For the first time, lawmakers were found guilty of supplanting lottery funds for schools

Along with all of their other budget challenges, lawmakers this session will need to allocate an additional $10.1 million for the Education Lottery Trust Fund as the result of a determination made last month that lottery funds had been used to supplant rather than enhance education funding this year.

Back in 2004, Oklahoma voters established the state lottery via two state questions. The first, SQ 705, created the Lottery Commission and specified how lottery funds would be allocated. The second, SQ 706, created the Oklahoma Lottery Education Trust Fund into which lottery funds are deposited and stated that this fund could be spent only on specified education-related purposes. To ensure that money raised through the lottery would be used to enhance education spending and not allow existing education dollars to be diverted elsewhere, SQ 706 included “supplantation” language. This language was added to the State Constitution as Article X, Section 41.D :

In order to ensure that the funds from the trust fund are used to enhance and not supplant funding for education, the State Board of Equalization shall examine and investigate appropriations from the trust fund each year. At the meeting of the State Board of Equalization held within five (5) days after the monthly apportionment in February of each year, the State Board of Equalization shall issue a finding and report which shall state whether appropriations from the trust fund were used to enhance or supplant education funding.  If the State Board of Equalization finds that education funding was supplanted by funds from the trust fund, the Board shall specify the amount by which education funding was supplanted.  In this event, the Legislature shall not make any appropriations for the ensuing fiscal year until an appropriation in that amount is made to replenish the trust fund.

Although SQ 706 was silent on how to determine supplantation has occurred, the Office of Management and Enterprise Services (OMES) developed a calculation it uses each year to determine whether lottery funds enhanced or supplanted education funding. Even though the Legislature has cut overall education funding multiple times since SQ 706, the State Equalization Board had never found that appropriations from the Lottery Trust Fund supplanted education funding.

Until this year, that is. In February, the Equalization Board was presented with the finding that supplantation had taken place in FY 2017. According to the calculations by OMES (see Schedule 5), education funding was reduced in FY 2017 by 0.8 percent, while overall appropriations were cut just 0.5 percent. Therefore OMES found that the Oklahoma Education Lottery Trust Fund supplanted funding for education by 0.3 percent, or $10,144,171. The amount corresponds to 0.3 percent of the total appropriated in FY 2017 to the three agencies that receive lottery funds — common education, higher education, and career technology education, excluding spending on administration.

What Happens Now

Lawmakers must now appropriate $10,144,171 to the Lottery Trust Fund before they can make any appropriations for FY 2018. This money will then need to be appropriated from the Trust Fund according to the statutory requirements in Title 3A, Section 713: 45 percent to common education, 45 percent to higher education, and 5 percent each to the school consolidation fund and the teachers’ retirement system. It’s not clear whether this funding would be appropriated as supplemental funding for the current fiscal year or added to the certified FY 2018 Trust Fund appropriation ($59.6 million).

Lawmakers already have $713 million less for next year’s budget compared to this year. The $10 million needed to cover the supplantation gap will be another hurdle for legislators who already face a daunting challenge to balance the state budget. It may also compound the sense, already pervasive among Oklahomans, that the lottery has failed to significantly boost education funding. Lottery revenues have fallen to just over $50 million a year, which is less than 2 percent of what the Legislature appropriates for common and higher education. It’s also a fraction of the funding lost each year as a result of enormous tax cuts and tax breaks. Ultimately, it is these policies that have supplanted the funds that voters intended to go for education.

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Former Executive Director David Blatt joined OK Policy in 2008 and served as its Executive Director from 2010 to 2019. He previously served as Director of Public Policy for Community Action Project of Tulsa County and as a budget analyst for the Oklahoma State Senate. He has a Ph.D. in political science from Cornell University and a B.A. from the University of Alberta. David has been selected as Political Scientist of the Year by the Oklahoma Political Science Association, Local Social Justice Champion by the Dan Allen Center for Social Justice, and Public Citizen of the Year by the National Association of Social Workers.

7 thoughts on “For the first time, lawmakers were found guilty of supplanting lottery funds for schools

  1. Friends, family and myself have been wondering about the lottery funds and why that money wasn’t helping our schools. This post confirms our various suspicions. We are tired of this kind of thing. Hopefully, the State Legislature will straighten up and put the citizens first.

  2. I agree independent auditors need to look at the books over the past several years to confirm if this was the first time and find out where the stolen money was allocated instead of education.

    We should also take a hard look at OK State Legislature’s reduced funding for education compared to where they increase funding (i.e. Dept of AG). It seems like increases for education from outside sources (i.e.federal or lottery funds) are offset by decreases in State funding so Oklahoma education never really improves.

    The State sold gambling in Oklahoma as good for education but it seems like a con. I sound like a conspiracy nut saying this, but I wonder what happened to the primary Legislative supporters for gambling in Oklahoma. Are they directly benefiting from the gambling industry now or maybe much wealthier than before they were elected? Just wondering how we ended up worse off than where we started.

  3. Our legislators screwed us. We could have had the most rad education system in the country had the lottery funds enhanced rather than supplanted education funds. Instead, legislation made the deal then stole the money.

  4. The State Auditor IS doing audits and IS making recommendations of which he is only legally able to bring attention to the issues. Repeatedly in the 2015 state audit he eludes to the missing monies and lack of documentations. Only the State Attorn Gen can enforce. In fact if you go to the auditors website he has lists of recommendations of what to do to help stop the problems from progressing. Since he has seen the discrepancies and knows where the waste is, he is now a candidate for Governor. I would say of all the people who know where the problems are, he would be the one.
    The state auditor also audits the school systems and the gaming industry. He is trying to tell everyone publically on his website (since all the audits are public record) that we have and have had a problem. Problem is everyone is only seeing a piece of the pie. No one is putting all the pieces together but the auditor. He is the one who is Ble to see the biggest picture. The voters do not generally do their due diligence and research the issues before voting. Even though they can get a sample ballot 2 weeks before an election online at the election board website. I believe that is what legislators are counting on. That we are uninformed and will vote mostly blind. Thankfully the teachers are making a loud enough noise that it is bringing light to some of these issues.

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