Nearly 15 years after the North Carolina General Assembly narrowly passed a bill establishing an education lottery system, state legislators and local school districts are still arguing over how the revenue should be spent. 

When small towns think and act big, amazing things can happen. Anyone who has traveled has come across communities that have taken risks and been rewarded for it, vibrant small towns that are just fun to visit.

I think the town center plan currently being studied in Maggie Valley fits that description.

As people across North Carolina daydream about what they would do if they won millions from playing the lottery, they probably don’t give much thought to how the money is spent every time they buy a losing ticket. 

The North Carolina Education Lottery Commission would argue that no one is a loser when lottery revenue goes to fund education, but local school boards throughout the state might beg to differ. State lottery revenues have increased every year since it was launched in 2006, yet local school districts don’t feel like they are reaping the benefits.

After wading through more than 300 legislative goals presented by more than 500 commissioners throughout the state, the North Carolina Association of County Commissioners has agreed on five top priorities to present to legislators during the 2015 General Assembly.

Macon County Commissioner Ronnie Beale, president of the NCACC, gave his fellow commissioners an update on the recent Legislative Goals Conference during the board’s retreat last week. 

Keeping a roof over the head of Haywood County’s nearly 8,000 students is getting harder every year as the school system grapples with funding cuts at both the state and county level.

With 16 schools, it’s wise to stay on a steady rotation of replacing a roof every one to two years. Go four years without replacing one, and it is catch up time.

“Then where is the money going to come from? Instead of $1 million project you are looking at a $3 to $4 million project,” said Chuck Francis, chairman of the Haywood County school board. “Now we are at the point where somebody is going to have to step up our schools are going to start going down.”

That’s exactly the message school leaders will be taking to county commissioners this year as they lobby for their maintenance budget to be restored. The county’s annual $600,000 maintenance and repair budget for school buildings was cut to $200,000 four years ago.

“We have to buy light bulbs and fix broken pipes. It’s fixing door knobs and changing locks and keys, and replacing windows that get hit with a rock,” Assistant Superintendent Bill Nolte said. “It is just on and on and on.”

SEE ALSO: Where do schools rank?

Commissioners don’t doubt the schools need the money.

Falling behind on upkeep will eventually catch up with the county, agreed County Commissioner Mike Sorrells, a former school board member.

“The longer you prolong this the more behind they are going to get,” Sorrells said. “If you don’t do your preventive maintenance you are going to end up with a huge backlog. So it is like the saying goes ‘pay me now or pay me later.’”

But in this case, the county may have to take the “pay me later” approach, depending on how the coming year’s budget shapes up. (see related article.)

Another routine expense the school system once kept on a regular schedule is replacing activity buses used for field trips, band trips, sports teams and the like. Those activity buses have to come from local dollars — and the money to replace them hasn’t been there.

“We had a schedule plan to increase that, and that has been frozen for three years,” Francis said.

Assault on all fronts

The school system has also lost a pot of state money for building maintenance, repairs and small capital projects. The state once earmarked a share of corporate income tax for school systems, divvied up based on school population around the state.

When the recession hit, the state started keeping that money for itself — resulting in a loss of $270,000 a year.

That puts the school system out a total of $670,000 in building needs.

Meanwhile, however, the Haywood school system has gotten a boost from lottery money. The school got more than $1.4 million last year in lottery money to use for maintenance and capital projects.

When the state started a lottery six years ago, lawmakers promised the money would be a boon for education. Lottery money would not supplant current funding but would be stacked on top of the funding schools already got, lawmakers promised.

Ultimately, it appears lottery money has supplanted other sources of school funding after all, even though it wasn’t supposed to.

Operational money

In addition to school building construction and maintenance money, the county also gives the schools money for operations, nearly $14 million a year. It hires extra teachers that the state won’t pay for, school secretaries, janitors, supplies, and myriad other operational costs not covered by base state funding.

While the county hasn’t cut the schools’ operational budget, it hasn’t grown any either.

About eight years ago the county brokered a deal with the school system designed to curb what had become an annual fight over how much money the county would pony up. Under the deal, the county would use a formula based on student population to determine school funding each year. The formula also built in a 1 percent increase year to year. But it has been frozen for the past 4 years.

Commissioner Mark Swanger, who at the time had just gone from school board chairman to county commissioner, came up with the idea of a formula.

“The formula worked great,” Sorrells said. “Every year, the school system was able to say we are expecting this amount of money.”

Sorrells saw real progress during those years of better funding.

“So it has been disheartening to have to cut back and cut back,” Sorrells said.

By definition, the lottery is a gamble. There’s no guarantee of winning, no assurance that you’ll look back on your ticket purchase without regret.

Sure, it can pay out big sometimes, but you could just as easily come up empty. And in North Carolina, for the school districts the education lottery helps fund, it turns out the story of what happens to that money might be much the same.

For the last five years, regulations on what can be done with lottery money have been pretty strict. But with state and local budgets in crisis, the General Assembly last year lifted some of those strictures, allowing schools to pay other expenses that were losing state funding with lottery money; a consolation prize for losing the big pot. So many districts started clutching money they once spent freely, fearing state budget cuts that are just over the horizon and wondering if they’d made the right choices with lottery money given to them in the past.

SEE ALSO: GOP may loosen rules on lottery proceeds

In Swain County, lottery money has always gone to debt service, paying down notes taken out for school improvements. County Manager Kevin King said that’s what they’ll continue to put those dollars toward for the foreseeable future. The same is true for Macon and Jackson counties.

In Haywood County, however, they’ve taken fuller advantage of what the funding rules allow. The way lottery money allocation works today is pretty simple: school districts get a percentage funding based on their ADM, average daily membership, which is basically how many students are attending their schools. Districts used to get extra money based on their property tax rates, which put western counties with historically low rates at a disadvantage. However, after years of lobbying by school officials, the General Assembly removed that inequity during its last session.

Lottery money ‘icing on the cake’

But regardless of where it comes from, lottery funds have, in the past, been earmarked only for capital improvements. That means new buildings, repairs to existing facilities and, as in Swain County, debt service for similar projects that have already been paid for.

Back in Haywood County, they decided to use their funds to install artificial turf on their sports fields, a project that’s taken their yearly lottery funds, which average about $600,000 annually, since they started receiving them.

After last year, though, when the extent of state budget woes became increasingly clear, Assistant Superintendent Bill Nolte said they started saving as much of that money as they could, aware that the state would have to find $3.7 billion dollars in cuts somewhere, and schools might be first on the chopping block.

“You … want to save the lottery money because it’s the only source that you have as an emergency source,” said Nolte, noting that, after paying the remaining two turf payments that are still outstanding, Haywood’s lottery fund balance would leave about $600,000 to fund teaching positions or address liability issues and emergency facility needs, which is as low as he’d like to see the fund get.

“We’re down pretty close to a pretty uncomfortable level of having a reserve there,” Nolte said.

But when asked whether, retrospectively, the turf still seem like a sound decision, Nolte defended the choice. He said the school system used the money for one of the few things it was allowed to spend it on.

“It [lottery funding] was never intended for emergency crises, it was never intended to pay for teachers, it was never intended to buy paper. That [capital expense] was the only thing we could spend it on at the time. It was a very logical expenditure,” said Nolte. “If we had a crystal ball and we knew that two to three years later we would be in an economic crisis, we may have not done that project.”

But, as Nolte points out, crystal balls were in short supply, and in what seemed like a healthy economy, they would have been decried for saving the money then.

“Back when we did the fields, there was no opportunity to spend the funds in another manner. If we had saved those funds back then, people would have said, ‘what are you saving for?’” said Nolte. “At the time that we made those expenditures it was a very popular decision.”

Now, however, there is no decision more popular than holding onto what you’ve got, in case things continue to decline.

Hold on tightly

That’s the opinion voiced by several commissioners at a recent Haywood County Commissioners meeting, where they expressed concern about what’s happening to the county’s lottery money.

Commissioner Bill Upton, who was formerly a principal and superintendent in the Haywood County school system, questioned school officials on the wisdom of using lottery funds to fix decrepit bleachers instead of saving the money in case it’s needed for teacher positions next year. Commissioners eventually approved the bleacher repairs, which had been flagged as a safety hazard by the school’s insurer for several years, but their reluctance to dole out lottery money on non-essentials was clear.

“The ballgame’s changed and that’s my big concern,” said Upton in an interview. “In the past, you know, you had to use lottery monies for projects and all. I think that’ll change.

“The unknown is what bothers me, and you hate to make decisions that will come back and hurt you this summer [when the state budget is set].”

According to North Carolina State Superintendent June Atkinson, a lot of districts around the state are thinking along the same lines. She said that few chose the option to use lottery money for teacher funding or other non-traditional uses last year. There were more hoops to jump through, including extra scrutiny at the local level, and there was still some federal funding available that gave many districts a buffer for state losses.

But this year, said Atkinson, those federal appropriations will be long gone, to the tune of $1 billion statewide, and the $3.7 billion hole at the state level is going to hit schools hard. This year, she expects many more districts to take the General Assembly up on any offer of unrestricted lottery funding they choose to make.

“In the leadership in our schools, people are making a concerted effort to stretch every dollar as far as they can go. When those federal dollars dry up, I’m sure school districts will be looking at those lottery funds,” said Atkinson.

However, she doesn’t think the lottery will ever become a staple to school funding — no matter how many restrictions are removed — because it’s just not enough to make up for what’s being lost.

“The lottery really is just icing on the cake,” said Atkinson, “because it is an unstable source of dollars. It changes based on the whims of people that buy lottery tickets … the percentage of the lottery dollars is such a small amount of money in comparison to the total amount [needed for school funding].”

And, just as in other retail sectors, those ticket-buying whims have been severely curtailed by the economy. Lottery revenue saw about a $44 million drop last year, and if those patterns continue, schools will have even fewer dollars to deal with.

But as for the money that’s left, Atkinson said she’s confident that lottery funding in the future, at least in the short-term, will surely be re-routed to needs other than capital projects, which would leave the state’s school facilities languishing.

Feeling the budget squeeze

Nolte said they’re already experiencing that squeeze in Haywood County.

“We swallowed very hard and did not do a building replacement at Waynesville Middle because we knew we might need that fund for schools or teachers,” said Nolte. That decision, he added, was pretty unpopular.

But they’ve been told to brace for a 10 to 15 percent cut from the state this year, so they’re hanging onto what they’ve got.

Nolte said he knows people might look at Haywood’s past lottery decisions as questionable, but would counter that argument by pointing out that the school system has long been recognized as fiscally responsible, running every project on time and on budget.

“I know that people want to make the arguments of bleachers versus teachers, or they want to make the argument of athletics versus academics, or they want to make the argument of don’t do anything to buildings, just keep people in jobs,” said Nolte. “But I hope people understand that we make the best decisions we can make with the information we have at the time.

“It’s real easy to second guess, and I just hope that people understand that we’ve got a long history of making very good decisions when it comes to capital expenditures. We’re taxpayers too, so we want to be very prudent with the revenues that are allocated to the school district.”

Statewide, Superintendent Atkinson hopes that lottery funds will help schools survive, but concedes they are a band aid on a hundred bullet wounds, and schools will have to shore up for a hard hit that’s coming soon, prioritizing student success over all else in the face of a bleak financial future.

“We’re at the point where we can’t make cuts without harming students. North Carolina ranks about 42nd in the nation as far as school funding. We’ve mad a lot of progress, and I just hate to see our not being able to continue that progress,” said Atkinson. “Money does matter.”

Staff Writer Quintin Ellison contributed to this report.

With the GOP takeover of the state General Assembly, lottery money and how schools use what they’re given will come under new scrutiny.

“I wouldn’t have voted for a lottery, but it is the law now and it needs to be done properly,” said Jim Davis, an incoming freshman Republican senator from Franklin.

Davis unseated Democratic incumbent Sen. John Snow in November, helping Republicans — for the first time in more than a century — take control of the House and Senate.

“I think the research will show the poor counties have a higher per-capita lottery purchase, and those people can’t afford (to play the lottery),” Davis said. “But it is here now.”

Davis, a former longtime Macon County commissioner, is an unwavering, unapologetic supporter of local control. Though Davis said he finds Haywood County’s decision to use lottery money for football stadium upgrades difficult to rationalize, “if the school board wants to do that and commissioners OK the choice, they ought to be able to do that.”

Incoming state senator Ralph Hise, R-Spruce Pine, said he would support allowing schools to use their lottery funding for items other than capital improvements again this year.

“I wouldn’t just limit that to lottery funding,” Hise said. “I think that we have to give local school boards more options in using their funding. We know the level of cuts, and as we get more specific information, we hope to be able to give as much flexibility to state departments and others with their own budgets.”

That would be a welcome change to Macon County Schools Superintendent Dan Brigman.

“I would love to have more lottery dollars,” Brigman said. “The formula definitely needs to be revised.”

Money from the North Carolina Education Lottery is divided among school districts based on enrollment. Counties with a higher tax rate used to get a higher percentage of lottery money, meaning Western North Carolina with its historically low tax rate got penalized. That was changed by the General Assembly two years ago.

— By Quintin Ellison and Colby Dunn

A wide selection of bleachers at nearly every secondary school in Haywood County will get some repairs and replacements thanks to lottery funds approved by county commissioners, but the decision was not without contention from some on the board.

Commissioner Bill Upton, long-time superintendent for the county’s schools, raised questions about the wisdom of using lottery funds for bleachers when the state is facing a $4 billion budget shortfall.

Upton expressed concern that, in the new budget, local schools will get state teaching money slashed and may need to rely on those lottery funds, which were last year freed up by the General Assembly to pay for teachers.

“Ultimately, you’ll come to the commissioners if you need more teachers,” Upton told Tracy Hargrove, the schools’ maintenance head who came to ask for the funds.

Hargrove countered with a safety argument, telling commissioners that the school system has been cited by its insurance company since 2007 for faults in the bleachers and couldn’t really justify leaving the repairs until later when they are so frequently used.

Commissioner Kirk Kirkpatrick told Hargrove he agreed with the measures, but was also concerned about the political and financial implications of the decision if teacher funding is, in fact, cut again in next year’s state budget.

“We don’t want to get into a political battle over, well the commissioners won’t give us money for the teachers when we’re approving improvements to bleachers,” said Kirkpatrick.

Michael Sorrells, the newest commissioner and long-time school-board member, came out in favor of the schools’ request, posing the question of what would happen if the repairs weren’t made.

“We’re just taking a chance,” answered Hargrove. “It’s got to be done at some point. We’re just taking on the liability if we don’t do something.”

In the end, the repairs passed unanimously, but Upton said he just wanted to make sure the county and its schools were thinking far enough in advance.

“It will get political when we start sending teachers home, and we will in Haywood County. I just want to make sure we think about all these things before we make a decision,” said Upton.

The effort to change the lottery funding formula so that counties in Western North Carolina get their fair share of proceeds is, for all intents and purposes, dead for this year. That’s too bad, but it also leaves voters with an important issue to discuss with candidates during the upcoming legislative election.

It’s past time to keep rehashing the same old arguments about whether having a state lottery is a good idea. It’s on the books and operating now, and it’s impossible to imagine ever going backward.