LEGISLATURE STUDIES VIDEO LOTTERY TO HELP EDUCATION

JEFFERSON CITY - In the aftermath of last November's overwhelming defeat of Proposition B, state legislators and education officials are attempting to put together methods to increase revenue that will enhance education programs at all levels.

Some officials who analyzed the negative vote concluded that the measure was too difficult for voters to understand, that there was distrust among the people that funds would be spent as promised, and a prevailing feeling from many people that state lottery proceeds were to have been earmarked for education.

Last week, the Missouri House passed a bill that requires lottery money to be deposited in a Lottery Proceeds Education Fund, to help finance many of the new programs approved for elementary and secondary education that have not been adequately funded.

The same bill gives voters in November an opportunity to decide whether to allow the Missouri Lottery Commission to expand its games to include a video lottery, which could generate as much as $100 million a year. The video lottery money would be deposited in a Higher Education Trust Fund to pay for scholarships and provide other enhancements for higher education.

The measure was approved by the House with 82 votes - the bare minimum needed for passage. It is now awaiting action in the Senate.

On Tuesday, the House gave first round approval to a rewrite of the state's school foundation formula that determines how money is distributed to school districts in Missouri.

An amendment to the bill, offered by Rep. Steve Carroll, D-Hannibal, would generate new money to fund the formula through an increase in the state corporate income tax and by capping the amount of federal income taxes that can be deducted from state income taxes to $25,000 for individual and $50,000 for couples.

Another component of the amendment would provide a tax break for families by doubling the dependent exemption from $400 to $800.

The net revenue from the amendment would be about $90 million.

All three tax provisions were part of Proposition B.

Several lawsuits have been filed by school districts charging that the present foundation formula is unfair. Many lawmakers are concerned that unless they don't revise the formula this session they could wind up with a court-mandated plan.

Rep. Mary Kasten, R-Cape Girardeau, voted for the video lottery bill last week, even though she has reservations about raising state revenue with a lottery. She also voted in favor of the amendment to the foundation formula bill.

Rep. David Schwab, R-Jackson, opposed the lottery bill but voted in favor of the foundation formula amendment.

"I'm not sure this is the right way to get money (video lottery) but the money will go to education," said Kasten. "It is not a bill I voted on with enthusiasm, but it will give the people a choice."

Kasten explained that with the state struggling financially, a variety of alternatives are being considered for raising money.

Kasten, who along with Schwab, also voted for a hike in the state gas tax earlier this year, said she had reservations about voting for another tax increase. "It was a tough one, but the new formula will not work without additional funding," she noted.

Schwab agreed the only way a new formula will work is if there is more money.

In Cape Girardeau County, the Cape Girardeau, Jackson and Nell Holcomb school districts would receive increases in funding under the bill, while smaller districts would not have an increase.

"I definitely think there is a big commitment to get a formula out this session," said Schwab.

"We would rather do it ourselves rather than let it go to the courts," Kasten added. "We don't want to take the consequences of what they tell us to do."

Schwab said he supports earmarking lottery proceeds for education, but could not go along with the video lottery.

"I don't like that approach as a way to raise revenues. You take something that is illegal, make it legal, and tax it for additional revenues - that philosophy just doesn't ring right," he declared.

For the video lottery to become effective, voters would have to approve it in November.

The tax increases would not have to go to a vote since it would bring in revenue within the cap of the Hancock Amendment that limits revenue growth in the state without a vote.

Former Cape County State Rep. Marvin Proffer, who now lobbies for Southeast Missouri State University, said with the state's tight financial picture there just are not too many options available for additional revenue.

The nice thing about a lottery, he said, is that you do not have to pay unless you want to play.

Proffer stressed that adequate safeguards have been built into the video lottery to ensure it is well run and not abused. The law would allow the games to be placed only in establishments that have liquor by the drink licenses.

"There really is no money on the horizon but this for higher education," said Proffer.

As for earmarking other lottery money for elementary and secondary education, Proffer said many people believe that commitment had been made and not honored, so earmarking the money will help ease some of the concerns.

He added that there is strong support among the people for earmarking lottery revenues for education.

The legislation specifically outlines what education programs the lottery revenue will go for.

A portion of the video lottery money will be earmarked for a scholarship program, while the remainder will be used capital improvements and maintenance of buildings on campuses, and for funding enhancements of targeted programs as determined through the appropriations process.

The scholarship fund could provide full scholarships for students of families with adjusted gross incomes of less than $25,000 a year, and partial scholarships for students in families with incomes of between $25,000 and $35,000 a year.

Students would have to meet minimum qualifications to receive scholarships. In order to continue them they would be required to maintain a 2.5 grade point average, make steady progress a toward degree, participate in a work study program, and not be convicted of any crimes.

The regular lottery money would go to funding programs in elementary and secondary education that have been enacted by the Legislature but have had little or no funding to implement.

Many of these programs were part of the Excellence in Education Act passed in 1985.

Lottery proceeds would be deposited in a "Lottery Proceeds Education Fund." The revenue could not be figured as part of the required percentage of state revenue which must be used for public schools under the state constitution.