Key Points:
- NC Lottery education funding dropped to 16% of ticket sales in 2025, down from 23% in 2023.
- Higher prize payouts and the growth of digital instant games reduced the money available for schools.
- Rising lottery sales don’t always lead to increased education funding.
The North Carolina Education Lottery continues to report record-breaking sales, but a new audit shows that a steadily smaller share of that money is reaching public schools. The findings point to a growing gap between how much residents spend on lottery games and how much funding ultimately supports education, highlighting concerns about NC Lottery education funding.
In the 2025 fiscal year, only 16 cents from every dollar spent on lottery tickets and games went toward public school funding. This marks a clear decline from previous years, even as overall lottery sales increased sharply. Lottery funds have long been used to support school salaries, building projects, transportation, and college scholarships across the state.
Sales Growth Outpaces Education Returns
The audit reviewed several recent fiscal years and found a consistent downward trend in education’s share of lottery revenue. In 2023, public schools received about 23 percent of lottery sales. That figure fell to 20 percent in 2024 and declined further to 16 percent in 2025. Over the same period, total sales reached historic highs.
In 2024, the lottery recorded $5.376 billion in sales and returned $1.07 billion to the state. In 2025, sales climbed to $6.586 billion, an increase of more than 22 percent. Despite this growth, the amount returned to the state slipped slightly to $1.05 billion. As a result, spending on lottery tickets rose significantly, while NC Lottery education funding dropped by nearly 2 percent.
The audit also examined internal costs and found that spending on salaries, advertising, and other operating expenses remained relatively stable. This indicates that higher administrative costs were not the main reason education received a smaller share of the revenue.
Higher Payouts Change the Revenue Balance
The primary reason identified in the audit was a sharp increase in prize payouts to players. Over the past few years, the lottery has returned a larger portion of sales as winnings. In 2023, about 66 percent of lottery revenue went back to players. By 2025, that share had risen to 76 percent. As payouts increased, less revenue remained available for education funding.
In its response included with the audit, the lottery explained that changes in game performance played a major role. Large multi-state jackpot games, such as Powerball and Mega Millions, tend to generate higher profits when jackpots grow very large. In the 2024 fiscal year, those games featured six jackpots above $1 billion. In 2025, there were only two, which reduced overall net profits from those games.
The lottery also pointed to the rapid growth of digital instant games, introduced in the 2024 fiscal year. These games now make up a large portion of total sales but have much higher payout rates than traditional scratch-off tickets or draw-based games. While they boost sales volume, they also increase the amount paid out to players, narrowing profit margins.
Business Implications of the Shift
From a business standpoint, the audit highlights how rising sales do not always lead to higher surplus funds. Product mix, payout structures, and consumer preferences all shape financial outcomes. As players move toward games with higher payouts, overall revenue may grow while available funds for designated purposes, including NC Lottery education funding, shrink.
The audit does not suggest operational inefficiency. Instead, it shows how structural changes in lottery offerings have reshaped how revenue is distributed. For organizations that rely on sales-driven funding models, the findings illustrate the importance of balancing growth, customer appeal, and long-term funding goals.
As lottery products continue to evolve, the relationship between sales performance and education funding remains closely tied to how games are designed and how winnings are distributed.
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