California Lottery

California Lottery Owes State $36 Million in Education Funding: Audit

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The California Lottery owes the state $36 million for not providing enough funding for education under a revised state law, according to a report from the state Auditor's Office.

The report released Tuesday and detailed in the Sacramento Bee, shows the shortfall occurred during the fiscal year 2017-18.

Read the full state Auditor's report here.

From its inception in 1984 until 2010, state law mandated the California Lottery distribute its annual net revenue as follows: 50% to prizes, 34% to education and 16% to operating costs.

Since 2010, the revised Lottery Act requires the California Lottery to establish a percentage that maximizes its education contribution after distributing at least 50% of net revenue to prizes and 13% to operating costs.

The lottery’s revenue recently more than doubled since 2010, rising from about $3 billion to about $7 billion per year, according to the Sacramento Bee. A decade ago, the lottery sent about $1 billion to California schools. In the 2017-18 state budget year, schools received $1.7 billion from the lottery, the newspaper reported.

Lottery officials responded to the findings, saying they don't believe the revised Lottery Act requires "a direct proportional relationship between net revenue and education funding." Lottery officials said they've satisfied the new law by raising the amount of education funding by a small fraction of its net revenue increase rather than the maximum amount, the audit report stated.

While the auditor contends the law's language is clear, it stated the Lottery Act may need to be amended again to ensure the California Lottery is aligned with the current law's intent.

The audit report shows the Lottery exceeded its required education allotment in fiscal years 2015-16 and 2018-19.

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