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Where lottery dollars go
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Below is a comparison of Georgia, Florida and the national average as it relates to how lottery funds are expended.

FY2007 Comparison
Georgia Florida National Average  
Prizes 65% 60% 59% 
Remitted to State 25% 30% 28%  
Operating Expenses 4% 4% 6%  
Other (including Commissions) 6% 6% 7%  

Recently, the House and Senate higher education committees met to discuss the future of Georgia’s lottery funded programs. Fiscal Year 2010 was the first year that lottery-related expenditures outpaced deposits into the Lottery for Education account. With nearly $1 billion in lottery reserves, these programs are not in danger for the short term, but Tim Connell, president of the Georgia Student Finance Commission, estimates that those reserves will shrink to $371 million by the end of fiscal year 2012 due to projected expenditures.
With these looming shortfalls in mind, it is important to examine how lottery revenues are collected and expended. According to preliminary 2010 numbers, the Georgia Lottery Corporation sold $3.6 billion in lottery tickets last year, and the Commission will deposit nearly $884 million into the Lottery for Education account. Where did the rest of those lottery funds go? For each one dollar ticket sold:
• Twenty-four cents is deposited in the lottery for education account to spend on educational programs.  In 1995, two years after the lottery’s inception, 35 cents was deposited for every dollar, and that percentage has steadily declined nearly every year.
• Sixty-five cents is paid in prizes. Of this, seven cents is paid out immediately for instant win tickets and is never realized by the Georgia Lottery. The proportion spent on prizes has steadily increased since the lottery first began in 1994.This has caused the amount paid to educational programs to decrease.
• Seven cents is paid in commissions to retailers.
• Four cents is paid in gaming and operating expenses to gaming vendors, etc.

State law-not followed today
Georgia statute states that “as nearly as practical,” net proceeds should equal 35 percent of lottery proceeds. At the end of each quarter, all net proceeds should be deposited by the Georgia Lottery into the “Lottery for Education” account established by the Treasury. The statute also says “as nearly as practical” 45 percent of actual lottery sales should be made available as prize money.  
But since the lottery first began selling tickets in 1994, it has only deposited more than 35 percent of lottery proceeds in FY95, one of the two years it was only required to deposit 30 percent. Since then, the Georgia Lottery has not met the 35 percent mandate established by the legislature. While the actual amount deposited into the Lottery for Education account has increased every year except FY98, the percent deposited compared to total proceeds has steadily declined. At the same time, the percent spent on prize money has steadily increased.

 Other state lotteries
Forty-four states and the District of Columbia currently have lotteries. Alabama, Mississippi and Arkansas are the only Southern states without a state lottery. Georgia is unique in mandating that lottery funds cannot supplant state funds and must be spent on a narrow range of educational programs. For example, Florida uses their lottery funds to supplement the state’s education system, but also finances a scholarship program and a Pre-K program as well.
With the available census data from FY07, only a handful of states pay a higher percentage in prizes than Georgia, with the national average at 59 percent. In terms of the proportion remitted to the state, Georgia has one of the lowest rates, 25 percent, and falls below the national average of 28 percent. With regards to lottery administration costs, Georgia spends only 4 percent of gross lottery sales on general operating expenses and 6 percent on commissions to retailers. This is below other states that spend an average of 6 percent on general operating expenses and 7 percent on other expenses, which includes but is not limited to commissions to retailers. 
In future columns, we will look in depth at the lottery programs.  
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