In 2019, the Michigan Lottery reported its biggest contribution to schools ever -- a record $1.07 billion.
This was about $129 million more than the previous year, the largest one-year increase in lottery history. It sounds like a lot of money, right?
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In a state that has seen a decline in education performance, it sure seems like the lottery revenue isn’t helping much -- but there’s more to the story. First, let’s look at how this all started.
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Start of the Michigan Lottery
In a bid to raise more tax revenue, Michigan voters approved the creation of a state lottery system, along with six other states, in 1972, with 72 percent of the vote in favor.
Here’s a blurb from a New York Times article on Michigan’s lottery launch:
“Ticket buyers were lined up 20 deep when the J. L. Hudson Company store in downtown Detroit opened Monday morning. In remote Port Austin, a liquor store reported that every customer but one had bought a ticket in the first six hours they were on sale.”
Originally, lottery revenue was to be directed to the General Fund, with only a small portion going to education. It wasn’t until the Public Act 259 in 1980 that lottery revenue was officially earmarked for the School Aid Fund.
Lottery revenue and Michigan schools: What’s the deal?
The Michigan School Aid Fund (SAF) provides the majority of state funding for schools, but the Michigan Lottery is only a slice of the pie -- and it’s smaller than you probably think. (SAF only accounted for 1 percent of the state’s total General Fund in 2018-2019)
In 2018-2019, Lottery revenue only accounted for 7 percent of the overall SAF. Sales and income taxes far out-weigh lottery revenue. Take a look at the chart below from the Michigan Senate:
In 2019, about 27 cents of every dollar spent on Michigan Lottery games went to the SAF. The rest of that money is paid out in prizes, about 62 cents of every dollar.
So is the Michigan Lottery helping schools?
Technically, yes. But there’s no way to know where Michigan Lottery dollars are going, specifically. Once they’re contributed to the SAF, they are all mixed in with other funding sources. And the Lottery has no control over where those dollars are spent.
The Michigan Legislature and Governor are strictly responsible for allocating the School Aid Fund. Check out the breakdown of program funding here.
The theory that the Michigan Lottery is lying about its contribution to schools is probably based on the heavy marketing by the lottery on helping schools, and the overall distrust of government to properly allocate funds. But as you can see, the lottery is just a piece of the SAF puzzle.