Lottery overdue for overhaul?

This year will mark the 25th anniversary of the election in which this state’s voters established the Georgia Lottery. It was the brainchild of then-Gov. Zell Miller and funds what is almost certainly his most celebrated legacy as governor, the HOPE scholarship/grant program.

One think Miller and his allies in the General Assembly stipulated was that the legislation was to be crafted so as to avoid what has happened with some other states, where political manipulation resulted in revenues supposedly dedicated to education largely supplanting, rather than supplementing, existing education budgets.

For the most part, the Georgia Lottery has done that. The HOPE scholarships for academic college tuition and HOPE grants for technical college tuition have been funded with wholly separate revenues from traditional ones — i.e., taxes. It has been and will be debated whether the deep and painful cuts in state education funding after 2008 were due entirely to the Great Recession or partly to skewed political priorities, but there’s no question that falling lottery revenues forced the downward adjustments in HOPE funding.

Since the end of the recession, much of that state education funding has been restored to the budget. But a recent audit of the Georgia Lottery Corporation, requested by the Senate Appropriations Committee, suggests that the operation of the state’s “voluntary” education tax needs some substantial tweaking.

As reported this week in the Athens Banner-Herald, Georgia is second among all state-run lotteries in ticket sales per capita. But the Georgia Department of Audits and Accounts reports that the percentage of lottery revenue put back into the two education programs it funds — the HOPE program and pre-kindergarten -- has been in steady decline in recent years.

The constitutional amendment approved by voters in 1992 stipulated that the lottery was to turn over, “as nearly as practical,” 35 percent of its proceeds to those programs. In FY 2016, that it was 25.5 percent. It has not, according to the audit, met the 35 percent mark in 20 years.

Auditors noted that the Georgia Lottery spends more money on advertising than any other state-sponsored lottery; that it has no set economy or accountability policy for making large purchases ($75,000 or more); and that its two largest contractors, International Game Technology and Scientific Games, are both under 22-year contracts.

The audit did note that Georgia Lottery Corporation has renegotiated for lower rates from both contractors three times since 2002. But with the two companies’ base compensation totaling more than $80 million in fiscal 2016, the state auditors recommended that those contracts be put out for competitive bids.

One major benefit of improved ticket sales noted in the audit is that bottom-line lottery revenue for the state has increased in actual dollars over the last two years, from $945 million in 2014 to $1.1 billion in 2016.

Still, when such huge amounts of money are at issue, and the things that money is earmarked for are of such critical importance, every improvement in accountability and efficiency is worth … well, millions.

This story was originally published January 3, 2017 at 3:47 PM with the headline "Lottery overdue for overhaul?."