As tuition rises and pressures continue on the HOPE Scholarship and Grant and the need for additional Pre-K slots continues to increase, the conversation usually gets around to discussing the funding being produced by the state lottery.  The Senate Budget and Evaluation Office has reviewed the legislation setting up the lottery and compared Georgia’s lottery to other successful lotteries around the country. 

Starting this week, we will share our analysis and offer any solutions we have found.  

How the lottery funds HOPE and pre-K

The Georgia Lottery provides funding for some of the state’s and nation’s most successful education initiatives, the HOPE Scholarship Program and voluntary Pre-Kindergarten programs. Since the lottery’s first year of operation in 1994, the Georgia Lottery Corporation has transferred over $15 billion to the state to be used for education.

In the fiscal year 2016 general budget, $511.3 million was appropriated to the HOPE Scholarship Program to provide scholarships to students attending public and private colleges and universities across the state, while $109.06 million was appropriated to the HOPE Grant program for students attending technical schools. Also in the FY16 general budget, $321.3 million in lottery proceeds were appropriated to the pre-kindergarten program. In total, over $977.77 million was appropriated in FY2016 to fund HOPE administration, HOPE grants and scholarships, HOPE GED, low-interest loans, and pre-kndergarten programs.

The Georgia Lottery is overseen by the Georgia Lottery Corporation. It is not a state agency, but rather a corporation created by statute. The GLC operates the lottery while remaining somewhat accountable to the Georgia General Assembly and less to the general public through audits and reports of the lottery program’s operations.

The Lottery for Education Act, passed in November 1992, outlines the general requirements that the Georgia Lottery was to operate under. These include the amount of total ticket sales that the lottery was to devote to certain areas — 35 percent of all ticket sales to be transferred to the Lottery for Education Account, 45 percent devoted to prizes, and 20 percent used to cover operating expenses for the lottery. These percentages were not written for strict adherence in order to allow the lottery to function at the most efficient capacity possible, although funding was envisioned to be as close to the recommended percentages as possible.

There are also strict requirements written into the Lottery for Education Act. One such requirement is the creation of a reserve account to only be used in years that the net proceeds from the lottery do not cover the total amount appropriated to education.

Other set requirements in the Lottery for Education Act include a set percentage that retailers receive as a commission for selling lottery tickets and a cap on the amount of bonuses that can be paid to lottery employees.

Reported lottery earnings

In FY14, the Lottery Commission transferred $945 million to the state treasury, representing 23.5 percent of gross ticket sales for the year. This 23.5 percent represents the continuation of a drop totaling 10 percent in the amount of net proceeds transferred to education since the lottery’s first year of operation.

The lottery commission hit the desired 35 percent of gross sales transferred to education only once, in FY95. Despite the drop in percentages of total percentage transferred to education, the amount of nominal dollars given to the treasury has increased in all but one year of operation.

The greatest portion of gross ticket sales from the lottery is spent on prize expenses. In FY2014, 60 percent of gross ticket sales were returned to players as prizes. Prizes include actual cash paid out as a result of winning tickets and additional tickets that are given out as prizes. Prize expenses are thought to be directly correlated with total sales. That theory holds that as the amount of tickets sold rises, prize expenses also will rise.

Some operating expenses have remained fairly constant since the lottery began. Operating expenses include direct gaming expenses that are necessary to keep lottery games in operation, and overhead expenses such as rent and utilities. Operating expenses for FY14 totaled $663 million or 16.5 percent of total gross sales.

In data reported on Open Georgia, salary expenses at the Georgia Lottery Corporation have been growing since FY10. FY2014 figures were 28.5 percent over salary expenditures of FY10, with FY11 seeing the highest annual increase of 13.2 percent — representing both bonus incentive payouts and base salary adjustments. FY2014 expenses were approximately $1 million above the previous year.

Part 2 – Comparing Georgia’s lottery to other states’

Legislation and final action may be accessed online at www.legis.ga.gov and the State Budget can be accessed online at the Senate Budget and Evaluation Web site www.senate.ga.gov/sbeo/en-US/Home.aspx

I may be reached at
234 State Capitol, Atlanta, GA 30334
(404) 656-5038 (phone)
(404) 657-7092 (fax)
E-mail at Jack.Hill@senate.ga.gov
Or call toll-free at
1-800-367-3334 day or night
Reidsville office: (912) 557-3811