S.C. Statehouse Report
Sunday, Oct. 9, 2005
VIEW: http://www.statehousereport.com/columns/05.1009.lottery.htm

COMMENTARY
NC Lottery may have bigger impact on SC than once thought
By Andy Brack
SC Statehouse Report

OCT. 9, 2005 - - With a new lottery expected to start in about a year in North Carolina, South Carolina lawmakers need to ready for a big loss of sales from a source they may not expect: from South Carolinians.

In late August, North Carolina became the last East Coast state to approve a state-sponsored lottery. Similar to South Carolina's lottery, North Carolina's gaming requires revenues to be used for educational purposes. Half of the Tarheel State's revenues are to go to reduction in size of classrooms and expansion of pre-kindergarten programs for at-risk kids; 40 percent for local school construction; and 10 percent to college scholarships. North Carolina officials expect to generate about $400 million per year in revenues for education, compared to $266 million generated in South Carolina's fiscal year that ended June 30.

But unlike South Carolina's law that limits the types of games to things like scratch-card contests and Powerball, North Carolina's law will allow the state to offer just about anything:

"Games may include instant lotteries, online games, games played on computer terminals or other devices, and other games traditional to a lottery or that have been conducted by any other state government-operated lottery."

Those 34 words of North Carolina's law could mean big trouble to South Carolina. Why? Because they allow North Carolina to offer addictive video poker and bar games like keno which would draw South Carolina gamblers to North Carolina to spend money that now goes to South Carolina.

"They have the ability to do a lot more than we can do," S.C. Education Lottery Executive Director Ernie Passailaigue said in a brief interview.

He said North Carolinians currently account for about 12 percent of the S.C. lottery's business. That translates into about $32 million in potential lost revenues for educational programs in South Carolina.

But what is unknown is how many South Carolinians will slip over the state line to play North Carolina's games when they arrive next year. What should be of particular concern are Palmetto State residents from York and Lancaster counties to those around Horry County. People in that band of northern S.C. counties tended to be strong supporters of video poker when it ruled the gaming roost in South Carolina a few years back. If those folks head north to get their gaming fix, South Carolina could lose even more revenue that lawmakers count on for education.

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"That's the wild card here," Passailaigue said. "We just don't know" how North Carolina's games will affect South Carolina.

If, for example, just 10 percent of South Carolina's lottery players started going to North Carolina to play games, the state could lose another $27 million in education revenues annually. In other words, North Carolina's new lottery could cause a $60 million annual loss to South Carolina's games, which is equivalent to half of the lottery revenues that have gone into K-12 programs over the last 3½ years!

Since January 2002, South Carolina's lottery has been better played than projected. To date, the program has generated $3.2 billion in sales and some $1.2 billion in proceeds to state coffers.

Concerns about North Carolina's lottery siphoning monies from South Carolina may just be paranoid thinking for two reasons:

  • When South Carolina started its lottery, Georgia officials were worried about a big drop in revenues. But after South Carolina got its lottery running, the impact to Georgia was relatively light, according to published reports.

  • South Carolina is likely to offer higher payouts than North Carolina, which may keep more Palmetto State players here.

Unfortunately with the lure of video poker and the bingo-like keno games that can be played every three or four minutes in bars, South Carolina lawmakers should take a long, hard look at tying the state too closely to lottery revenues to improve education. The days of the games being able to exceed revenue expectations by 10 percent every year may soon be gone.

RECENT COMMENTARY


McLEMORE'S WORLD
10/9: Employment desk

Another great cartoon from Bill McLemore:

To send a message to cartoonist Bill McLemore, write info@statehousereport.com


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FEEDBACK
10/4: Enough taxes paid to government

To the editor:

I do not agree with you about not doing away with property tax (Commentary, 10/2). Their (sic) is enough tax paid into the government to take care all of the service needs of the county and the state. Why should the government make me pay for school tax, I do not have any children in school? I know their (sic) can be a program that would work to do away with all property tax. The Federal and State Government should live with a budget .Their (sic) is no such thing that the state government cannot do away with property tax. I pay all kinds of tax on my phone, cable, lights and food. Also when you buy clothes their (sic) is tax. Every time you buy or use some kind of service, you pay tax. The money is not being spend right.

-- Dr. Ervin E. Lambert, Georgetown, S.C.

10/3: Property tax may be going to wrong uses

To the editor:

Good article (Commentary, 10/2). One factor that affects us here is that we have such a high number of illegals in the schools as well as using the clinics. The folks here know that while there is no argument that we need to educate and care for all we can, the bill is being footed by property tax - the feeling that a sales tax or a hybrid of both may be equitable is very strong. An article by you would exploring these issues would be very well received.

-- Rep. Bill Herbkersman, Bluffton, S.C.

10/3: Three-legged stool out of balance now

To the editor:

You have not gone to our website or looked at Senate bill S-880 . If you had you would know that we only want to take about 22% of the property tax away and replace it with a sales tax increase.The three leg stool is out of balance now . About 55% is property taxes and the sales tax and income tax is split on the othe (sic) two legs . These figures are from the buget (sic) and control board.

-- David Whetsell, Lexington, S.C.

10/3: Property taxes make local politicians accountable

To the editor:

I believe that without property taxes everyone would be looking continually to state government for a handout. Property taxes make local politicians accountable to their constituents. If anything should be done, it should be a system to prevent increases in individual rates that put people out of their homes. Thus a freeze on valuations would be welcome. It would protect the elderly and long time residents and protect them from the ravages of a spiraling real estate market. If new schools or services are required because of population increases that the additional revenue due to the additional building and increased valuation in the resale of existing property would provide a means to limit the insatiable appetite of politicians to take more and spend more.

-- Bob Pelletier, Pawleys Island, S.C.

10/3: Dumb commentary from tax promoter

To the editor:

Regarding the commentary by Andy Brack, "Getting rid of property tax would be dumb" (Commentary, 10/2) It's been awhile since I have heard/read anything with big words that was so stupid!

Mr. Brock (sic) completely ignores his own mentioning that local people want more local control of their government, by promoting MORE State government involvement........whether it's through Income, Property, or Sales Taxes... he is nothing but a tax,tax,tax promoter! Oh heavens, let's not reduce State government collecting taxes and then passing them to the locals.. that would be terrible, he seems to lament.

Nothing could be further from the truth of the average taxpaying citizen. Not only do they want control of paying their taxes, they also want control of where the tax money is spent. They are sick and tired of the "collect from those that can better pay, and give out to those that want!"

And, there is no question in the minds of the average taxpayer where services should be cut to be able to reduce tax bills... the answer is EVERYWHERE, beginning with the high salaries the government officials pay themselves, and ending with the wasteful, extravagant, use of our monies!

Mr. Brock (sic) talks about problems if the economy drops (the state will lose money) but seemingly forgets that as the economy grows in all areas, the property taxes continue to climb based on assessments.. AND NEVER ARE REDUCED when there is a downturn of that precious "economy"!

Keep it up Mr. Brock (sic) .. you are the flag-bearer of "The People shall Lose" attitudes! NOW you're talking D-U-M-B!

-- Daniel H. Toth, Warrenville, SC

10/3: Agree with property tax comments

To the editor:

Read your piece in the Hilton Head Island Packet (Commentary, 10/2) this morning and absolutely agree with your comments and conclusions. However, like many of your op-eds, you write more about what is wrong with an idea than promoting possible solutions. An observation, not a criticism.

As you know the S.C. Senate is holding hearings throughout the state on this issue. According to what I've heard, there appears to be a consensus leaning toward the "Point of Sale" method of assessing property. ... Many, many property owners here in the Low Country have become victims of the current system of assessing property. The "Point of Sale" method is a win-win for everyone.

-- Tom Hatfield, Hilton Head Island

EDITOR'S NOTE: Here is Mr. Hatfield's description of the point-of-sale method from a presentation he made to Beaufort County lawmakers on Sept. 25:

"All property is taxed at one percent per year of the price paid by the current owner. Taxes cannot be increased each year by more than two percent. For example a house that cost $400,000 would be taxed at $4,000 next year. However, the increase in taxes for the following year could not be more than two percent of $4,000 or $80. The next year it would be 2% of $4,080 and so on."

Recent feedback:

KEEPING TRACK
Ahead on AAA credit rating, poverty

This section tracks past forecasts by Statehouse Report with other media reports:

In Statehouse Report:

8/7: Credit rating downgrade is red flag: "Lawmakers need to take a serious long-term look at how they spend money and how they raise revenues if they want to again become the vanguard of state fiscal management. The state's credit ratings, just like your personal credit score, is important because the higher or better the credit rating, the less that the state has to pay in interest costs to fund borrowing. In short, it's an indicator of how well the state, manages its finances."

In the Spartanburg Herald-Journal

10/2, Ulbrich: Low taxes, lack of balance can hurt growth: "Yes, it is important to grow the economy. Too heavy a tax burden can hamper that growth. But so can too light a tax burden. South Carolina ranks near the bottom among the 50 states in most measures of tax burden and tax effort. A tax system that doesn't provide revenue stability and growth won't get us back our treasured AAA credit rating."

In Statehouse Report:

7/17: Solving poverty will require years of commitment: "The poor and working poor comprise about one in four South Carolinians. State officials need to remember them in public policy decisions - - and do more to make their lives better because if we can’t do more to help those in need of help, what does that say about our values?"

In The State:

10/2: Communities must address inequities to alleviate poverty: "Tremendous inequities exist. Consider the gap between the educational achievement of white students versus that of black students. Or the long-term neglect of rural areas, which sorely lack infrastructure, good schools, skilled workers and economic development. Such gaps won’t be closed overnight, but will require persistent commitment, courage and political will — and a lot more vision than we’ve seen thus far out of our State House."


SOUTH CAROLINA SCORECARD

Here's a "thumbs up" and "thumbs down" related to various political events from the past week:

Thumbs up

Bannister. Congrats to Bruce Bannister, a Greenville Republican elected last week to take the seat vacated by David Wilkins, now ambassador to Canada.

Thumbs down

Job growth. South Carolina is 50th in the nation. Enough said. Again.

Geddings. Remember politico Kevin Geddings, the consultant who served as chief of staff for Gov. Jim Hodges for awhile? Geddings, still a consultant, has resurfaced as a new lottery commissioner in North Carolina and already has made headlines for a past business relationship with a major lottery vendor. More: The (Raleigh) News and Observer.

Emergency Management Division. The state should be ashamed that it funds the state Emergency Management Division at less than $1 million per year. Lawmakers need to give this agency what it needs to it can be prepared in case we ever have a Katrina.

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