No one should be surprised by the state lottery's failure to produce promised revenues. For years, lottery critics have predicted exactly this scenario.
Lottery officials transferred $95 million to the state Thursday to begin paying for education programs. That was at least $17 million below the transfer that Gov. Mike Easley and the legislature had expected. It represented three months' worth of revenue.
No big deal, lottery officials said. The first quarter earnings weren't really expected to be much higher. New games are coming on board. A lot of money is going to be raised for education.
Blah, blah, blah.
We've heard it all before - not in North Carolina, but in other states where lottery patterns have followed a well-worn path: Initial sales are great, then the public figures out that lottery tickets are a bad deal and that the local bookies give much better odds. Sales lag, and to restore enthusiasm, lottery officials introduce new games and increase advertising.
It's all going just as critics said it would, and that means budget trouble for North Carolina.
Lottery revenues have proved to be as unreliable in North Carolina as they are in other states, and using them to write a budget is foolish.
Budgets are based on reliable tax-revenue projections. But lottery-ticket purchase patterns – and thus lottery revenues to the state – are not reliable. Budgets drafted using high lottery-revenue projections often experience shortfalls. It took only three months for North Carolina's lottery to prove it would be an unreliable source of income.
Now legislators have a problem. They budgeted $425 million of lottery revenue for this year.
Unless we all waste a few extra bucks each month on losing lottery tickets, lottery revenue shortfalls will create a hole in the budget that will require transfers from other sources of revenue.
Legislators will also go looking for ways to pump up sales, and the likely method of doing so will be more aggressive marketing.
Lottery critics have noted that the normal path of lotteries is for low-key advertising at the outset, when public enthusiasm is high. Once that enthusiasm wanes, the ads become more aggressive.
State law says the ads can't be aggressive, but state law can be changed, and there will be plenty of pressure to do so once budget cuts are at stake.
Easley and legislators refused to believe that the pitfalls of other state lotteries would occur here, too. They thought things would be different.
But the North Carolina lottery will be just like the rest, and it won't be long before legislators are arguing that we need aggressive advertising, new games and new methods of selling tickets. Don't be surprised when you see it.
— Winston-Salem Journal
