, the citizens are not that evil. We're the only state on the eastern seaboard, from Maine to Florida, that does not have a lottery. We're losing excessive, $350 to $400 million per year going to the other states. We need the revenue to reduce class size, to help with the County Commission's building of schools, to get better teachers, to provide scholarship for needy youngsters who cannot afford to go to college. So the lottery definitely plays a very important role, and it's a choice issue. No one forces you to play the lottery, so it's something like smoking, or drinking, or whatever, it's a choice that an individual has a right to.
Brown: Let me ask Representative Allen and Representative Stam this question, which is, do you believe that playing the lottery is a from of gambling and if so, or even if not, is gambling legal in North Carolina? I'll start with you.
Stam: Well, that's interesting. Of course it's gambling, by definition, but the lottery bill is not about freedom. It doesn't legalize gambling. The bill itself makes criminal the same act which the state then does and charges you an effective rate of 65 cents on the dollar for it, but says if you want to set up a lottery of your own, you'll go to jail.
Allen: Well, you know, North Carolina was very blessed to have the US Open Golf Tournament last month, and they were competing for a prize, so you might want to call that gambling; I'm not sure, but one could argue that, and I'm certainly prepared to do that. But you might say it's gambling by definition. You can say a lot of things are wrong if you want to; what about the other 40+ states that already have a lottery in place? You the beauty of this place is that many, many years ago, there are several buildings on the University of North Carolina's campus that was funding out of a lottery revenue, and my good friend and colleague, Representative Stam, is a graduate of the University of North Carolina, so perhaps one of the buildings that he went to class in was built out of lottery funds.
M: You know we hear a lot about these 40 other states that have lotteries and what's important to remember is that support for a lottery is a mile wide and an inch deep. Once people really know what a lottery is all about, support for a lottery starts dropping. Once people see the statistics for how bad a lottery really is, for the people a lottery is supposed to help, they back away from a lottery, and this issue breaks my heart in some ways, because I have tremendous respect for Representative Allen and Mr. Davis, and I'm on the same side of so many issues as they are, our organization wants to see more funding for education in many different areas, we just think there are much better ways to raise this kind of money than a lottery.
M: Why don't you give us some for-instances?
Brown: Hold on. Let me just begin to break down the specifics of how a lottery might or might not benefit. Let's talk about how much of the lottery revenue education would actually receive. According to House Bill 1023, 50% of the revenue would go to pay lottery winners. Up to 16% would go to pay lottery expenses in the operation of the lottery and the rest, which is about t 34-35% would go towards education and funding, but that's only anticipated. So, actually-I'm sorry. Let's take a look at the two different bills and how they propose to distribute the net revenues from the lottery. Now supporters of the house legislation expect at least 34% of lottery proceeds will actually be allocated toward education. The House Bill proposes those funds be allocated in the following way: 50% will be transferred to the public school building capital fund; 25% will be transferred to the State Educational Assistance Authority, and appropriated to fund need-based scholarships. The remaining 25% will be transferred to a special revenue fund to be established in the state treasury and to be known as the Education Enhancement Fund. This bill also has language that restricts advertising to point of sale locations and the premises of lottery retailers. Now the Senate Bill 622 proposes that of the 35% net revenue that will be generated from the lottery, $70 million would be transferred to a public school building capital and technology fund. One hundred and fifty million dollars would be transferred to a special revenue fund to be established by the state treasurer, and to be known as the County Assistance Fund, and this fund will be used to pay for school construction projects, plus pay off, school construction debts and the remainder would be transferred to a special revenue funds to be established, which would help reduce class size, the achievement gap, More at Four and other educational priorities identified by the General Assembly.
Okay, so now that we've tried to break that down, let's go to Mr. Davis. I know that we often hear about the many things that need to be improved in education in North Carolina, but how much of this money, we know 34-35%, but exactly is that going to do for education?
Davis: Well, I think it would do a great deal. I think if you look at the lottery and the 34% as a net profit margin, most businesses would take that. If you look at the overhead that people have in businesses and the advertising that they put in, they could come out with 34-35% as a net profit, they would look at this as a wonderful, wonderful venture. I think the same thing would happen for North Carolina, all the programs that you just outlined, More at Four, being able to give student scholarships, being able to help build buildings to reduce the overcrowdedness, being able to come up with new programs, not to supplant programs that are already there, would be wonderful for North Carolina. Look at student scholarships and the things that young people who have aspirations would be able to gain by being able to get these scholarships. And the good thing is that North Carolina can benefit from maybe the mistakes that maybe other states may have made. I'm sure that we will hear, let me finish up first, I'm sure we'll hear how bad the lottery is in this state and that state and advertising and how many will be aimed at minority communities and those things; I think we can profit here in North Carolina from any mistakes that may have been made, and still be able to have a profitable lottery for the people of North Carolina that will help education.
M: Let me put a perspective on that. I think there is a common perception out there that this will be a major source of funding for education, but this will be at most an additional four cents for every dollar that is already there and all of the worthy causes that are in both House and Senate bill are already being funded by the government. So, the effect, the consistent effect in every other state when you do this is that they people out there in the state think you've taken care of education by the lottery, so therefore they don't support new school bonds, they don't support other taxes for education. The lottery is taking care of the schools, and it gives no new money for schooling. It's a sham transfer from other taxes to this new pot of lottery money which does it four cents on the dollar.
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M: Net it's none, but the official, officially it's four cents on the dollar, but when you realize that you're taking money away from sales tax, there are other taxes that you're reducing, it nets nothing.
Allen: That's really not a fair statement, Skip, because you know as well I do, you've done your research, I know you. But the states that have lotteries, let me just use Georgia for an example. Over the last 10 years, and they just celebrated their 10th anniversary last year, I believe it was, over $6 billion worth of ___ went into public education in the state of Georgia. Six billion dollars! Now my bill, the bill we support, clearly states that there is to be no supplanting of funds. Now I want to stress that point, because you really need to let that penetrate. We are saying-
M: It's totally unenforceable as you know.
Allen: Well, I don't agree that it's not enforceable; obviously, it's enforceable; I mean, that's what the commission will do, once they establish the commission to set up the procedure, etc., etc.
M: Let's talk about Georgia, and I'll defer to David on this first.
Mills: Well, there are two quick points in response to Representative Allen. First of all, the Hope Scholarship Program is what's happening in Georgia with lottery money; that's an excellent example of how the lottery doesn't work, or really how the lottery might work here in a bad way, is it's reverse Robin Hood: it's taking money from the poor and giving it to the rich. The Hope Scholarship Program sets up scholarships that require a certain grade point average for students to be able to maintain that scholarship, and overwhelming the students who keep that scholarship are students who come from wealthy backgrounds who are able to stay in school and keep their grades up and don't have a lot of distractions, so what we're seeing is, poor people playing the lottery in Georgia and funding the education of the wealthy. The second point about supplanting that Representative Allen made, his bill does prevent supplanting, but the bill in the Senate very clearly states-
Allen: I can't speak for the Senate!
Mills: I'm not asking you to.
Allen: Okay, but you're making that statement, though.
Mills: But when these two bills are in conference, if your provision loses, and we get the Senate's provision-
Allen: If it loses.
Mills: Right. If we get the bill to the entire Senate passed-
Allen: Suppose we do not get that-
Mills: But my concern is if the Senate asked us to move $70 million out of corporate taxes and take it instead from the poor in the from of the lottery, that's Robin Hood right there, shooting that arrow.
Allen: David, David, this corporate tax business is hogwash. We consistently give the corporate community tax break in North Carolina. We just did it the other day with the cake factory coming into Rocky Mount. We did it with Dell up in Winston-Salem; we did it for Merck Pharmaceutical over in Durham ____. So we've taken good care of the corporate community. All right?
Brown: Let me jump in. I'm sorry. I want to move on. There are so many parts of this that we want to try and get to. One of the things that I believe Mr. Davis and Representative Allen talked about is that we need to bring lottery dollars back into this state.
M: I've got to speak to that, if I could.
Brown: Let me just make a point, and then you can. Can we be assured that if North Carolina were to have a lottery, that people still wouldn't go to border states to play the lottery? Can you say with all assurance that that would be cut out and then we would in fact benefit from those dollars remaining here, and representatives ___.
M: Well, obviously some people would travel each way, and it'd be a wash. But the comment, one of the strongest arguments for the lottery is we need to capture this money going to Virginia and South Carolina, but I actually put pen to paper with a CPA, and have calculated that we actually lose more money to other states with the lottery than without. The reason for that is that federal income tax law is prejudiced against gamblers because they're taxed at the highest rate but they don't get to deduct their losses, and so the consequence of having a lottery is having a lot more gamblers, a lot more winnings, and we will be sending an additional couple hundred millions of dollars to Uncle Sam to pay on the national debt out of state-
Allen: Are you saying that if people in North Carolina get money, they will have to pay taxes, and we don't want them to have that money so they wouldn't have to pay taxes?
M: Yes. I'm saying the question is, how much money is flowing out of state? Now, the state as a whole loses a lot. For example, the gamblers who lose under the lottery will lose an additional $1 billion, but if you look at the winners, they'll be paying the highest rate of federal income tax, so therefore more money goes out of state with the lottery than under our current situation.
Allen: __ I could tell you that if I win a million dollars tomorrow, I wouldn't mind paying the taxes. I'll pay the taxes. And right now, what's happening is-
M: You're missing the point.
Allen: --all of the money, and I think you're missing the point, or making a very terrible point, that the people who win would not want to pay the taxes. I think they will pay the taxes and I think they will pay the taxes and they'll take them up some gain that will come out ____.
M: But it's the losers-
Allen: Well, the losers are already giving money to other states, so North Carolina is losing.
Brown: Let me jump in with a question to Representative Allen, which is how much in fact is North Carolina losing to other states, do we know this?
M: Projections are all between $350 to $400 million per year.
Brown: Okay. So if that were to come back in and we're saying that 34% of that, and perhaps more, would be earmarked for education, I guess the question is, again, it's an assurance question, can we be guaranteed that all of that, all of that 34% that's being projected would be.
Allen: Excuse me. We can't guarantee that some is not going to go over to South Carolina who lives right on the border, or Virginia, you can't guarantee that. I mean, I will not sit here and attempt to tell you and your listening audience that we can guarantee-absolutely not.
Brown: Well, I didn't really want a guarantee. I understand that you can't control what individuals do. But at the same time, I guess the debate is whether or not it's worth it, if we don't really know how much we're going to get in, because we can't control whether or not people will still go to border states.
M: The misery that you will create-the best statistics available would show that after we've had this in effect for a few years, we will have an additional 150,000 compulsive gamblers in North Carolina whose lives will be ruined.
M: Well, one of the things that someone has suggested is that we set up a fund that would deal with any kind of gambling. And I would recommend that we let this lottery allow us to deal with lots of other problems that we have, that this fund could also fund compulsive gamblers, drug addictions, alcohol addictions. Of course, we're in the alcohol business right now as a state, and we're in the cigarette business as a state, so I would think that maybe we could gain something here by taking a small amount of that money and dealing with these addictions, I think it would be a wonderful cure for lots for things.
M: But the reality is, we had a consultant who's testified before the Senate committee on the lottery and his report was that there is a very small number of addiction in the lottery, far more with the smoking and tobacco.
Brown: We want to get to the moral issue of the lottery, we want to discuss that. But I wanted to ask Mr. Mills, are there any other economic repercussions that might be felt in the state if the lottery was instituted?
Mills: Well, that's the real danger of the lottery, is what's tempting is to talk about the big pile of money that Mr. Davis is talking about that we can use for so many things, that sounds great, but we have to think about where is this money coming from, and Mr. Davis says that we can do something different in North Carolina. I wish that were true but we've seen 40 states that all have pretty good ideas about how to help their people and they're all doing it wrong because the National Gambling Impact Study Commission says that an average person making less than $10,000 a year spends an average of $600 per capita per year on a lottery. Somebody making over $100,000 a year spends less than $150 per capita. That's four times in real dollars, not just in percentages.
Allen: David, I don't where your data is coming from, you said the National-
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Mills: National Gambling Impact Study Commission.
Allen: I can provide you with some data that will refute what you just said.
Mills: There's so few-
Allen: I'm telling you, I'm prepared to do that.
Mills: There are so few studies. Most studies shows that this advertising is targeted in low-income neighborhoods.
Allen: But you're reporting the ones you want to report. There are other studies that will refute what you just said.
Mills: So you're saying that other studies show that rich people play the lottery more often than the poor?
Allen: That data is available too.
Mills: Representative Allen, I've never seen anything like that.
Allen: Income level, the upper 50,000 income level played the lottery more than-
M: Oh, no, no, no.
Mills: That's a misnomer.
M: You have to be so bad at math to play the lottery.
M: At any rate, what happens is that the rich constantly get the benefit of making the choice themselves, and what happens is that there always seems to be a filter or some watchdog group that will determine whether or not poor people can make the choice themselves, and there needs to be some self-determination. Those people are making the choices right now, when they go across the lines, I think they ought to have the choice to do it here, and cost you a lot of money that might benefit them and their families and their children particularly to stay here in North Carolina.
Brown: Let me hop in here since we are here at the moral issue. Representative Allen, in many issues that deal with African Americans in particularly, let's say, minorities in general, there is a desire, usually for the government, to help, whether it be with healthcare, whether it be with education, why is the lottery different? Mr. Davis just said that there should be an amount of self-determination that is allowed for individuals whether they are rich or poor to make the choice to play the lottery; why is this different? Why shouldn't the government help in keeping, or being concerned about the welfare of a particular--?
M: A government cannot be too paternalistic.
Brown: Absolutely.
M: And that poor person has the right to play the lottery just like the wealthy person; that's a choice issue. You know, I hear this moral aspect of this. Have you heard of "beach bingo"?
Brown: No.
M: Well, ask my good colleague David and my friend Representative Skip ___. Have you heard of "beach bingo"?
M: I'm not sure that I have.
M: I've heard of it, but I couldn't tell you what it even means.
M: Well, I'll tell you what, Wednesday night, why don't we just ride around Durham or Raleigh or Cary. You will find some bingo parlors. I guarantee it. what is the difference between the bingo and the lottery, other than the prize, David? Will you help me understand that?
Mills: The difference is they're not set up by the state. The difference is that the government is not out promoting it. What we're asking the government to do with the lottery is we're asking the government to get in the business of encouraging its citizens to make bad decisions.
M: And it this is an education lottery, let's think what you're teaching: you're teaching don't work hard, don't study, don't save, don't invest, gamble and maybe you'll get rich.
M: That's not what you teach. I'm telling you-go ahead.
M: Well, obviously the state is benefiting from the alcoholic beverage controlled stores; they don't promote it but the product is promoted in the advertising process, and the thing is, nobody stands out in front of the liquor stores and says "Oh, you're poor, you can't buy liquor here; we're only going to sell liquor to the rich people who really can afford it." I don't think we do that, and I think those judgments are left to the people themselves.
M: But why do want to offer them such a bad deal?
M: Hold on. Let me-
M: Well, they determine themselves whether it's a bad deal.
Brown: Let me get a little bit back on target, and Representative Allen, I'm going to come back to you because I'm going to try and readdress the question that I asked earlier, what I was trying to say. We are aware here at UNC TV and in particular with Black Issues Forum, that from feedback that we've gotten from our viewers, people in the African American community are opposed to a state lottery-well, some of them are-because they're concerned that in the long run, it will deplete individual economic power, and because gambling can lead to addiction as well as increase in other social problems. Now what I want to now is, what sort of feedback are you getting in your constituency, and I'd also like to hear from Representative Stam.
M: Well, I'll tell you, when I ran for this position, that was one of the questions on my questionnaire when I met with citizens: do you support the lottery? Overwhelmingly, the answer was yes. If you look at any data, over 71% of the citizens of North Carolina just recently indicated that they support a lottery, I can tell you.
Brown: Okay, let me hear from Representative Stam.
Stam: I haven't done any polls, but every civic group I've ever spoke to or had in a debate, has had the same result. If you ask them to start with, or you favor the lottery, 2/3rds of them are in favor of the lottery. After a 15- or 20-minute discussion, about a third of them are now in favor of the lottery. It doesn't stand the light of day.
M: Well, the problem is-
Brown: Hold on, I'm sorry, I'd like to thank our guests; we've got to close. Representative Allen, Representative Stam, Eddie Davis and David Mills, for coming out and sharing their viewpoints on this very important issue. If you would like more information about our guest or a transcript of tonight's program, visit us online at www.unctv.org/bif or call us with your comments at 919-5459-7167. Be sure to join us each and every Friday night at 9:30 p.m. for more on the people and issues that matter. For Black Issues Forum, I am Natalie Bullock Brown reminding you to be encouraged no matter what. Good night.
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