It's 505 and welcome in to a Thursday edition of the Carolina Journal News Hour on Charlotte's FM News Talk, 107.9 FM, WBT, I'm Nick Craig. Good morning to you. North Carolina's education lottery is taking in far more money than it did two years ago.
However, the share of money reaching public schools across the Tarheel State is not keeping pace according to a recent audit. The performance audit by state auditor Dave Bollick, who will join us coming up here after the bottom of the hour, found that the reported gross sales jumped from $4.3 billion in fiscal year 2023 to $6.6 billion in fiscal year 2025. That is a 51% increase in just two years. Transfers to the Education Lottery stayed near $1 billion, $1.02 billion in fiscal year 23, $1.09 billion in fiscal year 24, and $1.08 billion in fiscal year 2025. The portion of sales sent to education in the aptly named North Carolina Education Lottery fell from 23 to 16 percent.
State Auditor Dave Bollock told the Carolina Journal: the top-line result of our audit is the education lottery is probably not what you think it is. The business of the lottery has changed tremendously over the last two decades, with the primary driver of change coming in electronic gaming. We see that very clearly in North Carolina, where in 2023, there were zero dollars in revenue from any type of digital phone or computer gaming systems. It was all scratch-offs and powerball.
So in just two and a half short years, the revenues went from zero to $2.6 billion. The audit, which is 105 pages, focuses on three main factors for the decline in education funding here across the state of North Carolina. We start off with topic number one, digital instant games, which are played on the lottery website or the lottery mobile app, and they are relatively new. They launched back in November of 2023, and in fiscal year 2025, they produced $2.6 billion or about 40% of total lottery sales. From its launch through fiscal year 2025, they accounted for $3.7 billion in gross sales.
However, due to an average 87% prize payout, the new lottery games generate significantly less revenue than traditional games. Lottery officials told auditors that the high percentage payouts are necessary to compete in online markets and in the online marketplace, with auditor Bolick saying when you've got casino-style games, which is really what these digital instances are, and you're paying out north of 80% in winnings, it becomes a volume business. That necessitates the need for new gamblers and more people to gamble. It's essentially the difference between shopping at Costco or shopping at a small corner store. In order for Costco to make a lot of money, you have to have a lot of people spending money in a Costco.
Same is true for the digital instances, the digital instance games. Also important to note, according to lottery officials in this audit, they noted that there is significantly more rollover in these digital instances, games, in comparison to the traditional scratch-offs or powerball that you would expect. For example, if somebody bets $10 or gambles $10. Wins eight, there's a very high likelihood that they roll that eight dollars over into the next online digital instance and do not withdraw that money.
So you've got $18 there being bet by one individual when realistically it was only $10 of their starting money.
So that is one issue, the digital instance games, according to the audit. The next, the decline in sales. Traditional lottery games like Scratch Offs and Draw Games saw their sales slip from about $4.3 billion in fiscal year 2023 to under $4 billion in fiscal year 2025. That is relevant as these games return a relatively large share of each dollar to education. State Auditor Dave Bollock asked: where is the lottery focusing its marketing efforts?
Are we focusing on scratch-offs or are we now applying more dollars on advertising side to the digital instances? These are questions. That I think this audit raises. The third focus of the report from the North Carolina state auditor is higher payout products. The North Carolina Education Lottery also added some of those in recent years.
$50 scratch-offs launched in December of 2023 with an 80% prize rate and reached about $588 million in fiscal year 2025 worth of sales, which rolls out to about one-fifth of all scratch-off revenue. Cash Pop, a draw game launched in November of 2024 with an average payout near 67%, generated almost $70 million in the first year. While both added new dollars for education, they also pulled the overall transfer rate down again due to those very high payout prize rates of 80 and 67 percent.
Now, that is relevant here in North Carolina as state law sets a 38% transfer target for education funding. The initial target when the lottery was created was 35% and lawmakers raised it to 38% during the 2021 legislative long session. According to the audit, the lottery hit the original target in its first full year, but the long-term average has been about 27%. Among the states that auditors reviewed, lotteries with a larger digital share generally transferred a smaller percentage for public use. Not every state's lottery is necessarily an education-funded lottery, but most of the funds are supposed to be for public use.
Virginia, our neighbors to the north, for example, after launching digital games, saw sales and total transfers rise while its transfer rate fell from 27.7 to 20.8%, about a 7% decrease there. Kentucky raised digital prize rates from about 74% to more than 87% and watched its digital sales climb from $5 million to nearly $800 million. North Carolina's fiscal year 2025 digital share is now 39.4% with a transfer rate of 16.3% that sits near Virginia on that spectrum in comparable states. It is important to note that states without digital games, including South Carolina and Tennessee, have consistently transferred a higher percentage for public use, whether that be education or state funding in general. The Office of the State Auditor does not tell the lottery to stop digital games or to chase the 38% target at any cost.
It asks the General Assembly to answer which goal comes first. Maximizing total dollars for education, holding a minimum percentage, or balancing the two under a defined, what would be a newly defined framework. If the percentages remain the primary test, auditors say that lawmakers should decide whether 38% of transfers to education still fits a market that is built around 87% online payouts. State Auditor Dave Bollick told the Carolina Journal: when the lottery was first set up, the strategic business model was to have a certain amount of percentage of revenue contributed to public education. Does that make sense now moving forward?
And does it make sense to put the emphasis on digital instant games moving forward? These are all reasonable policy questions that our team at the Auditor's Office has recommended that both the Lottery Commission and the Legislature start actually grappling with. North Carolina Education Lottery CEO in Mark Melico, in the agency's response, said that the lottery will review the audit with its commission and that he and Chief Government Affairs Officer Hayden Burgess will meet with legislative leaders on possible statutory changes. Again, talking about that 38% transfer rate, the lottery said it will keep meeting consumer demand, staying competitive, and maximizing the return to education here across the state of North Carolina. This is a massive 105-page report from the state auditor's office and from Dave Bollock.
You can read a full copy of that report. We've got it this morning over on our website, CarolinaJournal.com. Look for the headline: Bollock Education Lottery, probably not what you think it is. The state auditor will join us coming up here after the bottom of the hour, right here on the Carolina Journal News Hour. When life gets busy, it's important to reach for the things that help keep you grounded.
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It's 521. Welcome back to the Carolina Journal News Hour, Charlotte's FM News Talk, 107.9 FM. WBT, we are 54 days away from Election Day. Absentee by mail ballots going out on Friday of last week. Early voting kicks off here on October the 15th across the state of North Carolina.
And yesterday, former governor and the North Carolina state chair of Wright Count, former Governor Pat McCrory, hosted a tour of the Wake County Board of Elections to walk through the voting process, including how ballots are counted and secured, with the goal of spotlighting transparency and security in the electoral process. RightCount is a 501c3 organization dedicated to conducting research, educating citizens on election integrity issues, and protecting the rule of law concerning the tabulation of votes according to their website. McCrory said during the event, Our goal of Reich Count is to make sure that voters and the politicians running for office have as much confidence as possible and an understanding as possible in the election system. We're encouraging transparency like we saw today. We're encouraging education like we saw today.
And we're encouraging a professional process like we saw today in Wake County. This education and transparency are very much needed to regain and gain the confidence of voters to protect our democracy. Our goal is also to increase the number of people voting and make sure that the lack of confidence in the system doesn't dissuade them from actually being involved in the process themselves. Carolina Journal asked former governor and Pat McCory what was the most important thing for voters should know about the process of voting and ballot counting here in North Carolina. He responded by saying there is a professional process and a transparent process that's clearly laid out before the election, and that's often what's not understood.
They often only hear about the controversy after the elections are over, and that's why education to me is the most important part of this process, and the education needs to occur before the election. McCrory advocated that politicians and politicos running for office should educate themselves on the election process when they register to run, saying in part, you don't want to be learning about it on election day as many voters do. That often causes the suspicion and the paranoia and the lack of confidence, which we have to continually improve on to protect our democracy at the local, state, and federal cycles. Each election cycle, the Wake County Board of Elections conducts 13 training courses to prepare election officials to work early voting and on election day. A similar process, not necessarily to the same scale as Wake County is a very large area here in North Carolina.
All 100 county boards conduct a similar process. During the 2024 general election, Wake County held 102 training classes and trained more than 4,000 election officials. In a seven-week timeframe. Leading up to the primary, 69 classes were held and more than 2,300 officials were trained in just a five-week period. For the 2026 general election, Wake County is projected to conduct 84 classes across five weeks and train more than 3,200 election officials.
According to Olivia McCall, who is the director of the Wake County Board of Elections, spoke at the event in Raleigh on Wednesday, saying our goal is to make sure that the public has as much information as can be readily available. There are checks and balances in place, starting well before you even enter to vote. Polling places are equipped to assist voters without ID.
However, voters must present a photo ID to vote in the normal process. Under North Carolina law, voters can cast a provisional ballot if they do not have voter identification. Again, this goes to the. Election process that we heard from former governor in Pat McCrory. All of those procedures are laid out.
The Wake County Board of Election employees start election day at 5.15 a.m. and work hard to open all 216 precincts and get them up and running.
So voting can begin at 6.30, according to McCall, noting we have backup plans, four backup plans on Election Day. Wake County, similar to every other across the state, has a five-member bipartisan board. Board meetings are not live streamed, but are open to the public with an opportunity for public comment. According to the board chair and Olivia McCall, Wake County has four high-speed counters that can count up to 10,000 ballots per hour. They also employ technicians to maintain those counters and make sure that the process is running smoothly.
The ballot cage, something that the former governor talked about, is never unarmed except. Except when ballots are being received, that is a very secure area within the Wake County Board of Elections, and they can receive up to as many as 2 million ballots due to their population. The ballot cage not only has a badge reader, but a code for each person. Absentee ballots are sealed and stored in the ballot cage after first approval. A process known as logic and accuracy L ⁇ A testing is performed on each machine to ensure that ballots are read thoroughly and accurately for each ballot style and contest.
According to the Wake County Board of Elections Chair and Olivia McCall, a bipartisan team performs those logic and accuracy tests. Precinct officials conduct the testing and wear color-coded vests to indicate their party affiliation. For the 2026 general election, 171 ballot styles and four DS850 high-speed tabulators, 266 DS200 tabulators, and 261 expressive voters were tested by 10 team members, five bipartisan teams testing one of the projected 138,000 ballots in Wake County. Again, while it might not be to the same size, scope, and scale as a Wake County, and some of the information we learned from the former governor and state chair of Wright Count Pat McCrory, all counties across North Carolina over the last couple of months have gone through this process to verify that their tabulators, to verify that their machines and everything as it relates to the counting of votes is happening in an accurate manner. And as we have talked about and as we will see in the coming weeks, more and more ballots will begin the process of being returned during this absentee by mail period.
And then it will be all hands on deck starting October the 15th when early voting sites will open across the state of North Carolina, from the Tennessee border to the Atlantic Ocean, up to Virginia, down to the South Carolina border. We will see that process kick off. We'll be keeping a very close eye on all of that process, what the results are looking like. Like, not in terms of who is actually being voted for, but what the voter turnout looks like during that early voting and absentee period. We'll keep an eye on those details over on our website, CarolinaJournal.com.
And as always, bring you the latest right here on the Carolina Journal News Hour. It's 5:36. Welcome back to the Carolina Journal News Hour, Charlotte's FM News Talk, 107.9 FM. WBT, I'm Nick Craig. A good Thursday morning to you.
We are tracking a new report this morning over on our website, CarolinaJournal.com, as it relates to the North Carolina Education Lottery. To walk us through some of those details this morning, it's my pleasure to welcome State Auditor Dave Bullock to our airwaves this morning on the Carolina Journal News Hour. Auditor Bullock, thanks for the time.
Some interesting figures in this new report out from your office between fiscal year 2023 and 2025, we saw nearly a 51% increase in growth sales as it relates to the North Carolina education lottery.
However, during that same period of time, education funding transfers are down seven percentage points. Those numbers don't seem to add up at all. Yeah, Nick, thanks for having me. What we see with the education lottery is what I've said around the state. The the top line result of our audit is the education and lottery is probably not what you think it is, right?
The business of lottery has changed tremendously over the last two decades. And the primary driver of that change is electronic gaming. And we see that very clearly in North Carolina. Where in 2023, there was zero dollars. In revenue from any type of digital phone or computer gaming system.
It was all scratch-offs and powerballs. In 2025, $2.6 billion in revenue.
So in just two point five short years, that revenue went from zero to $2.6 billion in revenue with casino type gains being added to our lottery mix. of offerings. And that is, of course, incredibly relevant as you talk about that huge increase in share, according to some of the details out of your report out of the North Carolina State Auditor's Office. The thing that makes that interesting, Auditor Bullock, is that the prize payout percentage is about 87%.
So what does that equate to? A much smaller share of dollars that can actually get transferred over to education funding? It does, and what it really raises the question that our team found. Is what is the strategic direction of the education lottery? You know, when the lottery was first set up, the strategic business model was to have a certain amount of percentage of revenue contributed to public education.
Does that make sense now moving forward? And does it make sense to put the emphasis on digital instant games moving forward? These are all reasonable policy questions. that our team at the auditor's office has recommended that both the Lottery Commission and the legislature start actually grappling with. You know, when you've got casino type games, which is really what these digital instance are.
and you're paying out north of 80%. Uh in winnings Um it becomes a volume business. That necessitates the need for new gamblers, more people to gamble, because it's essentially the difference between shopping at Costco or shopping at a small corner store. In order for a Costco to make a lot of money, you got to have a lot of people spending money in Costco. Same proof for digital instance.
If the North Carolina Education Lottery is going to have any net gains in dollars, They have to have a tremendous number of people playing those games. when they're giving out uh north of 80% uh payouts. We are joined this morning by state auditor Dave Bullock here on the Carolina Journal News Hour. Auditor Bullock, I found interesting when going through some of the details in this report, the lottery officials said, Hey, you know, the reason that this percentage of payout is so high, around 87%, is because that's how they have to compete with these other online markets that offer similar things. It's an interesting problem for the lottery to deal with.
Some might just say, well, we'll lower the percentage and send more money to education, but I would presume that that would just plummet the usability of these digital instant games. Yeah, I mean, I think that goes again to the overarching, I think, conclusion in the audit report, and that is. with the lotteries of business. And we as a state have decided that we're going to run a lottery. And if we are, it's got to be run as a business.
The question, however, I think that this audit poses is how does that Business really gets managed in terms of the best return on investment to public education. And the question of needing to Game new gamblers as a strategy to increase revenue to public education. Those are going to be competing values, Nick. Uh and All that doesn't place a judgment on that one way or the other, but it certainly, I think, raises the true policy question along those lines. One of the key findings in this report is the growth of those digital instant games that we were just talking about.
But let's step back from those new products and look at some of the traditional lottery products that folks are familiar with: scratch-offs that you're buying at gas stations, Kino that runs in bars and restaurants across North Carolina.
Some of those figures are down pretty substantially over the last couple of years as well.
So, not only are we seeing a much lower percentage in terms of transfers in these digital instant games, but some of the bigger cash cows for education funding, those revenues have slipped pretty substantially. They have slipped substantially. And again, it is, where is the lottery focusing his marketing efforts? Are we focusing on the scratch also? Are we now?
applying more dollars on the advertising side to the digital instance. Those are questions. I think that this audit raises I will say one thing about the audit report. I would commend it to anybody who's interested in the lottery because this is a comprehensive report. It is, again, it's been the thing that we've pledged to the people of North Carolina.
that we would create. Substantive audit reports, and this audit report goes into tremendous detail. We even took many of the first Tuesday scratch-offs and actually detailed in the audit. the costs associated with the production of those scratch-offs as well as the administrative costs. and then the ultimate net gain on each one of those scratch-offs.
I think it's really important for the public to understand exactly how the lottery works because again, it is the people's money. And that's been a commitment that our office has had now for the last two years since I've been in office. It is a very comprehensive report, 105 pages. We've got a copy of that linked up over on our website, CarolinaJournal.com. As we round out the conversation here, Auditor Bollick, is it fair to say that the lottery has changed substantially over the last 30 years since it was introduced here in North Carolina?
I would imagine that the online sports betting, some of the prediction markets and these newer technologies that we've seen over the last couple of years, while that's not necessarily in this report, that's got to be putting the lottery in an interesting position when they're trying to compete with those dollars that are flowing to sports betting and some of these other prediction markets.
Well, it is, yeah. And I would say again, lottery is a business, and the state of North Carolina is in the business of running a lottery. and it is important to generate revenue. It has become an important source of revenue for public education, close to one billion dollars. And that figure ranges, but it's been relatively flat over the last several years, even with the increase in revenue.
And lottery officials will tell you that the reason that they have to move to this digital format is because of the increased competition from online sports betting, which is legal in the state of North Carolina, and other games. that are not necessarily legal that work outside of legal regulation that the lottery has to compete with. Yeah, we see a lot of that in the crypto sphere. For those that see plenty of ads on social media, it's hard to ignore those when you see those popping up in your social media feeds. Auditor Bullock, this is just one of the reports that your office has released as of late.
How do folks stay up to date and in tune with what's going on over at the North Carolina State Auditor's Office? Yeah, I appreciate it. Auditor.nc.gov, and you can get all the reports. Sign up to get the twice-a-month newsletter. Nick, I know you get it.
Uh and then every audit will also automatically go. to your email address. It is The people's office of the state auditor, and we want citizens to know what type of return on investment they're getting for the work that we do in the auditor's office. You know, this report, this audit of the educational lottery follows our financial audit of the lottery. It is a full performance audit.
It is the bread and butter. Of what I believe the people of North Carolina expect out of the Office of State Auditor, and we're really proud of the work we're doing. Yeah, and we appreciate seeing these reports on a very consistent basis here across the state of North Carolina. We have continuing coverage of this story over on our website this morning, CarolinaJournal.com. We appreciate the insight and information this morning.
State Auditor Dave Bollock joins us on the Carolina Journal News Hour. Bye bye. Good morning again, and welcome back to the Carolina Journal News Hour, Charlotte's FM News Talk 107.9 FM, WBT. We covered a report yesterday here on the Carolina Journal News Hour in this same segment as it related to some progress as it relates to education here across the state of North Carolina, seeing some good increases.
Now, that is, of course, relevant based on the lows that we saw in the 2020, 2021, and even 2022 school year after years of COVID-19 shutdowns and major amounts of learning loss, not only here in North Carolina, but across the rest of the nation. As North Carolina school report cards came back last week with the best mark in nearly three years.
However, with those results, the State Board of Education is still working on a plan to change how those report cards are graded. The share of schools earning a D or As it relates to their school, fell from 31 to just 23% this year. That is according to that preliminary data and the results presented to the state board of elections on September the 2nd. As recently as the 21-22 school year, that number was as high as 42%. The state also counted 162 fewer low-performing schools than a year before.
In addition, the number of low-performing districts, these are the overall school districts of which there are more than 100 here in North Carolina, dropped from 23 to just 10. Yet board chairman Eric Davis opened the meeting by cautioning against reading too much into the grades. Davis said at a recent meeting, while these academic results are vital in understanding what students are learning, we are making progress and where we need to improve. These results tell only part of the story about the education that our students are receiving and the performance of their schools. A board task force, Davis said, is developing new, a new, brand new accountability system that is, quote, less reliant on standardized tests and that will provide a more complete and accurate assessment of educating the whole child.
Some very interesting comments there from the chairman of the North Carolina State Board of Elections. or Board of Education, excuse me. The task force has been meeting since February and will deliver its final report to the board in early 2027. Staff said at the meeting, that's sooner than the spring timeline that had been discussed earlier this year. Among the ideas on the table, giving schools credit where student scores were well above passing, replacing the state's current growth measures with one that compares students to their own expected progress, and rethinking whether schools should get a single letter grade at all.
At the state board meeting last week, Michelle Mayer, who is the chief accountability officer for the Department of Public Instruction called the drop in low-performing schools incredible and a quote testament to the work that teachers are doing that school leaders are doing and the way in which students are performing she also described what she sees as the as the current system flaws state exams are scored on a five-point scale with a three counting as a passing Schools get credit when a student passes, but no extra credit when a student scores a four or five. Mayor said, our current accountability system does not incentivize fours and fives. You are either proficient or not proficient. Board Vice Chairman Alan Duncan voiced concerns for what the current system means for low-performing schools, saying during the meeting, I also have a great deal. concern that there's undue forces on students in levels two that are close to making a level three because that creates a better proficiency score with respect to the way that the system is set up right now.
He worried about what that means for the lowest performers. Schools have no built-in reason to push hard on improving our level one students and that's probably who needs it the most. Board member Kathy Moore offered the board's answer as to why they are changing the system that is showing improvement and some pretty substantial improvement, I'll note, noting that confidence in these results, pride in these results is not complacency. We still have work to do.
So some very interesting information out of the State Board of Education. The report, which seemingly showed things trending in the right direction here in North Carolina, may not be good enough for the Superintendent of Public Instruction and the State Board of Education. Education. We will keep an eye on early 2027 when some of those new recommendations from that task force come forward, what that exactly will mean for grading schools across the state of North Carolina. We'll watch that as we flip the calendar over here in just a couple of months, and we'll have continuing coverage over on our website, CarolinaJournal.com.
Well, that's going to do it for a Thursday edition of the Carolina Journal News Hour. WBT News is next, followed by Good Morning BT. We're back with you tomorrow morning, 5 to 6, right here on Charlotte's FM News Talk, 107.9 FM, WBT.
