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Is a lottery the winning answer to North Carolina's budget woes? Or should Gov. Easley think again?

Mind Game 

Is a lottery the winning answer to North Carolina's budget woes?

When the N.C. Council of Churches hosted its annual legislative seminar a week ago, the table-talk was all about Gov. Mike Easley's state lottery plans, the keynote (keno?) of his State of the State message the night before. The Rev. Gary Gloster, Bishop Suffragan, Episcopal Diocese of North Carolina, mentioned the lottery in passing as he welcomed 250 of the faithful to the Raleigh Moravian Church, and when he did you could see the heads shaking all across the pews.

Later on, Gloster said, they'd address the lottery and other issues in workshops, and the day would be "all about words, words, words." But first he invited them to make a picture in their minds of the world as it should be with the help of a pair of mimes, Doug Berky and Kim Christman. Since the medium of our newspaper is words, we're at a disadvantage trying to convey the power of the images Berky and Christman presented. Their message: Our industrial way of life has split us apart from one another, from nature and--for believers--from God. With masks and music they conjured up chainsaws and war and homelessness. But then they also imagined a different way, "a picture of a world in the sun/all people together, standing as one." The song, "I've Seen a Picture," is by Gene Cotton.

Gloster asked for meditation on this vision of a just society, and in the pews, heads were bowed.

One more thing before the lottery claimed center state: At a workshop on the idea of a living wage law (see "Upping the Ante," Jan. 10-16), one of the leaders invited participants to ponder Bank of America CEO Hugh McColl's hourly wage in 1999: $37,000. That's right, $36,000 an hour, based on his income of $76.8 million for the year. That's enough to cover health insurance costs for about 27,000 adults who don't have any, said Barbara Earls, head of the Council of Churches' Jubilee Project, which teaches congregations how to help the needy.

The idea behind local living wage laws that have been passed in numerous cities around the country is that government should be a model by setting wage floors high enough so that full-time workers can support their families without falling into poverty. That means, in some cases, doubling or nearly tripling the federal minimum wage, now $5.25 an hour.

But as Earls also said, ideas like this are dismissed immediately by legislative leaders in Raleigh because, notwithstanding McColl's good fortune down in Charlotte, "the state has no money."

Easley's lottery pitch is his answer to the no-money problem. Facing a projected deficit of more than $700 million to maintain current programs in the 2001-02 budget year, the governor called for "creative solutions to continue funding real progress"--in education, especially. He acknowledged that a lottery wasn't the only such solution. But it was the only one he touted.

Did Easley have any support here? No. When Kim Cartran, a policy analyst with the progressive N.C. Budget and Tax Center, asked 50 people that question at the beginning of the lottery workshop, one hand tentatively went up. By the end of it, folks were promising to pray for the governor.

For Cartran, the argument against a lottery is simple enough: It's a tax, and an inefficient and regressive tax at that. It's inefficient because, on average, the costs of setting up and running state lottery games consume roughly 15 cents of every $1 played. It's regressive because, pretty much by definition, winning big at the lottery is more enticing to low-income people than to the better-off. Actually, rich and poor play lotteries, in the states that have them (37 states and the District of Columbia), in about the same numbers, according to the N.C. Center for Public Policy Research (NCCPPR). At every income level, about half play and half don't. And they bet the same amounts. What that means, however, is that the poor "do spend a higher proportion of their incomes on lottery tickets than do players who earn more," NCCPPR reported--which makes it a regressive tax.

Easley's counter to this is, regressive or not, people in North Carolina are playing the lottery now--in Virginia. No question about it, the parking lots of lottery halls set up for our convenience just over the Virginia line are filled with N.C. license plates--Virginia officials estimate their take from Tar Heel players is almost $100 million a year.

Plus, South Carolina voters approved a lottery last fall (the legislature there is debating bills to set one up), and Tennessee has set a referendum for 2002.

But remember, Cartran says, if $100 million is played in Virginia, more than $50 million of that comes back to North Carolina players in prizes. And if we recaptured all of it with a lottery of our own, the state's take would only be about $34 million after administrative costs are paid. And while a South Carolina lottery might seem to be a sure thing, the legislature is considering a Republican alternative to the Democratic governor's bill, and if the GOP gets its way, South Carolina will ban lottery advertising and limit play to weekly drawings--no daily numbers.

Now, imagine that what North Carolina really wanted to do with a lottery is stop the "leakage" to Virginia and offer a convenient way for the gambling-inclined among us to make their play. We would have the occasional Tar Heel "Big Game," no advertising needed, and we would--to curb the regressive side of things--pay out 70 percent, or 80 percent, of the wagers in prizes. This last suggestion was made years ago by Duke University economist Charles Clotfelter. Most states have ignored it, and pay out--as Virginia does--between 50 and 55 percent in prizes. But Massachusetts pays 70 percent and, not by coincidence, neighboring Rhode Island pays 68 percent, according to NCCPPR.

After our "Big Game," the winner could stand the rest of us to hot toddies at the local establishment. There's an image.

But of course, what Easley wants isn't a game, it's the money. And with enough advertising, and daily games, and instant "scratchers" like they have in Virginia, North Carolina could raise between $300 million and $400 million according to authoritative estimates.

That image jarred the Council of Churches gathering, however. "For a lot of us, it's a moral issue," said Flora Cobb. "I'm a Methodist," she added for emphasis--and knowing chuckles. Cobb, a member at the Edenton Street Methodist Church in Raleigh, said gambling violates the church's teachings, and she urged Easley to "let North Carolina stay out of it, and retain our honor, dignity and integrity."

Added Dale Osborn, associate pastor at Binkley Memorial Baptist Church in Chapel Hill: "To tell our children that the best way to educate our children is by gambling... . " He threw up his hands.

There are other ways. Cartran said increasing the top state income tax rate from 7.75 percent to 8 percent on incomes over $200,000 would raise $90 million for the state. Closing the loophole that lets North Carolina banks avoid taxes on bond earnings would raise $100 million. Taxing long-distance telephone calls (we already tax local ones): $90 million. Limit corporate tax incentives for job creation to counties with high unemployment: $70 million. North Carolina cut taxes by some $1.4 billion a year in the '90s, mainly benefiting business and the wealthy. As the economy slows, those cuts are getting to be a pain.

"Paint us a picture," the song said, "with the color of love/with hope for tomorrow, show us the way."

A lottery is one way to raise money, if the first place you're looking is the people who can least afford it. But if you're trying to see what's fair, perhaps your mind will go first to Hugh McColl. EndBlock

  • Is a lottery the winning answer to North Carolina's budget woes? Or should Gov. Easley think again?

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