Where does all of the lottery money go

On multiple occasions, a member of the House District 31 constituency inquires about the impact upon common education of Oklahoma lottery proceeds. Many believed that once voters approved the lottery it would quench common education’s insatiable appetite for money. No doubt, based on viewing lottery advocacy commercials, they thought the lottery would have more of an impact and want to know where the money is going.

This isn’t an easy question to answer. When Oklahoma policy makers created the lottery they placed common education’s component of the funding into the state aid for schools funding formula. There are many revenue streams which go to common education both inside and outside of this funding formula.

Here is how common education funds are generated and allocated.

First, schools receive direct local funding from property taxes, gross productions taxes, motor vehicle taxes, the rural electric co-op tax, the vehicle stamp tax, the farm implement tax stamp and earnings from the school land commission which owns and leases out land all across the state as a revenue generator for schools.

Second, districts receive federal funding which likely represents between 10 to 15 percent of total funding for most schools.

Third, the state provides additional funding to schools in the form of state aid. State aid comes from a pool of money that includes sales tax income, the lottery and the many million dollars appropriated each year by the Legislature. In many districts the state aid provides the greatest amount of funding although the Edmond district is a notable exception to this rule.

State aid money goes to each district based on a series of factors. These diverse factors include the number of students, type of students, qualifications of teachers, the number of students who ride the bus to school and many others.

Each district must deduct from its state aid much of the direct local funding income. Readers may recall the 60 to 40 formula I wrote about by which new property tax income is not deducted from state aid. This formula only applies to the first year the school district receives the new growth money as about mid-way through that year the state department of education adjusts the district’s state aid to include a deduction amounting to about 85 percent of the district’s property tax collections. Edmond school officials aggressively and rightly oppose this practice as Edmond is likely one of the few districts in the state where direct local revenues total more than state aid revenues.

None of this takes into account for the bond issues which are traditionally issued to pay for building construction and which are assessed to the property tax bills of district residents.

By some estimates the accumulated amount of local, state and federal funding to Oklahoma common education entities likely amounts to 5 billion each year. Consider that the lottery contributes 40 million or less than one percent of this funding and you will see why its impact has hardly been noticed. The lottery funds are simply dwarfed by the billions of other dollars which comprise education funding.

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