Tuesday, December 9, 2008

Wanna Bet?

I was just reading the latest email newsletter from the Ohio Fair Schools Campaign, and came across this comment:

In an effort to clarify the common misconception that money from the Lottery somehow gets spent on schools, the Wellsville school board has released an article in "The Link," a newsletter printed for legislative liaisons of school boards.

Because this issue has been a source of great confusion for many people over the years, we decided it would be helpful to give our members some information about this subject. Lottery profits do go toward education, but do not provide "extra" money for schools. The Lottery revenue simply frees up money that would have been used on education, to be used elsewhere. While it's true that the Lottery generates about $600 million per year in net revenue for public schools, little of it is new money. In essence schools get nothing extra.

To read a related article, please visit:
11/18 The Review
Board of education clarifies Ohio Lottery advertisements

What these folks are trying to say is that the Ohio Lottery doesn't really help fund our schools. While Lottery profits are directed to the schools, they claim it doesn't make total school funding go up, it just allows money that used to be allocated to school funding to be redirected elsewhere, keeping school funding the same.

That seems plausible to me – it's a sleight-of-hand trick used all the time. For example, United Way has a policy that if an individual contributor says "Use my contribution any way you want as long as you don't give any of my money to The Home for Marooned Martians," they honor that request. However the Home would get the same amount of funding whether or not the contributor made this request, as money is completely fungible.

But I also recognize that Ohio Fair Schools Campaign is a lobbying group representing the interests of the education community, and is a supporter of the Getting It Right for Ohio's Future amendment (GIRFOF), which I vigorously oppose. Their perspective on this is undoubtedly biased, so I thought I'd do a little research, aided by all the information the Ohio Office of Management and Budget posts on their website. I used the Executive Budget for FYs 2008 and 2009 for most of the quantitative information.

As a reminder, here's the language from the Ohio Constitution (Article XV, Section 6):

The General Assembly may authorize an agency of the state to conduct lotteries, to sell rights to participate therein, and to award prizes by chance to participants, provided that the entire net proceeds of any such lottery are paid into a fund of the state treasury that shall consist solely of such proceeds and shall be used solely for the support of elementary, secondary, vocational, and special education programs as determined in appropriations made by the General Assembly.

One thing I didn't know is that lottery profits could be used to pay the debt service on bonds issued by the state for school funding purposes. Those bonds are issued by the State, and the money raised is allocated - at least in part - to the Ohio Public Facilities Commission in order to fund the construction of new school buildings and other facilities. That's a pretty good use of the lottery profits in my opinion, and I think you would have some difficulty saying that this spending would have occurred anyway had the Lottery money not been there.

Okay, so what about the general operating money? Do the profits from the Lottery in any way generate incremental everyday funding for the schools?

I think it may be all but impossible to answer that question with anything but opinion because you are essentially asking this: If the Lottery didn't exist, would the budget have included the same money for the schools anyway? After all, the first Lottery ticket was sold in 1974, so more than 30 years has elapsed since then. How can we ascertain today what funding decisions legislators might have made over the past 30 years had there been no Lottery?

The Lottery's website says they have contributed $15.5 billion toward school funding in that period, or nearly $500 million per year. I think one could be fairly confident that given a total state budget of about $24.5 billon, if the state revenues were $500 million less each year, the schools would have been allocated less as well. Would it have been $500 million less? If you think so, then you are arguing that all the Lottery proceeds go to the schools. If you think the schools would have received exactly the same appropriations if the Lottery didn't exist, then you would be agreeing with the Ohio Fair Schools folks.

The answer is probably somewhere in the middle – the Lottery does benefit the schools, just not as much as Lottery supporters claim.

So why are the Ohio Fair Schools people making their claim that the Lottery money is essentially being stolen from the schools?

Because they are using this half-truth to argue that schools should get all the funding they get now plus the $500+ million per years from the Lottery. Of course 90% of it would end up as the salaries and benefits of school employees, the real motivation for this argument – and the GIRFOF amendment.


  1. Paul,
    Thanks for clarifying the lottery funding issue for many of the readers. I, too, am surprised at how many people aren't aware that the lottery profits simply replaced other tax dollars that were previously earmarked for education. The replacement of those tax dollars by the lottery revenues didn't reduce our Ohio income tax rate at all and the tax monies that were previously directed toward education simply were redirected to other areas.

    The net effect was that Ohio government simply had a new revenue source of money.

    The idea that there is no such thing as a free lunch doesn't seem to sink into the general population. People who complain that our property taxes are too high and the state should pay for our schools don't realize that in order for the state to pay for the schools, the money that currently comes from our property taxes is going to have to be generated some other way, either an increase in our Ohio income tax, an increase in our Ohio sales tax, or some other new tax on us. It has to come from somewhere unless there are some other services provided by the state that will be cut and I'm sure that's never going to happen.

    So the residents of the poorer counties in Ohio (I, too, am from the Lawrence County area and have several relatives still living there - a couple of whom are teachers) that are currently paying less than 1% of their income (via property taxes) to fund their local obligation for their schools may see that go away, but there will probably be a corresponding increase in the Ohio income tax that they pay. And because of the progressive nature of income taxes, you, I, and everyone else will also see an increase in our income taxes to pay for the school funding. Will it be 2.79% (HCSD 2006 average property tax as a percentage of AGI) or more or less? Hard to say. But that money has to come from somewhere...

    So, when I hear the fine citizens of Ohio complain that property taxes are too high and we need a different way to pay for education, my response is that it's the Education costs that are too high and we have to get our spending under control. And every other school district in Ohio must do the same!

    It doesn't matter to me whether I'm paying for the schools via my property taxes or my income taxes. I realize and accept that I have to pay for the schools. I just want to make sure that my money isn't being used to pay for inferior employees, excessive salaries and benefits, and grandiose facilities. And if the school board and superintendent aren't going to ensure that, then I guess it's up to me (and everyone else who feels the same)

  2. Perhaps I should change my name to devils advocate, but which are the "grandiose" facilities in our district?

    I do, however, agree with most of the rest of your post.

  3. musicman - First, I think it is great that we have you as a devils advocate, especially since you are in the teaching profession, albeit in another district.
    On the subject matter, I too feel that we have many "grandiose" facilities in the district, mostly in the high schools. We started it with the building of Davidson, and now we have to match it with each new high school. My wife works in the central kitchen at Memorial (contract worker with Aramark, not a district employee)and and will be moving to Bradley when it opens. The new central kitchen there is, from what she tells me, far and beyond what is currently at Memorial, and far and beyond what is needed. We will now have 3 huge athletic facilities, because god knows, we could not expect schools to share, even though the football field gets used 5 times a year per school on Friday nights, and some other number of times for soccer. I'll be honest, I have yet to tour Bradley, but from what I have heard, it is pretty awesome. I guess some of us wonder whether we need "awesome" or "adequate" in our schools, since we are the ones paying for them. And I remember a previous post on another subject where visitors from another district were at Darby and commented on how "grandiose" it was
    and were then flabbergasted to hear we had 2 more just like it. Given that some of our buildings are a few years old, I guess I am amazed, although appreciative, that the call isn't made to tear them down and build new ones so that all students are treated equally.

  4. Musicman, I and many others who have now observed the almost completed
    Bradley complex is that we could have saved some bond money for future capital expenditures as an example
    of a bit over the top. It will not be inexpensive to maintain that complex, plus the additions to Darby and Davidson to bring those two
    complexes up to speed with Bradley.

    The employees also benefit from the existing infrastructure which is puzzling as to exactly how we
    are hurting our kids that we keep hearing about. Plus by Feb 2010
    we will need another operating levy
    just to cover for two more years our spending patterns based on the five year projection just presented by the treasurer. If you look closely at the revenue stream vs current expenditures, we will also need a levy in Feb 2012. Given
    a huge shortfall projected I see
    2 10 mill levies in a 4 years plus
    we will need a bond levy at some point in the next 2 to 3 years to pay for continuing operational capital costs.

    Conservatively if you have $100,000 home one can see approximately
    900.00 plus. Many homes higher than that.

    This also does not take into account the next contract.
    There has been no change to the
    salary increase schedule in the last 3 contracts. At the same
    step and regular increase module
    we will also have to increase our
    levy millage rate perhaps another
    1 to 2 mills conservatively to pay for that. Add another $100.0 or so
    per year, not just one time

    So how is the current compensation
    module and future spending not grandiose. Certainly a 7% raise
    in one year alone based on simply
    a 55,000 salary would be over $38.00 in just ONE YEAR.

    The other wild card is that our state budget even with a bailout from the federal govt will possibly see education flat contributions and for "well off" districts like ours perhaps even a cut.

    The employees and the school districts have supported current and past office holders with huge campaign contributions. The regular everyday homeowner cannot compete with the financial contributions to campaigns that the employee unions and school district, developers etcprovide for
    our elected officials

    So if we are looking at basically just a $1,000 in increases coming to our taxes each year based on
    a 100,000 home many on average are looking at more than that.

    Perhaps you have some suggestions where that money is going to come from. Many in this community dont make the average teacher salary
    and are just hoping not to lose their current position.

    But somehow the district and its employees expect the same year after year. Who is going to pay
    for raises at 7% and can afford it.

    If it is really about the kids, why not come forth with some planning and reduced compensation increases
    Or is it not about the kids and really about huge increases (grandiose) in compensation for
    the school employees.