The state Legislature has added another audit to the list of investigations into the California State Lottery, this one based on questions over whether the agency is giving enough money to schools as required by state law.
The department has been under scrutiny since employees alleged misconduct among senior executives in an anonymous letter last summer to former Gov. Jerry Brown. The state Justice Department has launched an investigation, and the State Controller’s Office has identified inappropriate spending on travel. Agency director Hugo Lopez resigned in June.
Lottery revenues have “skyrocketed” over the last 10 years, reaching nearly $7 billion last year, but the share of money the agency gives to schools hasn’t kept up, State Sen. Ling Ling Chang, a suburban L.A. Republican, wrote in an audit request.
The Lottery was making $3 billion in revenue and contributing about $1 billion for education 10 years ago, according to Lottery data cited by Chang. Last year, when revenues approached $7 billion, the agency had increased its school contributions to close to $2 billion, according to the data.
State Lottery spokesman Russ Lopez said that both revenues and money for schools increased after the state changed Lottery law 10 years ago to allow more flexibility for prize expenses.
“We think a better way to look at this is to consider the total amount sent to schools rather than as a percentage of sales,” Lopez said in an email.
Chang questioned whether money that could go to schools was being mismanaged. She cited a Controller’s Office finding that the Lottery had inappropriately spent about $300,000 on travel, food and accommodations along with earlier reports that the agency had spent $17,000 on baseball-shaped pens and other gear.
“Every dollar wasted at the Lottery is another dollar taken from our public schools,” Chang wrote in the letter.
Chang noted that the Lottery hasn’t undergone a full audit from the California State Auditor in 22 years. The Joint Legislative Audit Committee approved her request for an audit in a unanimous vote June 26, without specifying how quickly the audit needed to start.
“With recently alleged improprieties involving staff, a history of lawsuits, poor mismanagement, and both prohibited and questionable spending decisions, the public should be reassured that the California State Lottery is acting in good faith and in the interest of California’s students,” Chang wrote in the letter.
The Lottery investigations started with an anonymous letter that its own employees sent to the Governor’s Office complaining about rowdy behavior by top department officials at out-of-town sales events.
The Lottery’s contribution to schools averaged about $1.08 billion per year before the law changed under Assembly Bill 142, versus $1.38 billion after the change, according to Lottery figures.
The Lottery provides about 1 percent of total funding for kindergarten-through-12th-grade schools, according to Education Department figures.
Chang cites a portion of California law stating lottery funds “shall supplement the total amount of money allocated for public education in California.”
The State Lottery Commission sets the percentage of Lottery revenues that go toward education under the 2010 law. At least half the department’s revenues must go toward prizes, while Lottery administration expenses are capped at 13 percent.