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Wins, Loses Of NC Education Lottery And NC Schools

10:52 PM, Jul 18, 2013   |    comments
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North Carolina -- Counties thought they were getting the money.

And they did.

Just not as much.

Expectations about how lawmakers would allocate proceeds from the North Carolina Education Lottery have created huge budget problems for several counties across the state and it may trickle down and affect the pocketbooks of taxpayers.

"It's upsetting," said Pat Galloway, the director of financial services for Rockingham County.

Most of the nearly $3 billion dollars the lottery has raked in has gone to fund education.

The only exception came in 2011 when lawmakers used $26 million to pay for a Medicaid budget shortfall.

County lawmakers are taking issue with lawmakers reducing the capital project funding the last three years.

When the state approved the lottery in 2006, legislators said in a statute, 40% of the proceeds would go to counties for building and renovating schools.

Several counties took on debt expecting that amount.

But in the last three years, lawmakers have reduced the 40% to 23%.

Meanwhile, the bills for the loans are pouring in across counties in the state.

And some, like Rockingham, are scrambling to find new revenue sources to make up for the gap.

"I think we were misled. I don't believe there was an intentional lying," Mark Richardson, a Rockingham County commissioner reasoned. "We took on debt in this county that we would have never would have incurred intentionally had we known these funds would be withdrawn from us."

Rockingham County recently opened Douglas Elementary School.
It was built with the expectation the lottery proceeds would pick up some of the tab.

Galloway says, since the reduction in capital funds, the county now has barely enough in its coffers to pay for the debt.

"A lot of local governments depend on those funds and to just change it to something else. You know, you're not only impacting the local government. You're impacting the taxpayers," Galloway added.

Davidson County also recently finished building its own school with some of the lottery funds.

"[In] most counties, the lottery money has been used for debt service for all the schools that we're having to build because of the class size which means bigger schools, and so, all of us are in that same situation," said Zeb Hanner, assistant Davidson County manager.

But Hanner says officials in his county were conservative in their budget forecasts and as a result, the reduction in lottery funds for capital projects has not been a huge impact.

"You look at Randolph County, just beside us, they just built two new high schools in the last 5 years," he said.

But according to Senator Pete Brunstetter, co-chair of the senate appropriations committee, the 40% was only a guideline -- not a requirement nor was it binding.

"Counties were not told to necessarily rely on this to leverage for debt. But we are aware that a number of them have," Brustetter explained. "They were never assured they were going to get that percentage."

However, Richardson insists, counties were "given a realistic expectation that the funds from the lottery would supplement."

Some Triad counties are taking huge hits this year, based on data from the North Carolina Association of County Commissioners, Guilford County is short $3,841,327, Forsyth County is at nearly $3 million, Alamance, Davidson and Randolph are losing more than a million while Rockingham and Stokes are looking at hundreds of thousands of dollars.

"It's a huge impact," Galloway said. "We're strapped with a debt service payment that we're going to have to look for local resources to meet."

For the last three years, the state has diverted the percentage lost in capital funds to other educational needs like teacher pay, scholarships and classroom needs, according to Brunstetter.

"It was never designed to take the place of counties' responsibility for school capital needs," Brustetter added.

Rockingham County is now considering either raising taxes to pay for the debt or cutting some public services if lawmakers do not restore the 40%.

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