State Audit Says Lottery Shortchanges Schools

The California Lottery improperly diverted millions of dollars in unclaimed Lotto 6/49 prizes back into jackpots instead of giving the money to public schools as required by law, according to a state controller’s office audit scheduled for release today.

The audit for the 1987-88 fiscal year shows that the state-run lottery “shortchanged schools millions of dollars” by channeling $5 prizes that went unclaimed into the prize pools for future Lotto drawings, controller’s office spokesman Edd Fong told the Associated Press on Wednesday.

Lottery spokeswoman Joanne McNabb acknowledged the allocation of unclaimed $5 prizes to future prize pools, but disputed the controller’s office interpretation of the law.

The 1984 initiative that created the lottery does not require the $5 prizes to go to schools when they are unclaimed, McNabb said. The $5 prizes are paid directly by lottery retailers to holders of tickets with three out of the six winning numbers in each drawing. Only the larger prizes that are paid directly by the lottery must go to schools when they are not collected by winners, McNabb contended.

Controller’s office representatives and education officials, in interviews, rejected her argument. The lottery has asked the state attorney general’s office for an opinion clarifying the issue.

McNabb further discounted the contention that schools had been shortchanged, pointing out that the lottery has given schools more than the 34% of total proceeds required by the initiative. The extra money came from savings on administration of the games, she said.

State Schools Supt. Bill Honig joined the controller’s office in saying that the obvious intent of the initiative was to give unclaimed prize money to schools.

“To play legal games (with the interpretation of the initiative) is out of line. . . . They are bending over backwards not to give us the money,” Honig said.

State Education Department spokeswoman Susie Lange added that if it is determined that schools are being shorted, “We will pursue whatever remedy is necessary to reclaim whatever is due schools.”

Honig was scheduled to join Controller Gray Davis in unveiling the 25-page audit today.