Lottery’s Contribution to State Schools

Your Feb. 15 editorial did not accurately portray the facts of the California Lottery’s contributions to public education in California. The lottery has just completed its third straight year of continued sales growth. As in any sales-driven business, when sales go up, operating (administrative) costs rise proportionately. Approximately 75% of the total 1994-95 administrative cost of $336 million cited in your article was used to pay for external expenses such as ticket printing, gaming system fees, advertising and retailing compensation. (During 1994-95, $141 million was paid to retail businesses throughout California as compensation for selling and servicing our products.) Our actual internal expenses for 1994-95 represent the lowest percentage to sales in four years.

When you sell more tickets, you have to buy and print more tickets.

A more accurate reflection of lottery activities would have included, along with your graph on increased administrative costs, a graph of increased revenues to education (profits).

Further, your editorial incorrectly stated that schools stand to get less this year. In 1994-95, more than $791 million was contributed to education--an amount that represents the largest contribution since 1990-91. Rather than schools getting less, this amount represents an increase of 14.4% over the previous year. Current year revenue forecasts indicate the increase to public education funding will continue this year.

As a $2-billion sales-driven business, different from any other governmental agency, special oversight was created in the form of a five-member commission. The commission is a group of private citizens who bring business expertise from their own private sector endeavors to guide the lottery.

The California Lottery is not increasing its administrative expenses at the cost of education losing revenue, but rather is guided by the California Lottery Commission in making business decisions to continually increase its revenue to public schools.

A.A. PIERCE

Lottery Interim Director

Sacramento

* Your editorial raises yet another nagging question. The division of the total take, 34%, 50% and 16% for schools, prizes and administration respectively, fails to divulge the ultimate disposition of that portion of the prize money that is withheld over the 20-year payout period. The recent winner of $32 million will receive 1/20 of this total this year, $1.6 million, leaving a balance of $30.4 million for the remaining 19 payments.

If invested at only 5.27%, a reasonable interest rate today, the remaining principal of $30.4 million will remain with the lottery. Add this to the many hundreds of millions already retained by the lottery in the same manner, and I wonder why the schools are being so shortchanged.

JAMES R. PRATLEY

San Diego