GCS and NC Education Lottery

In August 2005, the North Carolina State Lottery Act (H. 1023) and the 2005 Appropriations Act (§ 622) was signed into law, which established the North Carolina Education Lottery. View Legislation.

Since then, people across Guilford County ask every year, "What about the lottery money?" or, "What are you doing with all that money from the education lottery?"

We're going to provide clear and accurate information about the North Carolina Education Lottery, how the funds are spent, and how they impact Guilford County Schools. You may be surprised where those dollars actually end up.

How the NC Education Lottery Funds are Spent

North Carolina General Statute § 18C-162(a)(2) requires that, to the extent possible, "At least thirty-five percent (35%) of the total annual revenues, ..., shall be transferred as provided in G.S. 18C-164."

Included in § 18C-164(c) is the following: "The General Assembly shall appropriate the remaining net revenue of the Education Lottery Fund annually in the Current Operations Appropriations Act for education-related purposes, based upon estimates of lottery net revenue to the Education Lottery Fund provided by the Office of State Budget and Management and the Fiscal Research Division of the Legislative Services Commission."

The original lottery legislation passed in 2005 required that the lottery fund net revenues be distributed as follows:

• 50% transferred to the Public School Building Capital Fund "to increase the level of county spending for public school capital outlay other than the retirement of indebtedness";
• 25% transferred to the State Educational Assistance Authority to fund scholarships;
• and 25% transferred to a special revenue fund to provide "enhanced educational opportunities so that all students in the public schools can achieve their full potential"

When reviewing the facts, you can see the legislation has changed significantly over the years in terms of the percentage of lottery funds dedicated to K-12 education and how these funds may be used. Historically, funds from the NCEL have been used in the following major categories:

• K-12 education (teachers and teacher assistants);
• School construction;
• Prekindergarten program(s); and
• College scholarships and need-based financial aid.

Which Agencies Control the Lottery Funds?

In addition to the significant legislative changes that have occurred regarding lottery funds, it also is important to note that these dollars don't flow (and have never flowed) directly from the lottery to Guilford County Schools (GCS). Rather, lottery proceeds go to other agencies including the State and the County.

State Distribution

When the State funds GCS, it does so in specific categories or allotments, such as teachers, instructional supplies and materials, textbooks, etc. The various State funding sources for these allotments are not identified. As such, GCS cannot verify that the expenditures listed on the NCEL website are accurate; we have no way of knowing.

More importantly, the NCEL website does not reflect the amount of State general fund dollars that were formerly used for education that have now been redirected to other areas in the State budget since lottery dollars became available.

In other words, lottery funding has supplanted, rather than added to, PreK-12 education funding in North Carolina.

For example, the lottery website states that schools in Guilford County have received 936 teaching positions funded with lottery funds since the inception of the NCEL. This seems to imply that GCS and charter schools located in Guilford County have received funding for additional teachers each year that lottery funds have been available. This is not the case, however.

To illustrate, let's compare the way the State funded classroom teachers in 2007-08 to the funding provided by the State for classroom teachers in 2014-15. The state used the following formulas to calculate the number of classroom teachers provided to school districts:

As you can see from this table, schools are not receiving more teachers than they did prior to the start of the NCEL. In fact, if you were to apply the 2007-08 formula to the 2014-15 student count, you would see that GCS has lost more than 123 teaching positions in the current year alone. That number would have grown by almost 60 more teachers if the state had not cut teacher assistants to pay for additional teachers in the 2014-15 budget.

County Distribution

NCEL revenues are also used to fund school construction in the State. These funds go directly to Guilford County, not to GCS. The Board of County Commissioners (BOCC) has decided to use more than $54 million in lottery funds to pay down debt on voter-approved school construction bonds, rather than fund new projects.

In addition, the amount of revenues the County has received from lottery proceeds for this purpose has decreased substantially, from $11.7 million in 2009-10 to $5.0 million in 2013-14. The square footage the school district must maintain has increased from 10.6 million in 2008 to 12.1 million in 2014. Funding from county proceeds for maintenance has decreased from $7 million in 2007-08 to $2 million in 2013-14, leaving us about 16 cents-per-square foot for routine maintenance and repair as well as preventive maintenance.

As noted earlier, approximately $49.4 million in lottery funding from prior years, along with $4.8 million in current year funding will be spent by Guilford County for debt service on the school construction bonds approved by voters, presumably to maintain and/or lower the county's property tax rate.

With BOCC approval, GCS submitted applications and received authorization to use less than 10% of lottery funding ($5.2 million) for the following maintenance projects: Eastern Middle, Hairston Middle and Kernodle Middle Schools structural enhancement; system-wide renovation and land purchase; and roof repairs at Weaver Academy, Allen Jay Elementary School and Page High School. As you can see, the vast majority of lottery dollars Guilford County has received have not been available to GCS for building repair and maintenance.

Pre-Kindergarten Funding

State funding for the NC Pre-K program flows through the Guilford County Partnership for Children (GCPC), not GCS.

Funds received in GCS from GCPC for prekindergarten programs have grown from $3,572,088 in 2007-08 to $3,716,034 in 2013-14. These dollars are restricted so they can only be used to serve pre-kindergarten students. The number of students served annually by GCS in these programs has grown from 825 in 2007-08 to 909 in 2013-14, so the funding has not kept up with the growth. In addition, GCS is not the only provider of pre-kindergarten services in Guilford County that receives state funding through GCPC, so the dollars reported in the NCEL report are spread over many providers.

College Scholarships and Financial Aid

The college scholarships and financial aid dollars do not flow through GCS, so we are unable to speak to the use of those dollars.

State Funding in GCS

Regarding whether GCS has insufficient funds for classroom books and supplies, it's important to note that, until 2013-14, State funding that comes to school districts for one purpose, such as allotments to pay for classroom teacher positions, could not easily be moved to another category, such as instructional technology, textbooks, or instructional materials (classroom supplies and materials).

The table below shows the impact of some of the State categorical cuts in funding to GCS from 2008-09 to 2014-15.

When reviewing these numbers, remember that funding from the state in these categories has continued to decrease as our enrollment has increased. GCS' average daily membership in 2008-09 was 70,968 students. The State enrollment projection for GCS for 2014-15 is 72,202 students.

At the same time, GCS has cut more than 400 positions, including many in central office. In fact, in-depth audits by national groups such as The Broad Foundation have noted that GCS' central office operations are efficient and lean in terms of staffing and resources. State analyses of central office expenditures have reached similar conclusions.