Abstract
In this paper, we estimate the impact of earmarking lottery revenue to education as opposed to filtering lottery revenue through a state’s general fund. A unique facet of this investigation is the comparison of states with lottery revenue earmarked for spending on K-12 education and states with lotteries for general funds. This approach enables us to investigate the effect of state lottery revenues on education and other budgetary components in a more controlled environment by mitigating lottery preference differences across states. Consistent with previous research, we find that earmarking lottery proceeds for K-12 education has little or no impact on actual state K-12 funding. We also find that lottery revenue does seem to increase K-12 funding in states that deposit the revenues into their general funds .
Highlights
Lotteries have been touted as a solution to education funding woes since 1967
Even if state legislatures earmark lottery revenues for education, government officials could shift monies previously used for education to other budget areas
We find that lottery revenue rarely has a significant impact on K-12 spending in our sample of states that earmark the revenue for that purpose
Summary
Lotteries have been touted as a solution to education funding woes since 1967. Former South Carolina Governor Jim Hodges proudly proclaimed that the 2000 referendum approving a lottery in his state was “a home run for education”(Hodges 2001). After an education lottery was narrowly approved in neighboring North Carolina in 2005, Governor James Easley trumpeted the vote as “a win for our schoolchildren,”(Bolton. 2005) and newly installed North Carolina Lottery Commissioner Tom Shaheen vowed to lead the charge “to raise as much money as we possibly can for all the great education programs” around the state (Robertson 2005). Even if state legislatures earmark lottery revenues for education, government officials could shift monies previously used for education to other budget areas. Dollars spent on lottery tickets could crowd out other spending and reduce general sales tax revenue
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