Audit finds North Carolina Lottery revenue surging but education share shrinking
RALEIGH, N.C. (WTVD) -- North Carolinians are spending more money than ever on the state lottery, but a significantly smaller portion of those dollars is reaching public schools, according to a new performance audit from the Office of the State Auditor.
The audit shows lottery sales climbed to $6.6 billion in fiscal year 2025, up from about $4.3 billion in 2023; a roughly 53% increase in two years. But the percentage of revenue transferred to the Education Lottery Fund dropped from 23% to 16%, leaving education funding nearly flat despite billions in additional sales.
State Auditor Dave Boliek said the public deserves clarity on how lottery dollars are being used.
"The public wants to know how much money is spent on administration, how much money is spent on advertising," Boliek said. "They want an independent look to verify what those dollar amounts are."
Boliek said the audit points to the rapid rise of digital instant games, which generated $2.6 billion in sales in fiscal year 2025 after having no sales two years earlier. Those games carry payout rates as high as 87%, meaning most of the money spent is returned to players.
Boliek said the shift is a business decision by the lottery. However, it affects how much money is available for education.
"That's not to say it's good or bad. But it is a decision the lottery has committed to," he said.
Despite the surge in sales, the amount transferred to education increased only slightly from $1.02 billion in fiscal year 2023 to $1.08 billion in fiscal year 2025.
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North Carolina Education Lottery CEO Mark Michalko said the statutory target requiring 38% of revenue to go to education "to the extent practicable" may no longer align with modern lottery products.
In a response statement to the audit, Michalko said, "If maintaining a minimum transfer percentage remains the primary objective, the General Assembly should consider whether the current 38 statutory target remains appropriate given today's lottery products and the competitive marketplace."
Boliek said lawmakers may need to revisit the statute.
"If the business climate doesn't allow for it to be close to 38%, then a reset of those expectations is in order."
The audit recommends that lottery officials meet with legislators to clarify how much money should be directed to education and how the funds should be used.
According to data from the North Carolina Education Lottery, a breakdown of the amount transferred to the education fund during fiscal year 2025 for Wake, Durham, and Cumberland counties is as follows:
- Cumberland County: $22.4 Million
- Durham County: $13.6 Million
- Wake County: $64.3 Million
In a statement to ABC11, Durham Public Schools said a review of how lottery money is allocated would be welcomed.
"Lottery funding has historically been an important component of North Carolina's investment in public education. As school districts face rising costs for personnel, facilities, transportation, technology, and other essential services, any decline in the share of lottery funding reaching local school systems places additional pressure on already constrained budgets," said Jeremy Teetor, Chief Finance Officer for Durham Public Schools. "Durham Public Schools receives around $2.5 million in state lottery funding per year for capital needs, while Durham residents authorized over $423 million in bonds in 2022 for our facility needs. We would certainly welcome a review of how lottery proceeds are allocated and opportunities to ensure that a greater share of these resources directly supports students and public schools."
The findings raise broader questions for taxpayers. Meanwhile, lawmakers and NCEL officials are left to consider the future of education transfers as digital games reshape the lottery.
