First, thank you fellow Fontbonne students and faculty for attending the following presentation. My name is Richard Jurado, Executive Director for the Organization for Revised Lottery Policy. Today, we are going to recap our white paper proposal on the viability of the Missouri State lottery program, and present proposals we deem quantifiable toward the reformation of the stated educational lottery. At the end of this presentation there will be a brief question and answer time, and would appeal to you hold your questions until that time. Thank you.
Just about every state in the union has some type of lottery, many are slated to provide funding for education. Yet, the lotteries popularity continues to grow as a potential “get rich quick” opportunity for the poor and middle class. However, the elements of the lottery has many foes and concerns by economist and political science professors of its stability and accountability. They classify most lotteries to be fungible – especially educational lotteries.
The following two authors, both noted professors in the fields of economics and political sciences have contributed several papers on the stability of educational lotteries. They have been quoted and reference quite often by other researchers who have spend time assessing the lottery system. So, we are confident to quote and present the following facts in this presentation.
Numerous economist and political science professors, along with tax watch dog groups offer noted opinions and facts that lottery that are earmarked for education are deemed fungible at the discertion of the local government/legistlation. The Review of Regional Studies state earmarking is a “proliferation of state lotteries” once the game of chance has been set into motion legislators re-examine the lottery by redirecting funds from one program to another. The National Tax Journal notes: Social Science Journal claims: They see as revenues potentially increase so does the cost of school operations. Additionally, the public is led to believe the lottery provides adequate funding to education – somewhat a supplement, yet it does not fill the gap that is every widening.
So let’s recap the report each of you reviewed several weeks ago.
We have presented in our report that for 13 years there exist a 70% gap between sales and proceeds issued to the states Educational fund and sales have grown at a exponential rate, educational distribution have remained static The Missouri Constitution Article 3 recommends a minimal of 45% set for prize payouts, yet distributions are at an average 63% of sales, not including admin cost and retail fees..
We have further identified that with the increase growth in lottery sales we have seen an increase in compulsive gambling among Missouri citizens. Yet the lottery commission has been given the task to provide revenue from ticket sales to cover the cost of advertizing and educational promotion on gambling, which should be considered a mental health issue such as an addiction, therefore covered by the dept of Mental Health. However, we discovered that educational revenues from riverboat gaming are being adjusted at a 50% rate to cover compulsive gambling program expenditures. So we can observe that the educational revenue system is fungible and lottery is not truly dedicated to supporting of education wholly.
Out of the total tax revenue received by the dept of revenue for Missouri, only 4% is non lottery money which goes to education, that is $1.15 billion. The rest is to come from lottery proceeds. If we tact this on top of the 9% provided by the federal government, we may see about $2 billion total annually. Yet the average cost to operate our school is approx $7 billion annually. Both taxes and the lottery do non suffciently support or provide adequate school funding.
To further add damage to the educational funds, one of our neighboring states is considering competing in the state lottery game which can result in a loss of annual revenue of $25 million according to the Missouri lottery commission. Did anyone think of these consequences of the impact of interstate lottery games?
We also reported some discrepancies in financial disproportions. The lottery commission for 2007 reported the following proceeds: The dept of Elementary & Secondary Education reports approved distribution, but we note a shortfall of $14 million dollars. Where are those dollars? The dept for higher education reported the following data – based on the distributions of legislature under House Bill # 3. But legislation reports a higher amount as reported by the lottery commission. A $9 million discrepancy. Where did the additional $9 million come from? If the lottery is providing funds annually to the schools, is the government holding on to revenue in the lottery fund, not fully providing ample distribution? Additionally the dept of high education shows a misalignment of funds of $1.3 million shortfall to the Community College funds.
ORLP strongly recommends a lottery reform for Missouri, as well as an independent assessment of the lottery for changes or abolishment of the program. Let’s take a look at the top three suggestion we wish to propose.
Roll back the prize payoff to the minimal 45% set under the state constitution. For the past 13 years there has only been 191 big lottery winners There might be reserves sitting in the prize pool – remember the $9 million that suddenly appeared beyond the lottery proceeds issued by the commission. If there is a reserve, then there is seems to be ample funds to cover prizes for all winners. The educational fund could see an increase of 25% in proceeds.
Changing the supplemental tax rate to increase sales. No one likes to pay taxes, especially supplemental tax on bonuses and winnings. The total amount can result in 45% of gross jackpot. Missouri should negotiate with the federal government for a special winners’ tax on lottery proceeds that benefit education, and an increase winnings of 20% The government wants to have its nose in education, but only 9%, so if they are wanting to support education, allow the state to gain more revenue by an initiative that could increase sales.
We commented earlier that gambling has become an addiction for some individual. Many seek services under the dept of mental health, which support is provided by the gaming industry and the lottery commission. But just like cigarettes and alcohol, which are considered addictions, an excise tax should then be applied to tickets sales. A 2 cent ticket charge could generate $21 million annually to cover the dept of mental health’s program beyond its projected five year plan to seven years. The lottery commission could then retain the cost of ads and education on gambling and apply the revenue to education.
Other possible reform solutions. To retain revenue in state, impose a 10% winners tax on out of state winnings. Apply an individuals or joint income tax Adjusted Gross Income as the tax base for supplemental tax on winners. Interest accrued on prize winners to cover the cost of annuities, plus provide winners a 1/8 percentage point on investment. District Lotteries rather than state so that revenue can be applied at the local level. Impose a statement at retailers that “Missouri lottery does not fully fund education, but is limited to disbursements based on achieved sales”: Set cap on winning with multiple winners and using the revised tax policy.
To ensure government is not involved in the numbers, first conduct an audit of financial statements, and then provide the rights for research to state universities students and professors to assess the lotteries soundness, and consider the proposed aforementioned proposal for validity and probable considerations. Consider outside independent resources, like the Heritage Foundation, The Tax Foundation, or other non for profit organizations to further assist
The ORLP implore each of you to reach out to your state and local representatives to question the strength of the states lottery program. ORLP has provided some simple and general information that should make you question whether you child’s future will be sustainable financially for the future – whether it be lottery or tax driven. Visit our website at www.ORLP.org and sign our petition
Capstone Presentation Lottery Alternative7 25 09 Ha
LOTTERIES: GAMBLING WITHOUR CHILDREN’S FUTUREA Report by the Organization for Revised Lottery Policy Richard A. Jurado Executive Director, ORLP Capstone 2009
“Even though revenues from lotterysales are intended to enhance thestate’s educational system, thelegislature is not legally bound toboost education with these profits.” R.E Stanley and P.E French – The Social Science Journal
The Review of Regional StudiesLotteries: “proliferation of state lotteries”Gambling with OurChildren’s Future National Tax Journal “while lotteries have proved to be a popularSuperficial Earmarks revenue source for state governments” the amount achieved is minimal Social Science Journal “the implementation of the lotteries, have the residents of these states experienced a substantial increase in public educational expenditures?” that “on the average lotteries account for approximately 3.8% of a state’s educational budget even thought the general public is lead to believe that schools receive more money … [and] provides a larger portion of these needed funds”
PROBLEMATIC FRAMEWORKRECAPA Report by the Organization for Revised Lottery Policy
Lotteries:Gambling with OurChildren’s FutureProblematicFramework Missouri Lottery Sales vs. Ed. Proceeds
Compulsive GamblingLotteries:Gambling with OurChildren’s FutureProblematicFramework Missouri Lottery Sales vs. Ed. Proceeds Compulsive Gambling Redirection
State Funding AppropriationLotteries:Gambling with Our Tax/Tax Year 2008 2007 Tax Provided Amount Education ReceivedChildren’s Future Cigarettes $ 116 m $115 m Yes $51,000,000Problematic Fin. Institution $14 m $10 m NoFramework Fuel $742,000 $744 ,000 No Missouri Lottery Sales vs. Ed. Income $6.7 b $6.6 b Limited – $8,917,450 Proceeds Community College Fund Compulsive Gambling Insurance $255,000 $213,000 Limited – Non Redirection State Fund to School Districts State Funding and General Fund Appropriation Local Sales/Use $2.3 b $2.2 b No State Sales/Use $3.2 b $3.3 b Limited – Prop “C” $803,381,288 100% to School District Fund Other $362 m $354 m Limited – Gaming $293,171,757 to Educational (riverboat gaming) 90% to Schools Total $15.8 b $13.2 b $1.156 b
Interstate CompetitionLotteries:Gambling with OurChildren’s FutureProblematicFramework Missouri Lottery Sales vs. Ed. Proceeds Compulsive Gambling Redirection State Funding Appropriation Interstate Competition
Where is the money going?Lotteries: Lottery Commission ReportGambling with Our $158,312,825 to Dept of Elementary andChildren’s Future Secondary Education (DESE) Missouri Lottery Sales vs. Ed. $76,990,310 to Missouri Dept of Higher Proceeds Education Compulsive Gambling DESE Redirection $144,281,940 million State Funding Appropriation Shortfall $14 million Interstate Competition House Bill # 3 Where is the MDHS money going? Lottery Reports - $76.9 million Legislature Reports - $86.1 million $9.1 million variance MDHS Some distribution misalign with HB 3 $1.3 million less
REFORMATION PROPOSALA Report by the Organization for Revised Lottery Policy
Lottery Policy Reformation Opportunities Amiable Reform Solutions Top Three Roll-back prize payoffs to the minimal percentage under the Missouri State Constitution
Lottery Policy Reformation Opportunities Amiable Reform Solutions Top Three Negotiate new reduced supplemental tax on prize winning with federal government
Lottery Policy Reformation Opportunities Amiable Reform Solutions Top Three Excise tax on ticket sales to gain loss school revenue from gambling funds redirected to compulsive gambling program Cigarettes and Alcohol carry excise tax to cover health related issues and addiction abuse Gambling also produces addiction Dept of Mental Health - $71 million over five years Excise tax of two-cent per ticket $21 million annually Commission Administration release
Lottery Policy Reformation Opportunities Amiable Reform Solutions Remaining Alternative Proposals Supplemental win tax on out of state play Consider imposing taxes on winnings based on IRS gross- adjusted income tax base Eliminate the “lump sum” payouts and mandate all prize payouts be in twenty (20) to twenty-five (25) year annuities Consider allowing districts to establish local lotteries programs Impose “truth in advertizing” policy regarding the fungible aspects of lottery sales and proceeds Establish a “cap” on lottery prizes and distribute potential prizes to multiple winners
Lottery Policy Reformation Opportunities Evaluation and Analysis of Proposals Independent Study University Level Students Economic or Political Science Papers Scholarly Journals by Political Science Professors Auditing Independent Service outside Missouri government Tax Foundations Evaluations