• DOT Slush Fund Use • Special Report: Oil Continues, p. 5 and the Suburbs, p. 16 Military Training and Kids, p.8 C A R O L I N A Ballances Sentenced, p.4 Statewide Edition A Monthly Journal of News, Analysis, and Opinion from November 2005 • Vol. 14, No. 11 the John Locke Foundation www.CarolinaJournal.com JOURNAL www.JohnLocke.org N.C. Wonders What to Expect From Lottery By MAXIMILIAN LONGLEY programs. Consistent with this charge, Contributing Editor the commission decided that the lottery DURHAM would be called the North Carolina n Sept. 27, Durham school- Education Lottery. teacher Novella Freeman won What can North Carolinians expect $100,000 in the Virginia Lottery. now that they have followed the example OA press release from the lottery commis- of other states and set up a lottery? sion told the story: The Tax Foundation, a Washington “‘I asked my husband to check the think tank promoting low taxes and numbers to see if I had really won,’ she a simplified tax system, has issued a later told Virginia Lottery officials. ‘He report claiming that state-run lotteries did and then he said: “Wow, what am actually are a form of regressive taxa- I going to get?”’ . [Freeman] said she tion. The report, published in October intends to use her winnings to take a 2004, was authored by Tax Foundation vacation and put the remainder towards staffer Alicia Hansen, who recently retirement. What’s more, she intends to presented her research at conference of continue to play the Virginia Lottery.” the National Coalition Against Legalized Less than a month before Freeman Gambling. won the Virginia Lottery, N.C. Gov. Tax Foundation Communications Mike Easley signed a bill establishing Director Bill Ahern said the foundation the North Carolina Lottery. The three is undertaking a “long-term campaign” members of the State Lottery Commis- to have state lottery revenues described sion met for the first time Oct. 6 to hear as taxes. The campaign is starting with Chairman Charles Sanders’ charge that the U.S. Census Bureau. “[i]t’s our job to set up a lottery which maximizes the funds that are available” This Virginia Lottery billboard is one of the first things North Carolinians see when they to support various public-education Continued as “N.C. Citizens” Page 2 cross into Virginia from Currituck County on NC 168 (Photo: Don Carrington) Supreme Court Case Could Affect Incentives Programs By PAUL CHESSER incentives programs offered by more federal decision could affect parts of to seek relief in North Carolina courts Associate Editor than 40 states could be affected if the his case. over state constitional issues raised in RALEIGH Sixth Circuit’s ruling is upheld. That “If nothing else, it heightens the the lawsuit. he U.S. Supreme Court said Sept. includes North Carolina, where a law- national debate [on incentives],” Orr Still, Orr said if the U.S. Supreme 27 that it will review the Sixth suit was brought against the state over said. Court confirms the decision, it could go Circuit Court of Appeals’ decision $280 million in incentives given to Dell The Dell lawsuit alleges that the a long way toward the elimination of the Tin the case of Cuno v. DaimlerChrysler, in Corporation. various incentives given to the com- economic incentives war that is waged which some economic incentives given Former state Supreme Court puter manufacturer violate the federal between states. by Ohio to the automaker were ruled Justice Robert Orr, who leads the N.C. and state constitutions. The Supreme unconstitutional. Institute for Constitutional Law and Court’s decision would affect only the Because the case will be consid- filed the lawsuit against state and local federal constitutional issues raised by ered by the highest court in the land, governments and against Dell, said the NCICL’s lawsuit. Orr would continue Continued as “Case,” Page 6 Did the State Legislature pass a 80lottery to fund education? The John Locke Foundation NONPROFIT ORG. Contents 200 W. Morgan St., #200 U.S. POSTAGE Raleigh, NC 27601 PAID RALEIGH, NC State Government 3 PERMIT NO. 1766 Washington Watch 6 Education 8 Yes 82 % Higher Education 12 No 8 % Local Government 16 Not Sure 9 % Books & the Arts 20 Opinion 24 Parting Shot 28 John William% Respondents Pope Civitas in June Institute Civitas Poll, Institute September Poll 2005 CAROLINA C A R O L I N A North Carolina JOURNAL JOURNAL N.C. Citizens Wonder What Lottery Will Bring Continued from Page 1 updating the “product line,” which Richard Wagner keeps needing to be “freshened” to Editor “Nationwide, from the New sustain consumer interest. Wisler said Hampshire lottery’s inception in 1964 that ways of keeping things fresh in- Don Carrington through fiscal year 2002, lotteries have clude “tweak[ing] the prize structure,” Executive Editor paid 53 percent in prizes and transferred and introducing new games and “new 35 percent to the state. The remaining game styles.” Paul Chesser, Michael Lowrey 12 percent covered operating costs,” The lottery, operating under strict Donna Martinez scrutiny from auditors, has never had Associate Editors Hansen said. “In fiscal year 2003, 31 cents of a scandal, Wisler said. The majority of players are middle-income people with Chad Adams, Shannon Blosser, every dollar spent on lottery tickets was Andrew Cline, Roy Cordato, kept by state governments,” she said. college educations. Lotteries are “a form Bob Fliss, David Hartgen, “This translates to an implicit tax rate of of entertainment and a form of revenue Summer Hood, Lindalyn Kakadelis, 45 percent — far higher than any state’s that is successful with little or no nega- Store sells lottery tickets at Va.-N.C. line George Leef, Maximilian Longley sales tax and higher than the effective tive issues,” he said. Karen Palasek, Marc Rotterman, tax rate on most states’ casinos.” State lotteries are operated by a R.E. Smith Jr., Jack Sommer, commission said “there is reason to staff of government workers. The N.H. The report, Lotteries and State Fis- doubt if earmarked lottery revenues in John Staddon, George Stephens, cal Policy, points to considerable lottery lottery has a budget of $8 million per Jeff Taylor, Michael Walden, fact have the effect of increasing funds spending by Americans: “In Fiscal Year year, and operates with 50 full-time Karen Welsh, Hal Young available for the specified purpose.” and 10 part-time employees. Two of Contributing Editors 2003, total consumer spending on lotter- Legislatures could simply cut general- ies was nearly $45 billion and per capita the employees work in marketing the fund appropriations for education to lottery, and the remaining workers are spending was $155.33. In FY 2002, the Jenna Ashley Robinson, reflect the lottery income. evenly divided between operations and average American spent more money Paul Messino, Brian McGraw The Taxpayer Foundation study accounting departments. The lottery is on lotteries than on reading materials Editorial Interns of lotteries, while declaring that “it is a “full state agency,” and employees are or movies (theater admissions only).” impossible to know” whether state leg- part of New Hampshire’s civil service What was officially designated by state islatures always nullified the benefits of system. and federal authorities as “profit” from earmarking by proportionately reducing Published by the sale of lottery tickets was in fact a the education budget, asserted that lot- Virginia is for lottery lovers The John Locke Foundation form of tax revenue. tery states spend slightly less per pupil 200 W. Morgan St., # 200 The report compared state-run than non-lottery states for the 1999-2000 In Virginia, the state lottery gener- Raleigh, N.C. 27601 lotteries to state-run liquor stores. The ated sales of $1.34 billion in fiscal 2005. (919) 828-3876 • Fax: 821-5117 school year. www.JohnLocke.org report says: “With both products the Under the North Carolina lottery A total of $774.6 million was paid out government legalized a previously il- legislation, advertising for the lottery in prizes and about $423.5 million was Jon Ham legal product, granted itself a monopoly can’t have “the primary purpose” of get- transferred to public education. Vice President & Publisher on the sale of that product and collects ting people to play. The ads can’t target The Virginia Lottery operates revenue from the sale of the product. “specific groups or economic classes,” under advertising restrictions that are John Hood In both cases the revenue collected is they must be “tasteful,” and they can’t similar to the restrictions applicable Chairman & President above and beyond the amount needed depict playing the lottery “as a means to the new North Carolina lottery. Jill to cover the cost of selling the product.” of relieving any person’s financial or Vaughan, director of communications of Bruce Babcock, Herb Berkowitz, Revenue derived from liquor and lottery personal difficulties.” Sales to minors, the Virginia Lottery, lists the restrictions John Carrington, Sandra Fearrington, ticket sales, the report argues, is just as and advertising appealing to minors, applicable to lottery advertisements in Jim Fulghum, William Graham, much tax revenue as are the proceeds are forbidden. her state: They must not have the pri- Lee Kindberg, Robert Luddy, of sales taxes collected from private mary purpose of inducing lottery play, William Maready, J. Arthur Pope, businesses. Where it all began they must explain the odds of winning, Assad Meymandi, Tula Robbins, they must not denigrate the work ethic David Stover, Jess Ward, Brave new world in NC The New Hampshire Lottery, the or family values, and they must not ap- Andy Wells first state lottery in the modern era, peal to minors.