NC school construction fund stretched as lottery’s education share shrinks

Even as North Carolina’s state lottery sets sales records, the share of proceeds flowing to public education has fallen, and school districts competing for construction grants are feeling the effects, according to a recent presentation to the State Board of Education.

The board reviewed the Needs-Based Public School Capital Fund, a lottery-funded grant program for school construction in economically distressed counties, during its April 1 work session. Vice chair Alan Duncan pointed to what a recent state audit had already flagged: The portion of lottery revenues allocated to the program has declined over recent years.

“Going back over the course of the last several years, [it has] become a lesser percentage,” Duncan said.

That aligns with findings from State Auditor Dave Boliek. According to a financial audit released in December, Boliek’s office found that the lottery’s contribution to the Education Lottery Fund dipped from $1.07 billion to $1.05 billion in the 2024-2025 fiscal year. Meanwhile, total lottery revenue jumped from $5.4 billion to $6.6 billion the same fiscal year.

Overall, the share of lottery proceeds devoted to education fell from 23% in 2022-23 to 20% in 2023-24 and 16% in 2024-25.

“Over the last three years, total revenues have increased by a total of over $3 billion, while contributions to public education have been flat,” Boliek said in a statement accompanying the audit. His office later launched the first full performance audit of the lottery since 2008.

The construction grant program has seen growing pressure as a result. 

“Auditor Dave Boliek has his finger on a significant problem: lottery revenues,” said Robert Luebke, director of the Center for Effective Education at the John Locke Foundation. “Why are revenues booming but the portion going to education flat? It’s a question with significant implications. The General Assembly approved lottery legislation with the hope that it would be a stable source of additional revenue for schools. It has been anything but, in part because the legislature treats it as a cookie jar. Its refusal to put in statute where the money is going and how much has contributed to the current problems. Schools and the general public are finally learning: the lottery is a bad bet.”

Nathan Maune, director of the Office of School Facilities at the NC Department of Public Instruction, told board members that in the current fiscal year cycle, the capital fund received approximately $2 billion in applications from 47 counties while awarding just over $392 million. That equates to funding roughly one in five dollars requested.

Since the program’s launch in the 2017-2018 fiscal year, the cumulative gap has widened to $11.9 billion in requests against approximately $2.4 billion in awards. Maune also reported a 30-year projection of statewide capital needs exceeding $60 billion, though he noted limitations on that prediction.

“My ability to predict the future is mixed,” he said. “But it is an educated assessment of what’s out there over the next three decades.”

The grants are capped by statute at $62 million per high school, $52 million per middle school, and $42 million per elementary school. 

Duncan said those caps can no longer cover a fully equipped modern high school. “Many of these projects that are ongoing or that have been awarded over the last year or two, they are leaving things out, because the money does not match up to what all the needs would be for a fully modern classroom experience,” he said. “That’s not faulting anybody. It’s just a statement of where things are.”

Board chair Eric Davis also pointed to scheduled state tax reductions and increased pressure on counties as an explanation for the school construction funding shortfalls.

“The current tax policy in our state is both underfunding public education and other vital services, but is also passing the burden of what the state should be providing down to counties,” Davis said. “The urban parts of our state that are experiencing the greatest economic growth are in better positions to weather this self-imposed storm. The rural areas already living on the edge are now being pushed further and further down.”

North Carolina’s income tax drops to 3.99% in 2026 under current law, before ratcheting down to 3.49% in 2027 and 2.99% in 2028 if revenue targets are met. The corporate income tax rate is scheduled to be entirely eliminated by 2030.

“NC school construction fund stretched as lottery’s education share shrinks” was originally published on www.carolinajournal.com.