The Elusive Budget Jackpot, Part I

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BUDGET DAY PLUS 27 -- With this year's budget negotiations continually coming back to some scheme, any scheme it seems, to extract money from the California Lottery, some context seems to be in order.

On this morning's edition of The California Report, we begin a two day examination of the Golden State's 23-year-old lottery... created by voter initiative and sold as a great way to help fund public education. But the lottery has never proved to be the goose that laid the golden egg for the schools; while last year it sent some $1.3 billion dollars to K-12 and higher education, that's pennies on the dollar for what it takes to educate California's kids.

In the meantime, the lottery has had dramatic turnover in leadership, has struggled to market itself, and over the past year has been called everything short of a failure by elected officials -- most notably, Governor Schwarzenegger.

Trouble is, almost every expert agrees that the lottery's real problems stem from the initiative approved by voters in 1984... an initiative that created the most regimented, and restrictive, revenue distribution system of any lottery in the nation.

The initiative mandates that 34% of all revenues must go to education. That guarantee sounds good, until you consider that it automatically also caps how much money can go back into prizes and jackpots. "The more that goes to prizes, the more that people buy lottery tickets," says Jason Dickerson of the Legislative Analyst's Office.

And therefore, the more money that would actually end up flowing into the schools.

"If all of the restrictions were gone today," says lottery director Joan Borucki, "in ten years from today I would [be able to] more than double the amount going to the good cause."

Other restrictions hindering the lottery's operations include legal rulings that have decreed new technology and guaranteed prize amounts for some games to be off limits; both limitations rarely -- if at all -- exist with any other lottery in the United States.

The governor's attempt to hike the lottery's profits, either through leasing to a private entity or this year's push to borrow against future lottery revenues, requires these restrictions to be lifted. And analysts have concluded that means going back to the voters.

“It's an asset that is underperforming," said Schwarzenegger at the news conference unveiling his revised budget in May. "And I think that as governor, or I think the legislators also, we have a responsibility to make sure that government performs at 100 percent.”

But those kinds of changes are frought with pitfalls, both political hurdles and larger, societal questions about government's role in encouraging more and more legalized gambling. Those issues are examined in tomorrow morning's report.

Audio from today's broadcast can be heard below.

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About John Myers

John Myers is senior editor of KQED's new multimedia California Politics & Government Desk.  He has covered California politics for most of the past two decades -- serving previously as Sacramento bureau chief for KQED News and, most recently, as political editor for KXTV News10 (ABC) in Sacramento. He moderated the only gubernatorial debate of 2014, and was named one of the nation's top statehouse reporters by The Washington Post. Follow him on Twitter @johnmyers.

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