RALEIGH — The North Carolina Education Lottery sold its first tickets in March 2006, but seven years later it appears the lottery's luck with state government could be wearing thin.
Members of the N.C. General Assembly and Gov. Pat McCrory are interested in scaling back or altering how the lottery advertises. Doing so could hurt annual sales that reached $1.6 billion last fiscal year and helped send $457 million to the state for education initiatives — records that have a chance to be broken again this summer.
In contrast to Govs. Mike Easley and Beverly Perdue — both Democrats who supported the lottery — McCrory called out the lottery in his recent State of the State address.
"I'm recommending that we pursue legislation to reallocate a portion of money away from the bloated and frankly annoying advertising and the large administration costs of the lottery commission," McCrory said in the statewide televised speech to legislators. He said he wanted to earmark that money toward school technology.
There's also a bipartisan bill scheduled for House debate this week that would delete the name "education" from the lottery, bar advertising at college sporting events and require ads to give the long odds of winning multimillion-dollar prizes. State law only now requires the overall odds of winning a game prize.
"This is the state of North Carolina lying to bettors," said Rep. Paul Stam, R-Wake, the No. 2 leader in the House and a primary sponsor of the bill. Stam opposes the lottery and hopes one day the 2005 law creating the games is repealed. For now, he'd be pleased to see lottery sales reduced on the games, which he considers bad bets that prey upon low-income people.
Lottery supporters said it's shortsighted to pull back on the highly successful instant ticket and draw games the public likes to play. Almost all net profits have gone toward class-size reduction in early grades, pre-kindergarten programs for at-risk children, public school construction and college student aid.
"The lottery's working," said Sen. Clark Jenkins, D-Edgecombe, who voted for the 2005 lottery law. "The idea of the lottery was to generate some revenue to help build some school buildings and some other things, and it's doing it."
Democrats spearheaded passage of the lottery in North Carolina — the last state in the Southeast to offer state-run gambling. Easley lobbied for the lottery's passage, saying border states benefited from North Carolina residents playing their games. The House approved the lottery in a 61-59 vote. Perdue cast the tie-breaking vote in the Senate, which she presided over as lieutenant governor.
Most Republicans and some liberal Democrats opposed its passage. Even with the GOP now in charge of the General Assembly and the Republican McCrory now in the Executive Mansion, repealing the lottery is unlikely. Public interest in the lottery remains high. Legislators also would have to make up for lost revenues.
The lottery is "a fact in North Carolina at this point," said Senate leader Phil Berger, R-Rockingham, who voted against the lottery in 2005. "So our job now is to do the best that we can with those dollars that come into the state generated from the state lottery."
Efforts in North Carolina to scale back the lottery's ability to generate sales is unusual, a gambling researcher said.
"Lotteries are considered free money, and expansion is the only way to go," said Bill Thompson, professor emeritus in public administration at the University of Nevada, Las Vegas.
Stam said "education" should be removed from the lottery's name because it's misleading people to think the games will solve all state education funding needs. The state is spending $11 billion on public education this year.
Lottery executive director Alice Garland said the "education" label "gives our citizens the best way of knowing where our money is going."
State law already limits advertising to 1 percent of overall sales. The lottery spent $14.7 million on advertising during the last fiscal year. A performance audit found North Carolina's lottery ranked at the bottom of surrounding states with lotteries on advertising spending per capita, and the 1 percent cap reduced North Carolina's ability to increase education funding.
Another state law prohibits ads that "have the primary purpose of inducing persons" to play. The ad restrictions mean the lottery often falls back on humor, Garland said. Television commercials have featured a green space alien, the fictional King Midas and pro wrestler Ric Flair.
Lottery administrative costs were 4 percent of total sales last year. A 2010 audit found gambling revenue per employee — one measure of efficiency — was growing.
"I feel very good about how we have run this lottery," Garland said. Democratic Rep. Rick Glazier of Cumberland County, another sponsor of Stam's bill, agrees with Garland on that point. But he now has buyers' remorse after voting for the lottery in 2005. Glazier says his vote was wrong.
Glazier said legislators have used lottery proceeds to replace current education funds, instead of supplementing them, and local governments are using the lottery an excuse not to raise its own revenues for education funding.
"I'm no longer willing to be a part of that process," Glazier said.