Dwindling Lottery Funds Are Teaching Schools Hard Lesson

Declining California Lottery revenues spell trouble for school districts that did not heed warnings about the danger of committing the money to continuing expenses such as teacher salaries.

The lottery, which in its initial year brought state public schools and colleges $692 million, will generate only $483 million for the 1986-87 school year, the state Department of Education estimates. For public schools, the 1985-86 average of $120 per pupil in lottery money will shrink to about $87. Some districts that gambled last year by putting the lottery money into teacher pay raises now find the money insufficient to keep up the increased teacher pay.

Those districts include San Francisco Unified School District, which last year gave about 50% of its lottery money to salaries, and Richmond Unified School District, also in the Bay Area, which applied 90% of its lottery revenue to salaries.

These districts and some others may be headed for a financial squeeze because they committed money to salaries as part of their multi-year labor contracts with teacher unions. If lottery revenues fall steeply, the districts may find themselves, as the end of the year approaches, short of money that they are legally obligated to pay in salaries, and forced to cut programs or lay off workers.

‘No Way We Could Make It Up’

“We’re one of the school districts that had to use lottery money for salary,” acknowledged Richard Lovette, superintendent of the Richmond district. “If the lottery money is short, there’s no way we could make it up. We’d just have to cut programs.”

“School districts that are committed to giving more than 25% of their lottery money to salaries are going to be in trouble this year,” said Bill Honig, state superintendent of public instruction.

The lottery law, which dedicates a minimum of 34% of lottery receipts to public education, allows school districts to spend the money for anything except research, new buildings and the purchase of real estate. When the lottery began, Honig and other state officials urged districts to use the money for one-time purchases and not to count on it as a dependable source of income. Many school employee unions, however, began campaigns to get school boards to dedicate much of the money to salaries.

Some districts found a way around the long-term contract problem by giving employees one-time bonuses. Other districts, however, including Los Angeles Unified and Santa Ana Unified, tapped the lottery money for pay raises for teachers and other employees as part of their labor contracts.

“Frankly, some of the districts didn’t have much choice,” said Rebecca Baumann, director of governmental relations for the California School Boards Assn. “The unions made this a big priority. They wanted to build as much as possible of this lottery money into the salary schedules.”

“It’s a risk, I agree,” acknowledged Joan Wilkinson, a school board member for the Santa Ana Unified School District, which last year committed about 45% of its lottery money to employee salaries. “But in these days, what source of funds isn’t a risk for education? For instance, our district has used urban impact money from the state to help us with bilingual education, and now this year that’s slashed in half. I don’t think the lottery money is going to drop 50% in one year.”

Bill Rivera, a spokesman for Los Angeles Unified, likewise conceded that “it’s risky” to commit lottery money to recurring expenses. The district offered to give the teachers $55 million of its lottery money this year, Rivera said. “We initially thought the district would be getting about $100 million this year, but it now looks like it’ll be closer to $60 million. We’ll get enough in lottery money to make it this year. Beyond that, there may be some problems.”

The decline in lottery money has presented fewer problems for state colleges and universities because their share was considerably smaller to begin with. The combined share of lottery revenue for the nine campuses of the University of California, the 19 California State University campuses and 78 community college districts is less than one-fifth of what goes to public elementary and high schools and, for the most part, the colleges and universities heeded the warnings and used the money for non-recurring expenses.

The drop in lottery money is hitting the school districts as they prepare for an even tougher year in 1987-88, because of an austere budget proposed by Gov. George Deukmejian. Despite widespread public perception that the lottery has produced a windfall for schools, state appropriations provide the great bulk of money for schools, with the lottery’s contribution actually equal to less than 3% of the state education budget. If state Education Department estimates of $483 million in lottery revenues prove accurate, it will be just 2.2% of the overall education budget of $21.6 billion.

In interviews last week, Honig and many school district superintendents charged that the governor’s budget tried to “disguise” lowered percentages of state funds for public education by injecting references to lottery money. Honig said he is thinking about going to court over the matter.

“The law implementing the lottery clearly says that lottery money can’t be used to replace state support for public education,” Honig said. He referred to the part of the lottery law that says: “Net revenues of the California State Lottery shall not be used as substitute funds but rather shall supplement the total amount of money allocated for public education in California.”

Had Been Predicted

The decrease in sales in the lottery’s second year of operation had been widely predicted. State officials, including Honig, warned school districts that lotteries in other states had sharp declines after the first year.

“We predicted a very heavy sales volume the first year,” said Robert Taylor, a spokesman for the California Lottery. “It was the big event when it began, and everybody was talking about it. The lottery told everyone to expect a fall-off in sales after the first year.”

Taylor said the lottery is predicted to pick up in sales next year and in subsequent years. “It is not unlikely that we will be approaching our sales volume for the first year in a year or so,” he said.

But the uncertain nature of lottery money has caused some to wonder if it is worth the price. Assemblywoman Teresa Hughes (D-Los Angeles), chair of the Assembly Education Committee, said the unpredictability has caused some harm to education in California.

“I think the people in the state were lulled into a false sense of security by the lottery,” Hughes said. “People think more money is now going to schools than really is the case.

“We’re happy for the big winners in the lottery--those people who become the new millionaires,” she added. “Those individuals are winners, and that’s nice, but that doesn’t make our schools winners.”