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Sharon Harper, 71, a lifelong Chicago resident, reached out to the Better Government Association to ask what happens to lottery proceeds. She said she feels a sense of distrust with the lottery since winnings are no longer broadcast on TV. Harper said she is a dedicated lottery player, buying about $100 in tickets per month under the impression the money makes its way to the public education system.
So where do lottery profits go?
The short answer: Public education is the primary beneficiary of lottery proceeds, though a small amount is distributed to capital projects and specialty causes, such as the Special Olympics. However, the lottery is not the windfall for education many people think it is.
The lottery generated nearly $2 billion in revenue from July 2021 to January 2022, according to lottery data. About 25% is transferred to “good causes,” per the lottery’s website.
As of January 2022, the Illinois Lottery transferred $420.86 million to the Common School Fund and $5.63 million to specialty causes for this fiscal year, said Meghan Powers, the Illinois Lottery communications director.
When we take a look at Illinois Lottery’s numbers for the last full fiscal year, which ended June 30, 2021, the lottery generated $786 million in tax revenue for the state, which was the third biggest year in lottery history, according to a 2021 Commission on Government Forecasting and Accountability report.
Of that, the Illinois Lottery transferred $762.5 million to the Common School Fund, $3.75 million to the capital projects fund and $10.19 million to specialty causes, Powers said.
These look like large numbers, but there is a more complex history to the lottery that tells a different story about how lottery money is actually spent.
Lottery proceeds last year accounted for only 5.3% of the state’s $14 billion total contributions to public education, according to the Illinois State Board of Education’s 2021 Annual Report.
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While education funding has been used as a marketing tool to promote the lottery, it is important to understand the lottery revenues earmarked for education are used to offset money the state used to spend on education, most of which is now spent elsewhere.
There is also a fixed amount of money the Illinois Lottery provides to the Common School Fund each month. The monthly contributions are capped at 2009 levels by state law, with adjustments for inflation, according to the 2021 Illinois Tax Handbook for Legislators. Any surplus is sent to the Capital Projects Fund.
Some brief history
Christopher Mooney, director of the Institute of Government and Public Affairs at the University of Illinois, explained the history of the lottery system in the United States. In the 1960s, gambling wasn’t commonplace in the Midwest or anywhere other than Las Vegas. Many morally objected to gambling at the time, Mooney said.
To help the lottery gain ground, one political move was to earmark the money for education. “It was purely a political sweetener,” Mooney said.
In 1985, the Illinois Lottery law passed, stipulating all proceeds support K-12 public education, with few exceptions. The lottery has contributed over $21 billion to Illinois schools in its lifetime, according to the Illinois Lottery.
However, lottery proceeds aren’t added to funds already set aside for education in the general fund, Mooney said. For example, when education receives $10 million from the lottery, that means $10 million from the general fund can be redirected to other priorities.
According to Powers, a 2018 law passed that changed this. Funds added to the Common School Fund are now supplementary to what the state budgets for education rather than in lieu of.
Mooney said the new law doesn’t change his general point about how little the lottery offsets education costs.
The lottery isn’t the only way to gamble in Illinois, though it was the most lucrative segment last year. The state collected about $1.36 billion in total tax revenue from wagering in fiscal year 2021, about 58% from the lottery, according to the 2021 Commission on Government Forecasting and Accountability report. This figure is expected to grow because of a 2019 law clearing the way for more sports betting and video gaming, as well as six new casinos — including one in Chicago.
Mooney said the additional tax revenues will continue to be marginal in the context of the state’s entire budget.
“It’s not like all of a sudden, we don’t pay income tax anymore,” he said. “Mostly, it’s going to the pockets of the gambling corporations. … The state is skimming some percentages off the top.”
