An Analysis of Who Funds and Who Benefits From the Carolina Education Lotteries
By
By
Mary Reagan Crosby[1]*
“‘The rich get richer, and the poor get poorer in our school districts,’ . . . a lottery [is] ‘the one ray of hope we can offer.’”[2]
In 1993, many South Carolinians believed schools failed to provide adequate education for the state’s children due to funding shortages.[3] As a result, a group of rural school districts and students decided to confront the State of South Carolina in the courtroom and initiate a lawsuit known as Abbeville County School District v. State.[4] This case, coupled with South Carolina’s comparatively low academic performance,[5] led to a public outcry for changes to the state’s education funding structure. South Carolina responded to its citizen’s protests by searching for alternative sources for education funding, and neighboring Georgia provided a possible solution: education lotteries.[6] Proponents of education lotteries pushed for the adoption of a similar solution in South Carolina, and thus the South Carolina Education Lottery (SCEL) was born.[7]
Legislation authorizing the SCEL was successfully passed in 2001, and for the last twenty years, SCEL revenue increased state education funding as planned.[8] However, this increase in education funding was primarily allocated to merit-based higher education scholarships.[9] Although the program intended to address South Carolina’s inadequate education system, the SCEL and its focus on merit-based scholarships has instead contributed to the growing inequity between school districts in wealthy counties and those in poor counties. As a result, SCEL effectively results in lower education lottery revenue allocations for low-income South Carolina counties.
Other states, notably North Carolina, have also implemented education lotteries to plug the holes in their struggling education systems.[10] Similar to the efforts of rural South Carolina school districts in Abbeville, North Carolinians sued the State of North Carolina, demanding adequate education funding and an adequate public education system.[11] North Carolina watched closely as South Carolina introduced its education lottery and sought to introduce a similar system. However, while South Carolina focused its education lottery revenue primarily on merit scholarships, with very minimal allocation to kindergarten through twelfth grade (K–12) funding, North Carolina instead focused lottery revenue allocation on K–12 funding and need-based scholarships.[12] North Carolina’s focus on a need-based allocation resulted in a more equitable allocation of lottery revenue among its counties than in South Carolina. Thus, although South Carolina and North Carolina share similar goals for their education lotteries, each state’s differing approach to lottery revenue allocation significantly impacts the resulting distributional effects.[13]
This results in a key question: why does South Carolina’s Education Lottery result in lower lottery revenue allocations to low-income counties? The problem lies with the structure of the SCEL. The SCEL is funded exclusively through lottery revenues, with lower income residents contributing more per capita than higher income residents—effectively functioning as a regressive tax.[14] Additionally, studies show that lower income citizens struggle to meet the high academic requirements of merit scholarships due in part to a correlation between household income and academic achievement.[15] Since SCEL scholarships are merit-based, if merit requirements are not met, a county will likely not receive a proportionate allocation of lottery revenue.[16] Notably, SCEL revenue allocations to K–12 funding is more equitable, with lower income counties receiving proportionately more K–12 funding than higher income counties. However, there’s a problem: only 3.7% of 2018–2019 SCEL revenue was allocated to K–12 funding, while 67% was allocated to merit-based scholarships.[17] If South Carolina were to change their focus from merit scholarships to K–12 funding, total lottery fund allocation may result in more equitable return on lottery spending for lower income citizens.
South Carolina fails to properly allocate SCEL revenues to the counties that need it the most. The areas in South Carolina that struggle academically tend to be lower income counties,[18] and lower income counties tend to spend a larger proportion of their income on lottery tickets.[19] By prioritizing merit-based scholarships over K–12 funding, South Carolina perpetuates a cycle of inadequate education in lower income area schools that results in those students struggling to meet the merit-scholarship criteria. Because lower income citizens are funding such a large portion of the state’s education lottery without receiving an equitable return on their spending through education funding in comparison to higher income counties, South Carolina should abandon its current approach of utilizing SCEL revenue for primarily funding merit-based scholarships and enact a need-based approach, like North Carolina, for both scholarships and K–12 funding.
This Note explores the origin and funding allocation of educational lotteries in South Carolina and North Carolina in a comparative format to demonstrate the inequities inherent in SCEL’s current merit-based allocation. Part II discusses the history of education funding reform in the Carolinas and lottery implementation. Part III analyzes lottery spending and lottery returns in the form of scholarships and K–12 funding by comparing the distributional differences between South Carolina and North Carolina lottery revenues. Finally, Part IV explains that South Carolina should adopt North Carolina’s need-based approach to lottery revenue allocation because such an approach would better South Carolina’s education shortcomings and simultaneously create a more equitable distribution to the citizens funding the lottery program.
Most state constitutions, including those in North and South Carolina, guarantee state financing for public education.[20] However, state financing for education has largely proven inadequate. In 1973, school districts across the country brought lawsuits against their respective states claiming that the lack of funding in their schools violated state constitutional education clauses.[21] This movement gathered steam in 1989 when state supreme courts in Texas, Montana, and Kentucky found their current educational funding allocations unconstitutional and in need of reform.[22] South Carolina and North Carolina faced similar lawsuits to provide the funding needed for adequate education; however, both states saw different results.[23] These cases, Abbeville and Leandro, respectively, act as valuable background in understanding the landscape surrounding educational funding in the Carolinas and the subsequent embrace of state education lotteries.
Abbeville County School District v. State, a twenty-four-year saga that began in 1993, reached its conclusion in the South Carolina Supreme Court in 2017. In Abbeville, forty rural, lower income school districts sued the State of South Carolina alleging that the lack of adequate school funding in their districts violated South Carolina’s state constitution.[24] The trial court originally found that the school districts failed to state a proper claim because the state constitution required only a system of “maintenance and support” for schools.[25] However, after an appeal, the South Carolina Supreme Court in 1999 held that the education clause should be interpreted to require “minimally adequate education” and remanded the case to the lower court to determine if this new standard was met.[26] On remand in 2005, the trial court found that South Carolina’s education system was minimally adequate except for the state’s funding of early childhood intervention programs.[27] After a second appeal in 2014, the South Carolina Supreme Court found that the funding provided to the plaintiff districts was improperly allocated by the legislature and the districts, and therefore the standard of minimally adequate education was not met.[28] The South Carolina Supreme Court required South Carolina and the plaintiff school districts to work together to craft better funding allocation for the schools.[29] However, in 2017, the Supreme Court then issued an order vacating its 2014 decision, with the majority holding that the prior decision was a “violat[ion] of separation of powers.”[30] Thus, despite two decades of litigation and citizens’ hopes that Abbeville would push the state towards adequate education funding with the support of the courts,[31] the South Carolina Supreme Court opted to leave the choice of educational change to the legislature alone.[32]
While Abbeville has been construed as an education-financing case, it can be more accurately described as an education-adequacy case.[33] Regardless, the requirement of minimally adequate education is related to the funding school districts receive.[34] Indicators of an adequate education include high teacher retention, facility maintenance, and lower classroom sizes.[35] Unfortunately, higher income counties tend to perform better in these areas than low-income counties primarily due to better funding.[36] In short, funding levels contribute to an adequate education, and awareness of low funding levels in school districts around South Carolina—as illustrated in Abbeville—contributed to the public outcry for better educational funding, which partially led to the political lobbying for a state lottery during the 1998 South Carolina gubernatorial election.
Unlike South Carolina’s Abbeville case, North Carolinians had better success with the education-funding case Leandro v. State.[37] In 1994, eleven school boards sued North Carolina for allegedly violating the North Carolina Constitution for inadequate school funding.[38] The plaintiffs argued that North Carolina’s constitution guaranteed two educational rights to all students: entitlement to an adequate education and entitlement to “equal educational opportunities.”[39] North Carolina moved to dismiss the case for failure to state a claim, but the trial court denied this motion.[40] However, the North Carolina Court of Appeals reversed the trial court’s order and granted the motion to dismiss, holding that the North Carolina constitution only required equal access to education, not a standard of minimum quality.[41] The North Carolina Supreme Court then reversed the decision again, holding that the North Carolina constitution guarantees students a “sound basic education,” and the legislature has a duty to allocate educational funds in a manner to best provide basic education.[42] With guidance from the North Carolina Supreme Court, the North Carolina state legislature drafted a plan of action, and as of 2021, the state continues to operate under guidelines established pursuant to the plan.[43] This plan focuses on funding proper facilities, early educational programs, quality teachers, and preparation for higher education.[44]
With citizens in North Carolina and South Carolina calling for educational funding to better the school systems, the states needed to find a solution as to where this funding would come from. Both would look to their neighbors to see the new trend of state lottery revenues being used towards educational funding. North Carolina and South Carolina would both adopt a state lottery, but both focused on different areas to primarily allocate funds.
In the United States, fourteen states devote all lottery proceeds towards education, either through college scholarships, K–12 funding, or some combination thereof.[45] Georgia was the first state to enact a lottery-funded scholarship, Helping Outstanding Pupils Educationally (HOPE), in 1993.[46] The HOPE scholarship program was deemed a success by many due to increased standardized test scores and increased student enrollment for in-state universities.[47] As a result, other southern states took notice, and began modeling their own lottery scholarship programs to resemble Georgia’s.[48]
South Carolina’s lottery history begins in 1998 with the gubernatorial election between incumbent David Beasley and Democratic candidate Jim Hodges. Hodges latched onto the Georgia Lottery idea, and successfully capitalized on both voter popularity of lottery implementation and education funding reform by claiming a state lottery could solve South Carolina’s education woes.[49] Education funding was a key platform for the candidates that year because of South Carolina’s struggles with low high school student retention rates and low bachelor’s degree attainment.[50] Additionally, the beginnings of the Abbeville v. State case reflected the frustration with subpar educational funding. Hodges’s support for the state lottery hinged on the premise that the lottery would serve as the solution to voter requests for more education funding—increased education funding that would be achieved not by raising taxes but by replicating Georgia’s lottery funded HOPE program.[51] During his campaign, Hodges continually referred to his proposed state lottery as a “voluntary tax” to combat criticism that lotteries act as a “regressive tax” on low-income state residents.[52] Hodges’s focus on replicating Georgia’s lottery allocation was a political tactic to garner more support from hesitant voters and legislators. By providing funding towards scholarships, higher income voters were more likely to support the lottery’s implementation.[53]
Despite criticism and hesitation surrounding the lottery, Democratic candidate Jim Hodges defeated Republican incumbent David Beasley,[54] and the South Carolina Education Lottery Act was enacted in 2001.[55] Hodges’s election strategy to focus on scholarship funding served as a catalyst for many of the issues surrounding the current lottery allocation scheme and contributed to the inequitable distribution of lottery funding we see today.
The SCEL Act defines a lottery as “a game of chance,” including instant tickets, on-line lottery games, and drawing numbers.[56] The costs of advertising, printing, and prizes are deducted from the total sales of lottery games.[57] After expenses, approximately 25% of total lottery sales are allocated towards education funding.[58] The SCEL Act states, “The net proceeds received . . . must be deposited . . . in a fund . . . entitled the ‘Education Lottery Account.”[59] Lottery net proceeds, including any investment earnings from the fund, must be used for educational purposes and programs as allocated by the General Assembly.[60]
Notably, lottery funding must be used to supplement, not supplant, existing educational funds.[61] The SCEL Act stipulates that the state of South Carolina must give at least the same proportion of funds to education as was given prior to the lottery’s enactment.[62] The goal of this stipulation is to ensure that South Carolina continues to fund new educational programs rather than use the lottery as a means of budget replacement.
The SCEL Act also dictates that appropriations shall be paid to fund all eligible applicants for three merit-based scholarships.[63] Merit-scholarship eligibility is determined by a student’s grade point average and standardized test scores.[64] Among the three state-sponsored scholarships, the Palmetto Fellows scholarship has the most stringent eligibility requirements and is the highest value scholarship offered by South Carolina.[65] The Legislative Incentive for Future Excellence (LIFE) scholarship has the second highest value and the second most stringent eligibility requirements.[66] The Helping Outstanding Pupils Educationally (HOPE) scholarship is an additional merit scholarship offered to South Carolina students but is only available for a student’s first year in college.[67] Along with the three merit scholarships, the SCEL Act also assists in funding need-based grants for eligible students[68] and Lottery Tuition Assistance programs to assist in funding a student’s attendance at a two year institution.[69] However, while need-based grants account for a mere 6% of SCEL scholarship revenue allocation,[70] merit-based scholarships account for 78% of scholarship funding.[71]
SCEL funds are also allocated by the South Carolina General Assembly to K–12 schools to fund school infrastructure requirements, including school bus maintenance, updated technology, and other pressing infrastructure needs.[72] The General Assembly can also fund elementary and middle school reading, math, science, and social studies programs,[73] but it has not done so since fiscal year 2014–2015.[74] The largest K–12 expenditure is typically for the purchase of instructional materials followed by technology.[75] K–12 is often advertised by the SCEL as a main aspect of lottery appropriations,[76] but the actual SCEL funding allocation for K–12 programs demonstrate they are not a major focus of the program.[77]
In North Carolina, the supreme court took a different approach and required the state legislature’s compliance with its decision in Leandro v. State of North Carolina.[78] Similar to the South Carolina Supreme Court’s 1999 Abbeville decision, the North Carolina Supreme Court required its state legislature to provide adequate support to lower income counties to achieve a “sound basic education in . . . public schools.”[79] North Carolina Governor Michael Easley believed passing the North Carolina Education Lottery (NCEL) could satisfy the Leandro decision’s requirements.[80]
The pressure to comply with the Leandro decision was instrumental in focusing lottery proposals on K–12 funding and need-based awards rather than merit-based scholarships.[81] However, the North Carolina lottery struggled to gain traction because of similar criticism to the South Carolina lottery. Namely, the lottery would simply become a new regressive tax on low-income North Carolinians.[82] While the prospect of designating lottery proceeds towards need-based recipients helped mitigate some of the criticism, it was not enough to garner the necessary support to pass.[83]
During Governor Easley’s 2004 reelection campaign, he once again proposed the idea of a state lottery to assist in mitigating education funding shortfalls during North Carolina’s economic downturn.[84] In 2005, with the threat of a $1 billion budget shortfall, the lottery bill passed the House and was introduced in the Senate.[85] Democratic leadership worried the bill would fail in the Senate, so the bill was introduced when two Republican senators, believed to oppose the lottery bill, were absent, and the lottery bill passed with a tie-breaking vote from the Lieutenant Governor.[86] Compared to South Carolina, there was more reluctance to pass a lottery bill in North Carolina, and animosity continued to surround the bill years after its passage.[87] North Carolina’s attempts at implementing a state lottery greatly impacted how the state chose to allocate its lottery proceeds. If not for the Leandro decision requiring the legislature to increase funding in public schools, and the threat of a budget shortfall pushing legislatives to compromise on need-based allocation by lottery critics, North Carolina may never have allocated lottery funds primarily towards K–12 expenditures and need-based scholarships.
The North Carolina Education Lottery (NCEL) statute not only provides a general guide for how lottery funds should be allocated but also allows for discretion.[88] Similar to South Carolina, roughly 25% of all lottery revenues are allocated towards education funding. Additionally, the North Carolina lottery statute does not offer the same safeguards as the South Carolina lottery statute—North Carolina’s statute does not include a section requiring the supplementation of educational funding rather than supplanting it.[89] Overall, North Carolina’s lottery statute is considerably more lenient than South Carolina’s Lottery Act. This has important impacts on South Carolina. First, it could be more difficult for South Carolina to alter how lottery revenues are distributed. Likely South Carolina would have to be take legislative action to alter their distribution. On the other hand, South Carolina’s stricter requirements for lottery appropriations can act as a safeguard against funds being used to supplant educational funding rather than supplement it. Supplanting has become a complaint against how North Carolina has chosen to appropriate some lottery funds.[90]
The main method North Carolina uses to determine each county’s needs for lottery-based education funding is through a “tier” system established by statute.[91] North Carolina uses each county’s unemployment rate, population, household income data, and property tax data to rank counties in one of three tiers, with Tier 1 being the most economically distressed.[92] This assists in North Carolina’s goal to prioritize needier counties over more stable counties to receive additional funding.[93] For K–12 lottery funding allocations, the largest expenditure is for non-instructional personnel followed by school construction.[94]
Unlike SCEL scholarships, NCEL scholarships do not look to prior academic achievement for eligibility. To determine eligibility for NCEL scholarships, students must complete a Free Application for Federal Student Aid (FAFSA).[95] Lottery scholarships are directly linked to Federal Pell Grants[96] and are meant to supplement Pell Grants by awarding more in Education Lottery Scholarships to students receiving less from the Pell Grant.[97] The goal is to ensure that North Carolina students eligible for any amount of Pell Grant funds will receive a similar amount in need-based lottery scholarship aid.[98] North Carolina appears to strive for equity among its needier students by correlating scholarships to Pell Grant eligibility.
South Carolina and North Carolina have had similar histories leading to the implementation of a lottery, but each state has chosen to tackle the issue of educational funding in different ways. Each state’s allocation approach greatly impacts the distributional effects on the states’ citizens as will be shown below.
Lotteries have long been regarded as a regressive tax on lower income citizens because they are more likely to spend a larger portion of their income on lottery tickets than higher income citizens.[99] In South Carolina, because lower income citizens are less likely to see a significant return on their lottery spending due to failing to meet the merit scholarship requirements, these citizens effectively subsidize scholarships for the children of higher income citizens. North Carolina better allocates lottery revenues to the residents who participate in the lottery by focusing on K–12 and need-based programs rather than merit scholarships. This Part explores the current structure of lottery spending and lottery returns from both the SCEL and the NCEL to determine how South Carolina could better distribute lottery revenues to minimize the inequities of the lottery’s regressive allocation.
An examination of lottery spending at a county level in both North Carolina and South Carolina demonstrates and the disparities between higher and lower income counties. The lottery data from both states show that lower income residents spend a significantly larger portion of their income on the lottery than higher income residents.[100] In 2018, South Carolina counties Allendale and York had the highest and lowest poverty rates, respectively.[101] Allendale’s citizens spent 60% more per capita than York’s citizens on lotteries.[102] This divide extends across South Carolina when comparing the ten counties with the lowest poverty rates to the ten counties with the highest poverty rates;[103] the counties with the highest poverty rates spent on average 87% more per capita on the lottery than counties with the lowest poverty rates.[104]
North Carolina’s statistics demonstrate a similar pattern. A comparison of Bladen and Union Counties, which have the highest and lowest poverty rates in North Carolina, respectively,[105] shows that Bladen County residents spent 104% more per capita on the lottery than Union County residents.[106] Similar to South Carolina, when comparing the ten counties with the lowest poverty rates to the ten counties with the highest poverty rates,[107] the higher poverty rate counties spent on average 64% more on the lottery than the lower poverty rate areas. [108] Therefore, in North Carolina—just as in South Carolina—the lowest income citizens spend more on the lottery than citizens with the highest income.
In both states, the data shows that the current state education lotteries are in fact a form of regressive taxation. Lower income citizens bear a larger burden in providing the lottery revenues that will be allocated to educational programs and scholarships.[109] Because the lowest income counties spend more per capita on the lottery, those counties will need to receive a greater amount of lottery-based educational funding to have an impactful return on their spending in comparison to higher income counties.
In South Carolina, one of highest income counties, Greenville County, received the most scholarships and scholarship funding. On the other hand, the county with the lowest median income, Allendale County, received the least number of scholarships and funding.[110] By population, Greenville County is larger,[111] and more students in the county receive scholarships. However, when comparing the number of scholarships received in proportion to population levels, both Greenville and Allendale Counties received a similar number of scholarships.[112] But the number of scholarships received is not the real issue. Rather, the amount of lottery scholarship funding received is what matters. On a per capita basis, Greenville County received 70% more in lottery scholarship funding than Allendale County. Thus, while the number of scholarships received by students in Greenville and Allendale Counties were roughly equal, Greenville’s students received more money due to its ability to earn a larger percentage of the higher awarding merit scholarships.
This is a common occurrence. Higher income counties received proportionately more merit aid from education lottery scholarships in South Carolina in 2018.[113] A comparison of the ten counties with the highest incomes and the ten counties with the lowest incomes illustrates a simple fact: nearly half (48%) of the lottery scholarships awarded to higher income counties are the Palmetto Fellows and LIFE scholarships, the merit scholarships with the highest award amounts.[114] This is in direct contrast with lower income counties, where approximately one-third of the lottery scholarships awarded (34%) are Palmetto Fellows and LIFE scholarships.[115] The Palmetto Fellows and LIFE scholarships are purely merit based, and more higher income students meet the merit scholarship requirements.
Why does this happen? Studies show that a student’s academic achievement has a positive correlation to income; therefore, students from households with a higher income typically attain higher academic achievement.[116] This correlation can be attributed to the fact that higher income areas are, on average, better funded areas, which are directly associated with academic success such as tutoring, high teacher retention, and facility maintenance.[117] A lack of funding in these academic success factors—which are considered indicators of an adequate education[118]—plague the low- income areas in South Carolina.[119] Consequently, high-income counties have greater access to the funding necessary for academic achievement, which leads directly to increased merit scholarships. Lower income counties simply do not have the same resources and correspondingly receive fewer merit scholarships.
Analysis of education lottery funding in North Carolina shows a similar trend to South Carolina: higher income residents receive more lottery scholarship funding. However, North Carolina differs from South Carolina in two key aspects: there is only one type of lottery scholarship, and award amounts are based on need rather than merit. In 2018, Wake County, the highest income county, received the most lottery scholarships while the fifth lowest median-income county of Tyrell received the least.[120] Wake County’s per capita return on lottery scholarships is 31% higher than Tyrell’s.[121] Additionally, the ten highest-income counties average 22% more in per capita return on scholarships than the ten lowest-income counties.[122] This may be due to how North Carolina has decided to award their need-based scholarships. Since North Carolina distributes need-based scholarships in relation to the Pell Grant, if a student receives the full amount available from the Pell Grant, that student will not receive a lottery-funded scholarship. However, if a student receives a portion of available Pell Grant funds, that student can receive a need-based scholarship to supplement the partial Pell Grant funds. Therefore, less needy students receive more in lottery funded need-based scholarships than the neediest students.
Although both North and South Carolina end up with similar statistics regarding the allocation of lottery-based scholarship funding, the states differ greatly in one key area. Of the total amount of funding appropriated by the NCEL, scholarships comprise only 3% of total lottery fund returns. Conversely, of the total amount of funding appropriated by the SCEL, merit-based scholarships comprise 67% of total lottery fund returns. As discussed hereinafter, North Carolina’s choice to deprioritize lottery funding for scholarships results in a significant impact on lottery returns in low-income counties.
Allocation to K–12 funding sheds some light on how lottery allocation to lower income counties could be balanced if K–12 was made the priority. For example, Clarendon County has one of the highest poverty rates in South Carolina while York County has the lowest.[123] As depicted in Appendix C, Clarendon residents received 193% more K–12 funding per capita than York residents.[124] Expanding the data set, the ten counties with the lowest incomes received 612% more K–12 funding than the ten counties with the highest incomes.[125] Unlike with merit-based lottery scholarships, South Carolina allocates more K–12 related funding to the lowest income counties. A potential reason for this is that the state contributes more per pupil funding to the lower income counties than to the higher income counties to make up for a deficiency in a county’s local K–12 funding collected through local taxes.[126] While South Carolina allocates more K–12 lottery funding to poorer counties, this allocation accounted for only 3.7% of the total education lottery funding in the year 2018–2019.[127] Comparing K–12 funding to scholarship funding, South Carolina allocated 2,200% more towards scholarships than to K–12 expenditures that year.[128]
North Carolina takes a somewhat different approach. In 2018, Tyrell County, the lowest-income county in the state, received 9% more K–12 funding per capita than Wake County, the highest-income county in the state. Expanding the dataset to the ten highest and lowest income counties in North Carolina, the ten lowest-income counties averaged 17% more in K–12 funding than the highest-income counties. Overall, North Carolina spent 2,700% more on K–12 funding than their lottery scholarships, which was comprised of 95% of their NCEL appropriations in 2018.[129] Compared to SCEL, the NCEL allocated 3,500% more to K–12 funding.[130]
While South Carolina allocates more K–12 funding to lower income counties than higher income counties, this fails to compensate for the fact that majority of the SCEL funding is to merit-based scholarships. Over 80% of SCEL scholarship funding is allocated on a merit basis,[131] and, as demonstrated previously, merit-based scholarships are disproportionately awarded to higher income counties. South Carolina would better allocate funds to the lower income residents who fund the SCEL if South Carolina adopted North Carolina’s approach by allocating majority of NCEL funds to K–12 funding.
In South Carolina, education lottery funding is allocated more or less equally. South Carolina’s ten highest-income counties averaged only 1% more in lottery funding than the lowest-income counties.[132] In other words, the highest and lowest income counties received roughly the same amount in education lottery funding. However, as discussed previously, lower income counties often spend more of their income on the lottery compared to higher income counties.[133] Thus, lower income counties are paying more to a system that gives them the same as those who pay less. To illustrate further, if Allendale County citizens spent 60% more per capita than York’s citizens on the lottery, a truly equal system would result in 60% more education lottery funding for Allendale County. That, however, is not the case because South Carolina lottery funds are not distributed on the basis of lottery spending.
Additional examples abound. In 2018, the county that received the largest return in funding based off their per capita lottery spending was Pickens County with a return of 40% on what they spent on the lottery in the form of scholarships for K–12 funding. [134] Conversely, the county that received the least in return in 2018 was Jasper County, which received only 6% return of its per capita lottery spending.[135] Additionally, Jasper County spent 214% more per capita on the lottery than Pickens County but received 45% of the total lottery funding that Pickens County received.[136]
Overall, the highest-income counties in South Carolina spend proportionately less on the lottery than the lowest-income counties but receive a higher rate of return on their lottery spending. The lower income counties that spend the most on the lottery effectively subsidize the highest-income counties. This results in a less than ideal situation: the lowest-income counties in South Carolina receive a significantly smaller return from the Education Lottery Fund, a program specifically designed to assist counties with the greatest need.[137]
In North Carolina, there are outliers,[138] but education lottery funding appears to be allocated relatively according to need. In the aggregate, the lowest income counties in North Carolina, Tier 1 counties, received 161% more in total lottery funding than Tier 3 counties.[139] North Carolina counties that have the greatest need for education funding receive more funding than their wealthier peers—something South Carolina fails to accomplish with its current lottery funding structure.
If South Carolina were to incorporate the main aspects of North Carolina’s Education Lottery, the resulting changes could significantly mitigate inequality within the state’s education funding system. If lottery funds were appropriated with a greater focus on K–12 schools, lottery returns would shift to benefitting the lowest-income counties more than the highest-income counties because the total return from the lottery will now primarily be K–12 funding. Additionally, South Carolina should adopt the need-based scholarship framework used by North Carolina rather than merit-based requirements to further close the gap between higher income counties receiving higher returns than lower income counties. Yet North Carolina’s system is not without problems. In direct contrast to South Carolina, North Carolina’s education lottery appropriations supplant the education budget rather than supplement. For example, while North Carolina’s largest lottery fund line item—education related non-instructional personnel—was originally funded through the state’s budget,[140] it is now almost completely funded through the lottery.[141] South Carolina’s statutory mandate to supplement existing funding rather than supplant the education budget is a better alternative. By modeling SCEL appropriations after NCEL appropriations, fund purely need-based scholarships, and maintaining the requirement of supplementing rather than supplanting, South Carolina can begin to better the disparities in lottery distributions.
South Carolina’s emphasis on allocating education lottery funding towards merit-based scholarships does not have the appearance of bias; merit-based scholarships award students who meet the prescribed standards. The South Carolina General Assembly does not pick and choose which residents receive a scholarship and which do not, nor is there a set quota per county for receiving financial aid. The eligibility requirements for students are the same across South Carolina. While it is true that anyone can meet the requirements to receive a merit-based scholarship, not all students are properly prepared to achieve these requirements. Lower income county schools are more likely to struggle academically due to the positive correlation between household income and academic success.[142]
By prioritizing merit-based scholarships over K-12 funding, South Carolina reinforces existing inequities in educational funding. The lack of a minimally adequate education in many of these lower income counties effectively acts as a barrier to entry, limiting the number of students who can earn merit-based scholarships. Consequently, South Carolina should modify their education lottery program to focus on K–12 funding and offer need-based scholarships similar to those offered by North Carolina. By doing so, South Carolina would better align itself with the Education Lottery’s original goal of focusing on South Carolina’s neediest students and mitigate the disparities between the counties. After all, education is the great equalizer, and South Carolina owes its neediest students considerably more than minimally adequate education—especially if they are the ones paying for it.
South Carolina Lottery Sales By County
| County | Total Sales | Per Capita Sales | ||
|---|---|---|---|---|
| Abbeville | $ | 5,786,957.50 | $ | 234.89 |
| Aiken | $ | 57,462,901.00 | $ | 338.61 |
| Allendale | $ | 4,759,636.50 | $ | 534.43 |
| Anderson | $ | 54,181,864.50 | $ | 270.63 |
| Bamberg | $ | 8,782,046.50 | $ | 614.64 |
| Barnwell | $ | 12,731,897.00 | $ | 601.98 |
| Beaufort | $ | 57,985,263.50 | $ | 305.89 |
| Berkley | $ | 69,313,163.00 | $ | 312.45 |
| Calhoun | $ | 4,688,299.50 | $ | 322.66 |
| Charleston | $ | 151,662,717.50 | $ | 372.67 |
| Cherokee | $ | 25,560,576.50 | $ | 446.88 |
| Chester | $ | 15,906,780.50 | $ | 492.76 |
| Chesterfield | $ | 16,869,477.50 | $ | 368.27 |
| Clarendon | $ | 20,979,624.00 | $ | 621.21 |
| Colleton | $ | 20,238,801.50 | $ | 536.40 |
| Darlington | $ | 34,429,518.00 | $ | 515.47 |
| Dillon | $ | 12,764,154.50 | $ | 418.37 |
| Dorchester | $ | 45,894,594.50 | $ | 284.46 |
| Edgefield | $ | 11,117,447.50 | $ | 409.47 |
| Fairfield | $ | 11,454,878.50 | $ | 511.56 |
| Florence | $ | 72,527,101.50 | $ | 524.44 |
| Georgetown | $ | 25,543,843.00 | $ | 408.95 |
| Greenville | $ | 135,058,559.50 | $ | 261.96 |
| Greenwood | $ | 30,079,467.00 | $ | 425.86 |
| Hampton | $ | 11,247,995.00 | $ | 579.32 |
| Horry | $ | 126,115,971.50 | $ | 365.89 |
| Jasper | $ | 18,393,592.00 | $ | 629.31 |
| Kershaw | $ | 31,526,525.50 | $ | 478.72 |
| Lancaster | $ | 28,706,715.00 | $ | 301.50 |
| Laurens | $ | 26,645,584.00 | $ | 398.56 |
| Lee | $ | 8,973,013.50 | $ | 519.60 |
| Lexington | $ | 99,053,460.00 | $ | 336.04 |
| Marion | $ | 14,808,104.00 | $ | 477.85 |
| Marlboro | $ | 16,046,967.00 | $ | 607.54 |
| McCormick | $ | 4,178,303.00 | $ | 443.70 |
| Newberry | $ | 17,529,698.00 | $ | 455.79 |
| Oconee | $ | 15,493,096.00 | $ | 198.08 |
| Orangeburg | $ | 70,092,880.50 | $ | 804.68 |
| Pickens | $ | 25,008,347.50 | $ | 199.79 |
| Richland | $ | 160,281,259.50 | $ | 386.07 |
| Saluda | $ | 6,608,827.00 | $ | 325.03 |
| Spartanburg | $ | 99,082,546.00 | $ | 315.06 |
| Sumter | $ | 63,488,686.50 | $ | 596.04 |
| Union | $ | 11,674,595.50 | $ | 427.22 |
| Williamsburg | $ | 16,388,541.50 | $ | 530.25 |
| York | $ | 91,224,298.00 | $ | 332.71 |
South Carolina Scholarships Awarded by County
| County | Number of Scholarships or Grants | Value of Scholarships and Grants | Per Capita Value of Scholarships and Grants Awarded | ||
|---|---|---|---|---|---|
| Abbeville | 198 | $ | 2,148,140.00 | $ | 87.19 |
| Aiken | 1091 | $ | 12,188,660.00 | $ | 71.82 |
| Allendale | 60 | $ | 446,880.00 | $ | 50.18 |
| Anderson | 1456 | $ | 17,036,660.00 | $ | 85.09 |
| Bamberg | 111 | $ | 1,320,840.00 | $ | 92.44 |
| Barnwell | 182 | $ | 1,750,760.00 | $ | 82.78 |
| Beaufort | 772 | $ | 9,177,020.00 | $ | 48.41 |
| Berkley | 1397 | $ | 15,011,760.00 | $ | 67.67 |
| Calhoun | 78 | $ | 1,336,280.00 | $ | 91.97 |
| Charleston | 1916 | $ | 25,396,200.00 | $ | 62.40 |
| Cherokee | 383 | $ | 3,892,600.00 | $ | 68.05 |
| Chester | 221 | $ | 2,389,680.00 | $ | 74.03 |
| Chesterfield | 342 | $ | 3,522,040.00 | $ | 76.89 |
| Clarendon | 191 | $ | 2,175,040.00 | $ | 64.40 |
| Colleton | 198 | $ | 2,444,580.00 | $ | 64.79 |
| Darlington | 403 | $ | 4,920,960.00 | $ | 73.67 |
| Dillon | 218 | $ | 1,932,220.00 | $ | 63.33 |
| Dorchester | 1221 | $ | 13,287,840.00 | $ | 82.36 |
| Edgefield | 169 | $ | 2,053,180.00 | $ | 75.62 |
| Fairfield | 155 | $ | 1,403,780.00 | $ | 62.69 |
| Florence | 936 | $ | 11,547,760.00 | $ | 83.50 |
| Georgetown | 395 | $ | 4,257,360.00 | $ | 68.16 |
| Greenville | 3274 | $ | 44,065,280.00 | $ | 85.47 |
| Greenwood | 576 | $ | 6,524,500.00 | $ | 92.37 |
| Hampton | 138 | $ | 1,542,000.00 | $ | 79.42 |
| Horry | 1671 | $ | 21,111,260.00 | $ | 61.25 |
| Jasper | 83 | $ | 979,060.00 | $ | 33.50 |
| Kershaw | 479 | $ | 5,700,220.00 | $ | 86.56 |
| Lancaster | 534 | $ | 6,179,840.00 | $ | 64.91 |
| Laurens | 428 | $ | 5,016,460.00 | $ | 75.03 |
| Lee | 101 | $ | 1,044,220.00 | $ | 60.47 |
| Lexington | 2111 | $ | 27,067,420.00 | $ | 91.83 |
| Marion | 164 | $ | 1,825,720.00 | $ | 62.85 |
| Marlboro | 173 | $ | 1,653,600.00 | $ | 58.92 |
| McCormick | 32 | $ | $591,820.00 | $ | 62.61 |
| Newberry | 316 | $ | 3,337,660.00 | $ | 86.78 |
| Oconee | 412 | $ | 5,084,820.00 | $ | 65.01 |
| Orangeburg | 518 | $ | 5,621,520.00 | $ | 64.54 |
| Pickens | 740 | $ | 9,838,940.00 | $ | 78.60 |
| Richland | 2516 | $ | 30,329,940.00 | $ | 73.06 |
| Saluda | 124 | $ | 1,419,680.00 | $ | 69.82 |
| Spartanburg | 233 | $ | 27,431,660.00 | $ | 87.23 |
| Sumter | 441 | $ | 8,576,140.00 | $ | 80.51 |
| Union | 204 | $ | 2,484,140.00 | $ | 90.90 |
| Williamsburg | 210 | $ | 2,644,180.00 | $ | 85.55 |
| York | 1990 | $ | 25,682,660.00 | $ | 93.67 |
South Carolina Education Lottery K–12 Funding and Per Capita Return From Funding
| County | Total K–12 Funding | Per Capita Return on K–12 Funding | Total Per Capita Return on Scholarships and K–12 Funding | |||
|---|---|---|---|---|---|---|
| Abbeville | $ | 59,662.00 | $ | 2.42 | $ | 89.61 |
| Aiken | $ | — | $ | — | $ | 71.82 |
| Allendale | $ | 78,485.00 | $ | 8.81 | $ | 58.99 |
| Anderson | $ | 227,847.00 | $ | 1.14 | $ | 86.23 |
| Bamberg | $ | 118,907.00 | $ | 8.32 | $ | 100.77 |
| Barnwell | $ | 103,124.00 | $ | 4.88 | $ | 87.65 |
| Beaufort | $ | 217,597.00 | $ | 1.15 | $ | 49.56 |
| Berkley | $ | 37,498.00 | $ | 0.17 | $ | 67.84 |
| Calhoun | $ | 67,563.00 | $ | 4.65 | $ | 96.62 |
| Charleston | $ | 59,363.00 | $ | 0.15 | $ | 62.55 |
| Cherokee | $ | 165,882.00 | $ | 2.90 | $ | 70.95 |
| Chester | $ | — | $ | — | $ | 74.03 |
| Chesterfield | $ | 89,596.00 | $ | 1.96 | $ | 78.84 |
| Clarendon | $ | 162,507.00 | $ | 4.81 | $ | 69.22 |
| Colleton | $ | 52,757.00 | $ | 1.40 | $ | 66.19 |
| Darlington | $ | 896,369.00 | $ | 13.42 | $ | 87.09 |
| Dillon | $ | — | $ | — | $ | 63.33 |
| Dorchester | $ | 123,798.00 | $ | 0.77 | $ | 83.13 |
| Edgefield | $ | 204,524.00 | $ | 7.53 | $ | 83.15 |
| Fairfield | $ | 89,709.00 | $ | 4.01 | $ | 66.70 |
| Florence | $ | 458,163.00 | $ | 3.31 | $ | 86.81 |
| Georgetown | $ | 60,000.00 | $ | 0.96 | $ | 69.12 |
| Greenville | $ | 729,977.00 | $ | 1.42 | $ | 86.88 |
| Greenwood | $ | 155,973.00 | $ | 2.21 | $ | 94.58 |
| Hampton | $ | 58,776.00 | $ | 3.03 | $ | 82.45 |
| Horry | $ | — | $ | — | $ | 61.25 |
| Jasper | $ | 96,250.00 | $ | 3.29 | $ | 36.79 |
| Kershaw | $ | 4,252.00 | $ | 0.06 | $ | 86.62 |
| Lancaster | $ | — | $ | — | $ | 64.91 |
| Laurens | $ | 40,151.00 | $ | 0.60 | $ | 75.64 |
| Lee | $ | 242,041.00 | $ | 14.02 | $ | 74.48 |
| Lexington | $ | 312,116.00 | $ | 1.06 | $ | 92.89 |
| Marion | $ | — | $ | — | $ | 58.92 |
| Marlboro | $ | 137,132.00 | $ | 5.19 | $ | 67.80 |
| McCormick | $ | 104,500.00 | $ | 11.10 | $ | 73.94 |
| Newberry | $ | 72,987.00 | $ | 1.90 | $ | 88.68 |
| Oconee | $ | 59,556.00 | $ | 0.76 | $ | 65.77 |
| Orangeburg | $ | 493,047.00 | $ | 5.66 | $ | 70.20 |
| Pickens | $ | 90,866.00 | $ | 0.73 | $ | 79.33 |
| Richland | $ | 79,255.00 | $ | 0.19 | $ | 73.25 |
| Saluda | $ | 20,000.00 | $ | 0.98 | $ | 70.81 |
| Spartanburg | $ | 513,242.00 | $ | 1.63 | $ | 88.86 |
| Sumter | $ | — | $ | — | $ | 80.51 |
| Union | $ | 85,909.00 | $ | 3.14 | $ | 94.05 |
| Williamsburg | $ | 221,825.00 | $ | 7.18 | $ | 92.73 |
| York | $ | 449,905.00 | $ | 1.64 | $ | 95.31 |
North Carolina Lottery Sales for Tier 1 and Tier 3 Counties
North Carolina Scholarships Awarded for Tier 1 and Tier 3 Counties
| County | Number of Scholarships or Grants | Value of Scholarships and Grants | Per Capita Value of Scholarships and Grants Awarded | ||
|---|---|---|---|---|---|
| Alleghany | 18 | $ | 18,578.00 | $ | 1.66 |
| Anson | 49 | $ | 46,447.00 | $ | 1.87 |
| Ashe | 58 | $ | 66,597.00 | $ | 2.46 |
| Bertie | 32 | $ | 35,443.00 | $ | 1.86 |
| Bladen | 69 | $ | 69,312.00 | $ | 2.09 |
| Brunswick | 232 | $ | 235,234.00 | $ | 1.72 |
| Buncombe | 618 | $ | 695,623.00 | $ | 2.68 |
| Cabarrus | 584 | $ | 641,345.00 | $ | 3.03 |
| Camden | 25 | $ | 29,576.00 | $ | 2.76 |
| Carteret | 153 | $ | 165,161.00 | $ | 2.38 |
| Caswell | 36 | $ | 36,632.00 | $ | 1.61 |
| Chatham | 112 | $ | 128,196.00 | $ | 1.75 |
| Cherokee | 72 | $ | 76,989.00 | $ | 2.71 |
| Chowan | 29 | $ | 27,678.00 | $ | 1.97 |
| Clay | 15 | $ | 20,177.00 | $ | 1.81 |
| Columbus | 135 | $ | 150,854.00 | $ | 2.71 |
| Durham | 610 | $ | 686,824.00 | $ | 2.17 |
| Edgecombe | 131 | $ | 135,618.00 | $ | 2.61 |
| Gates | 21 | $ | 17,866.00 | $ | 1.54 |
| Graham | 23 | $ | 22,166.00 | $ | 2.61 |
| Granville | 85 | $ | 87,204.00 | $ | 1.45 |
| Greene | 35 | $ | 34,331.00 | $ | 1.63 |
| Halifax | 106 | $ | 103,127.00 | $ | 2.04 |
| Harnett | 233 | $ | 240,688.00 | $ | 1.79 |
| Haywood | 163 | $ | 174,316.00 | $ | 2.81 |
| Henderson | 264 | $ | 286,816.00 | $ | 2.46 |
| Hertford | 49 | $ | 56,745.00 | $ | 2.40 |
| Hyde | 12 | $ | 11,613.00 | $ | 2.22 |
| Iredell | 478 | $ | 529,675.00 | $ | 2.97 |
| Jackson | 97 | $ | 100,127.00 | $ | 2.31 |
| Johnston | 457 | $ | 484,783.00 | $ | 2.39 |
| Jones | 25 | $ | 21,021.00 | $ | 2.18 |
| Lenoir | 156 | $ | 171,859.00 | $ | 3.07 |
| Lincoln | 206 | $ | 219,830.00 | $ | 2.62 |
| Macon | 76 | $ | 74,537.00 | $ | 2.11 |
| Martin | 64 | $ | 70,351.00 | $ | 3.10 |
| Mcdowell | 113 | $ | 107,557.00 | $ | 2.36 |
| Mecklenburg | 2550 | $ | 2,683,466.00 | $ | 2.45 |
| Mitchell | 30 | $ | 8,162.00 | $ | 0.54 |
| Montgomery | 78 | $ | 22,153.00 | $ | 0.81 |
| Moore | 198 | $ | 66,313.00 | $ | 0.67 |
| New Hanover | 697 | $ | 258,466.00 | $ | 1.11 |
| Northampton | 37 | $ | 24,897.00 | $ | 1.27 |
| Orange | 217 | $ | 145,068.00 | $ | 0.99 |
| Pasquotank | 92 | $ | 34,909.00 | $ | 0.88 |
| Pender | 138 | $ | 61,095.00 | $ | 0.98 |
| Perquimans | 23 | $ | 11,075.00 | $ | 0.83 |
| Person | 105 | $ | 44,401.00 | $ | 1.12 |
| Richmond | 124 | $ | 46,314.00 | $ | 1.03 |
| Robeson | 367 | $ | 158,993.00 | $ | 1.21 |
| Scotland | 89 | $ | 48,669.00 | $ | 1.40 |
| Swain | 51 | $ | 11,531.00 | $ | 0.81 |
| Tyrrell | 5 | $ | 3,177.00 | $ | 0.77 |
| Union | 608 | $ | 215,176.00 | $ | 0.91 |
| Vance | 93 | $ | 59,567.00 | $ | 1.34 |
| Wake | 2715 | $ | 1,225,920.00 | $ | 1.12 |
| Warren | 35 | $ | 21,771.00 | $ | 1.10 |
| Washington | 27 | $ | 17,565.00 | $ | 1.48 |
| Watauga | 162 | $ | 79,621.00 | $ | 1.42 |
| Yadkin | 97 | $ | 30,223.00 | $ | 0.81 |
| Yancey | 39 | $ | 9,577.00 | $ | 0.53 |
North Carolina Education Lottery K–12 Funding and Per Capita Return From Funding for Tier 1 and Tier 3 Counties
funding since they already receive more than wealthier districts, but instead allege that the funding results in an inadequate education.”); Amanda S. Hawthorne, Note, The Opportunity in Adequacy Litigation: Recognizing the Legitimacy and Value of Pursuing Educational Reform Through the Courts, 56 S.C. L. Rev. 761, 761 (2005) (explaining that Abbeville I was originally filed in 1993). ↑
County%20Distributions%20FY18.pdf [https://perma.cc/NK8L-65F6] (showing disbursements of lottery funds in North Carolina). ↑