California Lottery Bill Would End Controversy, Maximize Money for Schools

Posted on: May 4, 2021, 09:09h. 

Last updated on: May 4, 2021, 09:31h.

Philip Conneller @casinoorgphilc Read More
Expertise: Gaming Business, Regulation, Tribal Gaming.

The California Senate has unanimously passed a bill that would ensure the state lottery funnels the largest possible chunk of its revenues into education, The California Globe reports.

california lottery
Senator Bill Dodd (D-Napa), sponsor of the Napa bill.

Senator Bill Dodd’s (D-Napa) bill aims to resolve a “difference of opinion” between the California State Lottery (CSL) and some lawmakers over the interpretation of a 2010 amendment to the State Lottery Act.

This allowed lottery officials some discretion when setting the percentage of revenues they shared with public schools. But that led to controversy. In February last year, state auditor Elaine Howle said she believed CSL had shortchanged schools by $36 million.

The audit was requested after whistleblowers claimed mismanagement and misspending at Lottery HQ.

Dodd’s bill would require the Lottery Director to reoptimize the prize payout rate at least once every five years to maximize the amount going to education. This will ensure it is not giving away too much money in prizes. The new rate would be used to set the lottery’s budget each year.

The bill is due before Assembly committees later this month.

CSL Exploding Sales

When Californians voted to establish a lottery in 1984, they were told that 34 percent of revenues would go to education.

But during the Great Recession in 2010, then-Governor Arnold Schwarzenegger signed an amendment that permitted “the commission to establish the percentage to be allocated to the benefit of public education at a level that maximizes the total net revenues allocated to the benefit of public education.”

State law currently mandates that 87 percent of all lottery sales go back to the public, either through winning payouts or to public schools, while CSL keeps 13 percent for operating costs.

But since lottery sales have grown each year since its inception, Dodd believes these percentages need to be recalibrated to reflect these larger revenues.

Ellen Giveaway ‘Mishandled’

Critics say 13 percent has become more than enough to fund CSL’s operations, and this has led to a culture of wastefulness. In her audit report, Howle accused CSL of using too many noncompetitive contracts with suppliers, which meant it was likely to be missing out on cost savings.

Last month, a state review found the CSL had “mishandled” a December 2019 scratchers giveaway on The Ellen DeGeneres Show that cost around $449,000 in gift boxes, on-stage props, and 30,000 scratch-off tickets worth more than $138,000.

The idea was to give each audience member a box containing $500-worth of scratchers to promote the idea of giving lottery tickets as a Christmas gift. But whistleblowers said not all the tickets were given to audience members. At least some were shared with friends of the show’s production staff.