County Manager Kevin Patterson asked the Scotland County Board of Commissioners this week to amend the budget to cover the loss to the county school system.
"Due to the state's withholding of $62,797,068 from the lottery, and eliminating the low wealth allocation of funding for this year, the county's estimated receipts from the lottery has dropped significantly," Patterson said.
Originally budgeted at $825,000, the school system will now receive $509,859 for the year. The county manager recommended that the board of commissioners amend the budget for lottery proceeds and distribution by $315,141.
State lawmakers say they want to use the lottery money to save teacher positions that had been targeted for cuts.
Commissioner Betty Blue Gholston made a motion Monday night to amend the budget, which was seconded by Commissioner John Alford. The motion passed unanimously.
"The state took all projected growth for the lottery next year, along with $62 million in existing lottery funds in order to use as backfill to cover operating costs to schools," Patterson said. "We knew the potential was there for the cuts, which is why we budgeted $825,000 rather than the estimated $915,091. This is just another example of how budgets are getting tighter and tighter."
Critics of the lottery say the $19 billion budget the General Assembly approved last week leaves little doubt that lottery revenue will be used to replace lost education money rather than provide new funding for public schools.
"If anybody still had some vestige of hope of the lottery not supplanting, they should be able to let go of that," said Sen. Phil Berger, an Eden Republican who opposed the lottery's creation.
This year's budget does three things that could be interpreted as shifting lottery funds to replace state tax dollars:
--$35 million in unclaimed lottery prize money and excess receipts will be held to help fill a potential $518 million gap if Congress does not provide an anticipated but as-yet unapproved boost to Medicaid funding.
--$63 million has been shifted away from school construction into class-size reduction, a program used to make sure teacher-to-student ratios don't balloon in lower grades.
Class-size reduction is one of four uses specified in the original lottery law, but money put into the program mingles with tax dollars, making it hard to parse what is a supplement versus a replacement for school funding in the best of times. With lawmakers cutting funding for schools, the distinction is even more blurry.
--The budget authorizes counties to shift what they do get in school construction funding to pay for classroom teachers. School districts that decide to make such a shift would be using lottery money to replace lost state-level funding.
"History shows with other states that we have to be careful here or it will become a giant shell game," said Les Merritt, who was state auditor when the lottery was crafted. At the time, the Republican warned then-Gov. Mike Easley, a Democrat, that there were insufficient safeguards in place to ensure lottery funds wouldn't be abused.
"It was very easy to stick to the plan when there was plenty of money coming in," Merritt said. "None of those promises meant much."
Those "promises" were written into the original lottery law, but the General Assembly rewrites reams of law every year, including the state budget.
"I don't think there were very many people, even at the time, on either side of the debate who believed those promises," said Rob Schofield, with N.C. Policy Watch, which characterizes itself as a progressive think tank.
Still, Scotland County Schools spokesperson Andy Cagle said that school officials were looking at ways to be fiscally responsible in light of the budget cuts.
"School officials are currently in the evaluation stage, looking at capital projects slated for 2010-2011 to see what can be put off another year," he said, adding that the projected Wagram school expansion will not be affected by the cuts. "We are doing what we can to be fiscally responsible and to save as much money as we can."
Patterson said he is working with school officials, who are "very aware" of the situation.
"The administration is making every effort to control the use of local funds, utilizing as much state money as is possible," Patterson said. "The school system is being very proactive."