Lottery Helps Legislature, Colleges Fleece Students

February 1, 2010

Investigative Reports

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The NerveA years-long fleecing of college students in South Carolina continues apace, with the state-run Education Lottery’s sales increasing but doing little if anything to offset precipitous tuition hikes.

Combined with steep higher education funding reductions, the two trends undermine the rationale for the lottery that was sold to South Carolinians – to help kids afford to go to college – and instead leave students digging deeper into their pockets and sinking ever more deeply into debt to pay for school.

It is especially true in a historical context.

State law requires the watchdog arm of the General Assembly – the Legislative Audit Council – to review and report on the lottery’s finances every three years.

The Audit Council plans to release the latest of those reports Tuesday, according to Andrea Truitt, audit manager for the agency.

Even amid the Great Recession, the lottery experienced a $12.6 million sales increase in the 2009 fiscal year. That growth pushed the lottery’s sales above the – take a deep breath – $1 billion mark.

Played by many a working-class and low-income folk, the lottery began selling tickets in January 2002 and has reached or surpassed the $1 billion sales total only one other time, in 2006.

For 2009, the lottery touts big contributions to education – more than $260 million – and low administrative costs – 4.3 percent of its sales, versus the maximum overhead for the games allowed under state law – 8 percent.

A little basic math puts that 4.3 percent into perspective. In dollar figures it totals some $43.2 million, or about one-sixth of the lottery’s education outlays for the year.

As it follows, the deeper one digs into the numbers, the more clear it becomes that they have not added up to greater higher education affordability for South Carolina’s aspiring college graduates, despite a widely recognized need for a better educated population in the Palmetto State to spur economic development and boost per capita income.

However, South Carolina’s legislators and public universities would seem to be as culpable for the situation as the lottery is, if not more so. After all, the lottery does not control how its education funding is appropriated.

That responsibility falls to the General Assembly. And legislation that created the games says their net proceeds “must be used to supplement, not supplant, existing resources for educational purposes and programs,” according to the lottery Web site.

But lo and behold, lawmakers have steadily decreased higher education funding as a percentage of the state general fund budget from the very beginning of the lottery’s inception.

In 2001-02, dollars for public colleges and universities made up 13.7 percent of the general fund budget, according to S.C. Commission on Higher Education data. Dropping almost every year since then, the percentage was 10.2 in 2008-09.

Legislators also have regularly allocated a goodly sized chunk of lottery revenue to K-12 programs, further undermining the capacity of the games to make the cost of college more affordable for students.

At the same time, public colleges and universities in South Carolina have been jacking up their tuition to unprecedented levels ever since the lottery began operating.

The cost for in-state, undergraduate students to attend USC Columbia has skyrocketed nearly 115 percent since the 2001-02 school year, from $4,260 then to about $9,150 this year, a Commission on Higher Education chart shows.

At Clemson, the escalation was more than 117 percent during the same time period, from $5,090 to just over $11,075.

Francis Marion: 110 percent, from $3,790 to $7,960.

Technical colleges have been on the tuition warpath as well. Midlands Tech doubled its tuition over the course of those years, from $1,800 to $3,600.

The list goes on.

And, adding proverbial insult to injury, some of those same schools, and others, collectively have shelled out hundreds of thousands of dollars on lobbying in the recent past. Those highly questionable expenditures are listed in State Ethics Commission reports required under S.C. law.

For more on that, click here to check out another story posted today on The Nerve.

The state’s public institutions of higher learning also have veered off mission with expensive economic development ventures that have had – at best – mixed results.

Innovista, anyone?

The latest lottery, state funding and tuition numbers confirm the findings of a South Carolina Policy Council study released in November 2007.

Describing lottery proceeds as an unstable and regressive revenue source, the study says, “As students across the Palmetto State received tuition assistance through a range of merit- and need-based programs, (some new, some existing but expanded) the schools raised their tuition rates to meet this new source of funding.”

Meanwhile, the report says, “When the schools began receiving greater revenues through tuition (which was supplemented by scholarships), the General Assembly actually decreased the state reoccurring appropriation. In fact, this started in 2001-02, the year of the transition into Education Lottery scholarships.”

The study concludes that in many instances lottery money has indeed “supplanted, not supplemented, the state’s spending on K-12 and higher education.”

Need more evidence that the lottery has failed to make the cost of a degree more reasonable for South Carolina’s young people? How about the fact that the state got a big fat “F” in college affordability in the 2008 version of “Measuring Up,” a national report card on postsecondary schooling published annually by the National Center for Public Policy and Higher Education in San Jose, Calif.

The state salary database lists 49 lottery employees whose salaries exceed $50,000, including the relatively new director of the government-run games, Paula Harper Bethea.

Indeed, Bethea is set to hit the lottery every year by way of her salary – $226,000.

That’s more than 24 times the yearly cost to attend USC Columbia for Carolina kids.

It’s almost five times the average salary of South Carolina public school teachers.

The bottom line? Think of the lottery as a tale of Robin Hood in reverse, being played out by the state and its public institutions of higher learning, with students on the losing end.

Reach Ward at (803) 779-5022, ext. 117, or eric@scpolicycouncil.com.