Where does all the lottery money go?

Being that I write about public policy, I routinely get hit with this question: “Where does all the lottery money go?”

A narrative that many people believe is that when the state lottery was instituted it was intended to cover the cost of public schools throughout New York. While it’s true that lottery income was intended to help education, it was never supposed to cover it in full. Despite the number of tickets New Yorkers buy, it simply can’t.  

The New York lottery brought in $9.68 billion in revenues in fiscal year 2016-2017. After taking away prize money and sales, the system was left with $3.27 billion in profits (a whopping 34%), which was invested in school aid. For that same year, public schools had cost New Yorkers – at the federal, state, and local levels of taxation -- $62.7 billion.

So, as you can see, gambling proceeds barely put a dent in spending, accounting for just over 5% of expenses. Even if New York’s educational spending was at the national average ($11,400 versus $22,600), we’d still be looking at the lottery covering less than 10% of the total cost.

That doesn’t mean that it’s not helping. In 2016-2017, the Lottery issued $48 million to schools in Niagara County, $11 million in Orleans County, and just under $14 million to districts in Genesee County.

Had those funds not been in play, my school district Royalton-Hartland, for example, would have had to lean on homeowners for another $2.1 million in 2016-2017, all things being equal. Other examples of district-specific lottery revenues are Lockport at $8.1 million and Batavia at $3.7 million.

Since the inception of the lottery in 1967, it has paid out $48 billion to schools. $1 billion has gone to Niagara County schools alone.

I don’t care if you live in a rural school district or a big city system. That’s not chump change. It’s the difference between keeping and losing teachers, the arts, and sports. 

This manages to work to the advantage of taxpayers because New York pilfers from players at a rate that’s similar to how it taxes homeowners: Despite New York having the highest traditional lottery sales in the country, its payout rate is among the lowest. While that means more money for schools, it means less money for winners and greater expenditures by players who have try harder to come out ahead.

There are some legislators – like Senator Tim Kennedy of Buffalo -- who are trying to make those odds even worse to the benefit of public schools. He has been toying with legislation that would decrease the payouts to players by considerable amounts, which some quick math shows could increase school funding by $1.5 billion.

It would probably work because state-run gaming has been one of the few growth industries in the Empire State (maybe hopeful players are trying to overcome an increasingly-bad upstate economy?). The New York lottery’s 2016-2017 revenues were 26% higher than they were 10 years earlier while its payments to schools were up 28%.    

When the lottery began in 1967 its first slogan was "Your Chance of a Lifetime to Help Education". 51 years into the program, it has been almost a lifetime, and the lottery has been doing what was intended, helping education. It’s not the end-all-be-all for funding our schools, but it’s a start.   

From the 07 May 2018 Greater Niagara Newspapers and Batavia Daily News