As an effort gears up to restore funding to education through a 1-cent sales tax, we’re already hearing more Oklahomans ask a common question: Why hasn’t the lottery fixed our education funding problems? In a post from last year, we broke down the numbers to show that the lottery helps some, but the boost it provides is far less than what has been cut from other revenue sources.
Oklahoma’s Lottery Education Trust Fund contributed $65.4 million to the most recent state budget, divided between K-12 public schools, Career Tech, and higher education. Out of that $65.4 million, $29.4 million went to the state aid formula for public schools and another $6.5 million went to other funds that support K-12 education. Yet Oklahoma’s total funding for the state aid formula has been cut by $172 million since fiscal year 2008. The gain from the lottery is barely more than one-tenth what’s been cut overall.
Besides these other cuts erasing the gains from the lottery, another problem has emerged. The lottery’s support for education has fallen to a new low, and it’s projected to go down even further. Here’s the total funding going to the Education Trust Fund since the lottery was created:
After holding steady at close to $70 million for the first eight years of its existence, the Education Trust Fund dropped significantly in fiscal year 2014 and fell even more in fiscal year 2015. Projections by the Oklahoma Lottery Commission show that next year it’s expected to keep going down.
Why is this happening? The Oklahoma Lottery Commission’s Executive Director Rollo Redburn blames the requirement that the lottery contribute 35 percent of its profits every year to the Education Trust Fund, which he said prevents them from offering higher prize payouts. He said the mandated profit requirement has meant that they have had to gradually decrease payouts over the years, and that even flat payouts tend to become less appealing over time. He argued that removing this cap would lead to more funds going to education, because more generous jackpots would increase lottery sales. Lottery officials have lobbied for years to remove or reduce the profit percentage to education without success.
Another likely drain on lottery revenues is competition from tribal casinos. That’s not necessarily bad news for education, because casinos also contribute to Oklahoma’s Education Reform Revolving Fund (1017 Fund). In FY 2015, the 1017 Fund received $112.8 million from tribal casinos, and total fees paid by casinos to the state set a new record. The new record marks a comeback from last year, when the casinos’ contribution to the state fell for the first time since they were established in FY 2005. There’s some evidence that the gaming market in Oklahoma has reached a saturation point, so we can’t expect support from gaming to keep growing like it has over the last decade.
The lottery and gaming are helping to fund our schools, but these trends confirm that we can’t expect gambling to pick up the slack from Oklahoma’s overall disinvestment in education. There are no quick fixes to the fact that in good years and bad, Oklahoma is not bringing in enough revenue to maintain core services. The only question is how bad things will have to get for Oklahoma families before lawmakers begin to take this structural budget gap seriously.