RALEIGH, N.C. – During her campaign for governor, Beverly Perdue often said she wanted take extra steps to ensure profits from the North Carolina Education Lottery were spent solely on education.
She was worried lawmakers might tap the ready source of cash for something else. And less than two months in office, faced with a brutal economy that’s sapping the state of revenue, both lottery critics and allies say she’s become the prime example of her own fears.
Perdue said last week she would use $87.6 million in lottery profits to ensure there’s money available in the state’s day-to-day operating accounts to pay the bills through mid-April. Lawmakers who voted for the lottery law say they’re frustrated by the decision, even though they know she made it to face the state’s worst fiscal emergency in a generation.
“The commitment that I told the people was that this was an education lottery and it would never be used for (something else)”, said Rep. Bruce Goforth, D-Buncombe. “I didn’t know that we’d have the circumstance that we have now.”
The lottery money was part of the $300 million Perdue shifted from four dedicated accounts to help close a $2.2 billion gap in the state budget caused by dwindling sales and income tax receipts. Her decision didn’t surprise those who have long said requiring the lottery to benefit education was merely a statutory facade.
“This isn’t so much an ‘I told you so’ moment as a ‘no kidding,”‘ said John Hood, president of the conservative-leaning John Locke Foundation and a lottery opponent. “The lottery was truly sold as an un-tappable pot. You weren’t supposed to use this money for another purpose.”
The new governor defends the transfers as a precautionary move but said she couldn’t guarantee the money would be returned “if things continue to go downward.” Perdue argued the lottery money would still be used for its intended purpose, since more than half of the state’s $21.4 billion budget is dedicated to public education.
“That was a pot of money sitting there,” Perdue said this week. “It’s my constitutional responsibility to balance the budget and pay the bills, and I’m going to do that.”
By law, roughly 35 percent of lottery ticket sales revenue is designated for education programs: class-size reduction, prekindergarten programs, college scholarships and school construction. Perdue said “there is not one single project that isn’t going to be built” as a result of her decision to tap $37.6 million in lottery construction money and $50 million more in a lottery reserve fund.
But it means some school districts and county managers are scrambling to find money to make debt payments on building projects. In Beaufort County, officials are looking for spending cuts to make up for $183,000 that was expected from the lottery last month to help pay down $33 million in school construction bonds.
“We are very concerned about the ramifications that it will have on an ongoing basis … as the lottery money was to be pledged for school construction,” said Jim Chrisman, assistant Beaufort County manager.
Concern about changes to the lottery law led Perdue to propose “a constitutional amendment to make sure that lottery funds stay dedicated to education,” as she wrote in a March 2008 candidate questionnaire from The Associated Press. She later reaffirmed her intentions in an interview.
Perdue said this week she’s still committed to such an amendment, which would have to be approved by voters. But she believes it wouldn’t limit how the money is used during a fiscal emergency, as it would be trumped by the constitutional requirement to balance the state’s budget.
Lawmakers could try to write an amendment barring the governor from tapping into the funds, even to narrow a budget shortfall. That would likely move the debate into the courts.
In 2005, an appeals court ruled then-Gov. Mike Easley was within his rights to withhold $210 million in expected tax reimbursement to local governments to narrow a 2001 shortfall. But the state Court of Appeals ruled last summer Easley was wrong to intercept $225 million headed to North Carolina state employee pension funds.
House Majority Leader Hugh Holliman, D-Davidson, who voted for the lottery, said the constitutional amendment is “problematic.” He said the Legislature must do its best to protect the current funding formula for education, but isn’t surprised by Perdue’s decision.
“I understand the pressure that the governor is under,” Holliman said. “I’d have to tell you, if I were governor I’d probably do the same thing.”
