When voters authorized the Montana Lottery in 1986, the promise was that lottery revenues would be used for education funding. Now, with schools facing budget woes and lawmakers debating funding bills, one listener wants to know if this gamble is paying off.
Austin Amestoy: Welcome to The Big Why, a series from Montana Public Radio where we find out what we can discover together. I'm your host, Austin Amestoy. This is a show about listener-powered reporting. We'll answer questions, big or small, about anything under the Big Sky. By Montanans, for Montana, this is The Big Why.
We’ve got John Hooks back for this episode
John Hooks: Howdy Austin!
Austin Amestoy: What topic are we tackling today?
John Hooks: Well Nancy Valk, a listener down in Hamilton, has a question about the Montana Lottery, which has been around since voters authorized it in a referendum in 1986.
Nancy Valk: I have lived in Montana since 1981. I voted for that lottery. What they told the voters was that it would go to fund schools and relieve property taxes.
John Hooks: But headlines around schools experiencing budget woes and an upcoming vote over a $50 million bond for a new middle school in Hamilton have her questioning just how much money from the state lottery actually makes it to Montana schools.
Nancy Valk: Just need to know where the money goes and how much of it actually goes to schools, etc. etc.
Austin Amestoy: Ah yes. As an education reporter I can testify to just how darn complicated the formula used to fund Montana’s public schools is. And I don’t have the foggiest clue how the lottery factors in. Where should we begin?
John Hooks: Let’s do a quick rundown of how the lottery works. So the other day I went to a gas station and picked up a $2 Montana lottery scratch ticket.
The lottery runs scratchers, number games like Powerball, and for the last few years, sports betting. Those sales bring in around $150 million a year in total revenue.
Some of that money goes toward the lottery’s administrative costs and paying commissions to businesses that sell tickets. And a pretty big chunk goes out as payouts.
Austin Amestoy: How big of a chunk?
John Hooks: Well, by law the lottery has to give out at least 45% of its revenue each year in prizes.
Austin Amestoy: So were you the lucky beneficiary of one of these mandated payouts?
John Hooks: Well … no.
Austin Amestoy: Ok, so that surplus revenue that comes from unfortunate losers like yourself, where does that go?
John Hooks: That surplus money is around $20 million a year these days. When the lottery vote initially passed, it stated that the surplus revenue would go toward education – specifically it helped pay a portion of a statewide fund for teachers retirement benefits.
Austin Amestoy: I’m recalling that our listener, Nancy Valk, mentioned something about these funds helping ease the property tax burden. How did that work?
John Hooks: Well at the time those retirement funds were paid for by property taxes. So, theoretically at least, bringing in lottery funds alleviates some of the need to put that burden on homeowners.
Austin Amestoy: Did it work?
John Hooks: I mean, kind of. The thing is it’s just not a big pot of money. For example, in the first year of the lottery, the state brought in about $8 million. But the total property tax collected was over $1 billion. So it’s a less-than-one-percent drop in the bucket.
Austin Amestoy: I get the sense here that the disbursement is different these days.
John Hooks: Correct. Despite the stated purpose in the lottery referendum, lawmakers have the power to change where state money goes. So in 1995 they redirected lottery proceeds to the state general fund. That’s essentially a big, centralized bank account of about $3 billion Montana uses to pay for a lot of state government.
Austin Amestoy: So does any of that lottery money in the general fund find its way to the education system?
John Hooks: Sort of. Around $2 million goes toward a special scholarship fund. But with the bulk of it in the general fund, it's sort of a roundabout path toward education.
To help me explain this is Representative Eric Mathews, a former teacher and legislator from Bozeman.
Rep. Eric Mathews: So when that money went to the general fund, what happens now is that instead of using other sources of revenue to pay for education and having this money go towards the original intent, it just kind of all went into one pot and it's not any added value to the education system.
Austin Amestoy: So in the general fund, that lottery money gets diluted by the other billions of dollars and doesn’t really have a targeted impact.
John Hooks: Exactly. And while education is the biggest overall expense from the general fund, there’s not really a straight line from lottery to schools.
Austin Amestoy: Gotcha. But admittedly, I'm still curious why you brought in Representative Mathews here?
John Hooks: Well, conveniently enough for this episode, Rep. Mathews brought a bill forward this legislative session that would reroute that lottery money back to education, but in a different way than its original obligation toward teacher retirement.
Austin Amestoy: Interesting. What’s his idea for the money?
John Hooks: Mathews’ bill looked to keep the existing scholarship program and send the rest directly to school districts. The amount they get would depend on how many teachers they have, and that money would go into a flexibility fund for schools to spend on pretty much whatever their needs are.
Rep. Eric Mathews: So it's added money to a district in a time when we're behind in inflation and the schools are laying off people and not serving all of our students' special-ed costs and all sorts of things and this gives just a little bit of breathing room.
Austin Amestoy: How did the bill fare once legislators got their hands on it?
John Hooks: It sailed through an initial committee vote with broad bipartisan support. But once it got to the House floor, things started to take a turn.
Austin Amestoy: How so?
John Hooks: Well, the bill was amended to the point that even Matthews didn’t want to see it go through
Rep. Eric Mathews: The way this bill stands now, I’m going to be voting no on my own bill.
John Hooks: Democrats and a handful of Republicans joined forces and the bill died as we were getting ready to record this episode.
Austin Amestoy: The legislative process at work. So what did our listener, Nancy Valk, think about all this?
John Hooks: She wasn’t that surprised to learn that the money goes into the general fund instead of directly to schools. The main thing for her is she wants to see that money go back to the original purpose Montanans voted for back in 1986.
Nancy Valk: I just think it's really important that that conversation is being held, that all property owners and those of us that, whether or not we have kids in school, we care about the schools. We want them to have the funding that they need. In this case, in this instance, there was a funding mechanism established. Maybe it's not a large one, but it was still established to help the schools. And that's what I want to see it do.
Austin Amestoy: Great John, thanks so much for digging into this for us.
John Hooks: Thanks for having me!
Austin Amestoy: Now we want to know what makes you curious about Montana. Submit your questions below, or leave a message at 406-640-8933. Let's see what we can discover together!
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