Propositions 1C and 1D

The biggest change to existing lottery law if Proposition C passes is that it would no longer require lottery profits to be dedicated to educational institutions. Currently, these profits make up around 1 percent of the overall budget of California’s public education institutions.

In addition, payments to educational institutions from the general fund would increase to offset the elimination of funding from lottery funds.

Passage would also allow for the California Lottery Commission to increase the percentage of prize money awarded to players. Supporters of the proposition argue that states such as Massachusetts and Florida saw their lottery profits increase after they increased the percentage of prize money awarded to players.

The proposition also seeks to allow borrowing from future lottery profits, which would be received from investors immediately. The real future profits would then be used to pay back investors – with interest.

The state’s budget plan for the 2009-10 fiscal year assumes that $5 billion would be borrowed. This loan would lock the state into debt-service payments amounting to $350-450 million annually for the next 20-30 years.

Any lottery profits not required to pay debt-service costs would go to the general fund; however, the Legislative Analyst’s Office claims that future lottery profits under the proposed changes to current lottery law would not be enough to cover the general fund’s higher contributions to education after debt-service payments are made.

The proposition sets no limit to the amount of money state officials may borrow in the next fiscal year or thereafter.  The current lottery law has been in effect since 1984 following its creation by the passage of Proposition 37. 

In 1998, California voters passed Proposition 10 – also known as the California Children and Families Act – which established funding for an early childhood development program called First 5 California. This was done by levying a tax on cigarettes.

The funds generated from this tax are deposited into the California Children and Families Trust Fund, which as of June 30, 2009, had a surplus of nearly $2.1 billion. The Legislative Analyst estimates that revenues from this act will be about $500 million for 2009-10, funds that are not subject to Legislature appropriation

Proposition 1D would change the funding of this act in two main ways:

— Reducing funding by $268 million annually from 2009-10 through 2013-14; the redirected funds would be subject to appropriation by the Legislature.

— Redirecting up to $340 million of unspent reserves to the state’s general fund on a one-time basis in 2009-10.

A state commission and 58 county commissions were established by the act, the former being responsible for allocation of 20 percent of the $500 million estimated annual figure; the latter administering the rest.

For example, the San Francisco county First 5 program administers 31 programs and works with city agencies, public and private schools, non-profits and hospitals. The county’s First 5 budget for fiscal year 2007-08 was just under $7 million, compared to Santa Clara County at $21 million, Alameda County at $16.9 million and Contra Costa County at $10.6 million.

Should the proposition pass, Sherry Novick, executive director of First 5 Association of California, believes administrators will be considering decreases in certain initiatives rather than making cuts across the board.

PROPOSITION 1C LOTTERY MODERNIZATION ACT.

PROPOSITION 1DPROTECTS CHILDREN’S SERVICES FUNDING. HELPS BALANCE STATE BUDGET.

Reach the reporter at [email protected].

 

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