The California State Lottery was created in 1984 with the passage of Proposition 37. After operating costs and payment of prizes, profits from the lottery are dedicated to educational institutitions. Under Prop. 37 guidelines, lottery payments to California public schools, community colleges, and universities must equal at least 34 percent of the total funds generated from lottery ticket sales annually.
Proposition 1C would borrow $5 billion of future lottery profits to help pay for current cuts in the state budget. It would enact major changes in lottery operations and spending and would allow the state to borrow from future lottery profits. It would also change how profits are used in regards to educational institutions.
Proposition 1C is the lottery funding element of the six-proposition budget deal reached between the Governor and the Legislature in early 2009.
Proposition 1C would significantly alter California law and the State Constitution in regards to the California's lottery system in both its operation and in how the funds are spent. It would allow the state to borrow $5 billion from existing lottery profits to help address the state's current budgetary problems. The measure would also allow the state to borrow from future lottery profits, which is currently not the case.
With the passage of Prop. 1C, lottery profits would no longer be dedicated for education funding. Existing state law directs lottery profits to educational institutions such as public schools, community colleges, and state universites. Lottery profits would be used to pay off the $5 billion borrowed under Prop. 1C as well and any other amount borrowed from lottery funds in the future. Any remaining profits would be go the the state's general fund. To make up for the loss of payments to schools, educational institutions would receive increased payments from the general fund beginning in 2009-10.
These payments would be made equal to the amount of lottery profits paid to these institutions in 2008-09 plus an adjustment for gorwth in cost of living and the number of students. These payments would be in addition to general fund money already required for education under Proposition 98. In future years, all education funding coming from the general fund, including funds originating from the lottery, would be considered part of annual Proposition 98 funding
Currently, lottery prizes are fixed at 50% of lottery sales. Prop. 1C would give the California State Lottery Commission power in setting prizes at different levels in order to generate the most profits. In other states, higher payouts have often led to increased lottery ticket sales. The California Legislative Analyst's office estimates that increased payouts could increase ticket sales from 30 percent and 80 percent.
The measure would also change current lottery operations laws in a number of ways. It would reduce the maximimum amount of lottery operating expenses to 13 percent of lottery funds.The state lottery director would have more flexibility when awarding contracts to private entities that are providing services and equipment. The lottery commission would have a much higher threshold before needing to publish expenditure reports to the public. Any expenditures of over $500,000 would require voter approval. Audits of lottery operations would be posted on the world wide web. Finally, any unused operating funds would be carried over for future years.
Arguments and RebuttalsCampaign Information
Campaign contributions database - Individual Committees (Secretary of State website)
Campaign contributions database - total (Secretary of State website) Select May 2009 election" and "Prop.1C" in dropdown box.
Public Opinon Resources
Reports and Studies
The Basics of Proposition 98: A Tutorial for State Policymakers. Legislative Analysts Office, May 2009.
Proposition 1C: Should California Authorize the Sale of Lottery Bonds To Close the Budget Gap? Sacramento, Calif.: California Budget Project, April 2009.
An overview of the California State Lottery and the Lottery Commission’s decision to participate in a multi-state lottery game. Sacramento, Calif.: Senate Publications & Flags, 2005.
Proposition 98: a Primer. Sacramento, Calif.: Legislative Analysts Office, Feb. 2005.
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Center for Governmental Studies