The CA Lottery turned 30 in 2015 - But Where's the 34%

The California Lottery celebrated its 30th anniversary in 2015.  One of the reasons this came to my attention was that when I was at a 7-11 store earlier this year, I noticed there was a new Scratcher ticket in the case.  A ticket that cost $30 to play.  That boggled my mind a bit.  I'd gotten used to seeing $10 Scratchers and then the $20 Scratcher tickets came along.  Where will this end?  What's the history?

 According to an article published back in 2014 in the SF Weekly, the state of Texas introduced a $50 Scratcher ticket in 2007.  At this time, the highest regular face value Scratcher ticket sold by the CA Lottery was $5.  How did we get from $5 tickets to $30 tickets in just eight years?  It began with the Gubinator.  In early 2008 Governor Schwarzenegger floated the idea of privatizing the CA Lottery.  He described it as an "...underperforming asset" and he was right.  Look at the total CA Lottery revenues from 2005 through 2008 (Note:  All data on CA Lottery performance contained herein are taken directly from the CA Lottery's own annual reports):

Total Lottery Revenue				Increase
				Decrease
Year		Revenues
2005		3,333,620,669
2006		3,584,996,251		7.54%
2007		3,318,346,505		-7.44%
2008		3,049,620,915		-8.10%

In an era of a booming economy, lottery sales revenues were shrinking.  Were people less interested in gambling because they were doing so well?  Probably not.  The idea of privatization of the CA Lottery did not go over well.  Instead, in order to boost lottery revenues, the law was modified.

CA Assembly Bill 142 was introduced in January of 2009.  Its main purpose was to boost lottery sales.  One of the ways it did this was to remove the requirement that 84% of lottery revenues (after allocating 16% to expenses) was to be split up as follows - 50% in prize money and 34% to educational funding.  How did it do this?  You can read this portion of the bill's text for yourself below:

"This bill would require revenues of the state lottery to be allocated so as to maximize the amount of funding allocated to public education, and would require that not less than 87% of the total annual revenues of the state lottery be returned to the public, and no more than 13% be used for lottery expenses. The bill would further specify that, of that 87%, not less than 50% of the total annual lottery revenues, in an amount to be determined by the commission, be returned to the public in the form of prizes. The bill would require the commission to establish the percentage to be allocated to the benefit of public education at a level that maximizes the total net revenues allocated to the benefit of public education. By changing these allocations, the bill would change the purposes for which the funds of a continuously appropriated fund may be appropriated, and thereby would make an appropriation. The bill would make other conforming changes."

No more requirement to put at least 34% of all lottery revenues into the coffers for education.  AB 142 became law in 2010.  The CA Lottery report for FY 2009/10 shows that $1.100 billion went to educational funding from the lottery revenues.  That same report for FY 2013/14, four years later shows that the level of educational funding had gone up to $1.348 billion.  That's an increase of 22%.  Pretty good.  But over the same four year period, gross lottery revenues were up 46.1%.  So what happened?  Did the Education Fund continue to get 34%?  The answer is a resounding NO.

Total Lottery Revenue
				34% of total	Amount to	Actual % to
Year		Revenues		revenues	Education Fund	Education Fund
2005		3,333,620,669		1,133,431,027	1,148,775,087	34.46%
2006		3,584,996,251		1,218,898,725	1,258,507,917	35.10%
2007		3,318,346,505		1,128,237,812	1,176,929,117	35.47%
2008		3,049,620,915		1,036,871,111	1,069,328,092	35.06%
2009		2,954,839,094		1,004,645,292	1,027,728,959	34.78%
2010		3,040,959,866		1,033,926,354	1,072,496,752	35.27%
2011		3,438,577,998		1,169,116,519	1,102,860,768	32.07%
2012		4,371,491,746		1,486,307,194	1,300,240,379	29.74%
2013		4,445,874,040		1,511,597,174	1,262,058,020	28.39%
2014		5,034,661,424		1,711,784,884	1,327,928,392	26.38%

As you can see from this chart, until AB142 was passed into law in 2010, more than 34% of total lottery sales revenue went to the state's Education Fund.  Now, more money is going to the fund in dollar amounts, but less than 27% of total lottery sales revenue is going to education.  Where is the other money going?  Into prizes, to build growth in the games.  The promise that pushed the Lottery initiative to pass was more than 1/3rd of every dollar went to the schools.

That promise has been broken.  In Part 2, a look at just how much revenue is coming from the Scratcher Games.