Winston-Salem Journal

When it comes to state-sponsored gambling, one bad idea begets another. The General Assembly’s long and torturous effort to ban video poker has again been undermined. Machine operators have found another legal loophole so they can award prizes, and a judge has ruled that the state’s law is unconstitutional. The judge, however, has stayed action on that ruling for the time being.

Amid this legal turmoil, state Rep. Earl Jones, D-Guilford, says that the state should just go ahead, legalize the machines and derive as much as $40 million a year in taxes from them. Jones’ reasoning for legalizing video poker, in part, is that the state runs a lottery and that amounts to gambling.

There’s little chance Jones’ bill will become law this session, but it shows just how slippery a slope the state is on with regard to the lottery. Gambling is gambling, some will argue, and if the state is going to operate what amounts to a daily numbers game and big-jackpot games, then it should allow video poker and get some money out of it.

But there is a big difference. As bad as lotteries are, they are not as addictive as video poker. To quote state
Sen. Charlie Albertson, D-Duplin, “video poker is the crack cocaine of gambling.” The mesmerizing video images almost hypnotize players, as anyone who came across one of the games, while they were still legal, could have easily seen. The result, all too often, was a family where mom or dad had gambled away the rent and grocery money.

Jones says he is sick of paternalistic talk about protecting adults from themselves. Adults can choose on their own, just as with the state-run lottery. But society does outlaw many behaviors in the interest of protecting people. So, Jones is simply making an argument against the lottery, not one for video poker.

More sensible legislation is also before the House this year. It would declare the General Assembly’s intention to outlaw video poker in all of its forms. If legislators passed the bill, its sponsors say, it would finally quash video poker in the state. But it would also ban innocent product promotions, such as those offered by soft-drink companies that award prizes for a winning number under a bottle cap.

Given the scourge video poker has been, that is not too high a price to pay. So long as the legislature can declare all video poker illegal without interfering with the court case, it should do so.

A state-sponsored lottery is bad enough. North Carolinians don’t need what amounts to state-sponsored crack cocaine.

RALEIGH, N.C. – Winning the lottery in North Carolina can mean no payout if the winner owes the state back taxes, student loans or child support.

The News & Observer of Raleigh reported Tuesday that the state has collected $1.3 million in overdue payments from lottery winners since the first ticket was sold in 2006.

Some winners also have had to repay hospital debts. State law requires that officials check winners to see if they have such debts.

Lottery spokeswoman Alice Garland says some winners are happy the money will repay such debts, including a man who hit a $100,000 prize and paid some for back child support.

One man who won a $35,000 prize left the lottery office with nothing after taxes and debt payments were deducted.

RALEIGH, N.C. – The North Carolina Education Lottery can still operate after the state Supreme Court deadlocked over whether the votes creating the games were lawful.

Three of the seven justices agreed Friday the lottery law was unconstitutional and three others upheld the law. A seventh justice had recused himself from the case and did not vote.

The 3-3 decision means a lower court ruling that rejected the claim challenging the law remains in place.

Taxpayers and advocacy groups sued before the first tickets were sold in March 2006, arguing that the General Assembly didn’t pass the lottery legislation properly in 2005. They said the state constitution required the House and Senate to each hold two separate votes on separate days. Each chamber only took one day.

Winston-Salem Journal

Mother said, “Be careful what you promise because not all promises can be kept.”

Gov. Bev Perdue is relearning that axiom about a promise she, former Gov. Mike Easley and many members of the General Assembly made regarding use of state-lottery proceeds. They said the money would be used for new education initiatives only.

Three and a half years ago, Perdue, as lieutenant governor and president of the Senate, cast the deciding vote and broke a tie on legislation creating the lottery.

North Carolina legislators debated creation of a lottery for decades. Many different plans were proposed before supporters hit on the winning formula: The N.C. Education Lottery would raise money only for new education initiatives. Presented that way, the lottery gained favor with a large percentage of North Carolinians.

Easley and legislators almost immediately broke their first promise when they applied lottery money to existing early childhood-education programs that Easley had created several years earlier. So, from the start, the lottery money supplanted other education money. Only heaven knows where the new money generated by the lottery was really spent.

Now facing up to a $3 billion shortfall in next fiscal year’s budget, Perdue says she may tap $88 million of lottery cash to help the endangered General Fund.

Asked about Perdue’s grab of lottery money by McClatchy Newspapers, Sen. Dan Clodfelter, D-Mecklenburg, recalled that he voted against the lottery in part because he was skeptical of the education promise. But he added, “which is not to say that what she’s doing is wrong.”

Clodfelter is right. This may be a promise that Perdue had to break.

Perdue faces an enormous task. She must find enough cuts to keep the state budget balanced and she has, so far, largely spared the schools budget. While she has cut general government by 9 percent, the public schools have lost only 2 percent. It may be that making small further cuts to the giant education budget can prevent severe cuts to other important programs.

It is true that few foresaw an economic downturn of this depth, but state leaders had to know, based on their experiences in the economic recessions of the past 40 years, that there are times when deep cuts must be made. Many lottery opponents predicted just such a scenario when they said the day would come when an economic downturn would force the abandonment of the education-only promise for lottery money.

The first N.C. Education Lottery tickets were sold less than three years ago, and already the promise has been broken. The times demand extraordinary actions. Let this be an extraordinary exception.

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.”

RALEIGH, N.C.  – The paperwork that’s the basis of internal audits of the North Carolina Education Lottery would remain a public record in legislation clearing a House judiciary committee.

The panel Tuesday removed a provision that would have made such papers confidential. The audits remain public record.

North Carolina Press Association attorney John Bussian opposed the confidentiality provision. Such paperwork is confidential in other parts of state government, such as the University of North Carolina system, until the audit is released.

The bill largely makes technical changes sought by state lottery officials. It’s the first such “clean-up” of the lottery law approved in 2005. The legislation also clarifies what information about a lottery winner is a public record.

The bill now goes to the House Finance Committee.

RALEIGH, N.C. – The North Carolina Supreme Court must now decide whether state lawmakers violated the state constitution when they approved the state lottery in 2005.

Justices heard oral arguments Monday in a lawsuit filed by the North Carolina Institute for Constitutional Law.

Attorney Bob Orr told justices that a lottery ticket contains an inherent tax and must be approved like a state tax as required by the constitution. He said the bill should have been voted on twice by the House and Senate on two different days because lottery proceeds generate money for public education.

State attorney Norma Harrell disagreed, arguing that the lottery commission is merely a vendor and that purchasing a lottery ticket is voluntary.

There’s no timeline on when the justices will rule.