California Lottery Found to Have Not Paid Schools $36 million

According to a report by the California State Auditor’s office on Tuesday the California Lottery owes schools across California $36 million in unpaid funding.

$36 million not paid in one fiscal year

The audit found that, within the  2017-2018 fiscal year, that the Lottery did not increase the amount given to schools despite increases in overall Lottery revenue.

“The lottery has not provided required funding to education,” noted the findings of the audit. “It is critically important that the Lottery adhere to these requirements because they are safeguards that ensure that the Lottery’s education funding increases as the Lottery’s revenues increase and that the education funding is at its highest possible level and does not decline sharply from one year to the next.”

After being created in the mid 1980’s, the California Lottery had to give 34% of all revenues to public schools in the state. In 2010 AB 142 was signed into law by then Governor Arnold Schwarzenegger, vastly increasing the amount given to schools. Since then the proportional percentage of how much the Lottery has to give to education has been revenue proportional.

The audit also found that the state Lottery failed to use lower bidders in several noncompetitive agreements. In total, the Lottery spent $720,000 more than they should have.

The audit ruled that the state Legislature should have the Lottery pay back all owed funds to the schools. They also ruled that regular audits by the California State Controller’s Office of the Lottery should happen following the education and bidder agreement monetary issues.

According to the audit, by August of this year the Lottery should have an ‘optimal prize payout rate’ and use it to determine future budgets, as well as implement new competitive bidding procedures.

A Lottery designed to increase school funding

“That’s how the lottery was sold to several states in the 70’s and 80’s,” noted former state lottery advocate James Fisher. “I first started with the Ohio Lottery in the early 70’s right out of college, and not one state lawmaker there was receptive until education funding was mentioned. Looking back, it was how casinos in cities were seen in the last few decades. They were these big things that brought in a lot of money through something that was illegal, but they were also seen as the savior.”

“I helped out other states over the next several years, including California, mostly as a signature gatherer or getting people to write their state representatives. They were going through school funding issues in the early 80’s, and we had to really fight to make it a proposition in 1984, which we finally did in Prop 37. And it was like every other state. No lawmaker or voter was really receptive until education was tied in.”

“And this is big, because $36 million isn’t pocket change, and the state Assembly and Senate is going to see this. There may be another [AB 142] type of law in the net few years because of this, or there may be one that significantly puts more of a leash on the Lottery. I almost guarantee a bill with one or the other in the next few years coming up.”

The audit was released one week before the March 3rd Primary election which includes Proposition 13, a measure that would give a $15 billion bond for California schools.

While the Lottery hasn’t given a formal statement on the audit, the director of the  California Lottery has called some of the recommendations a “fundamental difference of opinion.”