A recent state audit reveals the North Carolina Education Lottery contributed a smaller percentage of its total sales to the state’s education fund in fiscal year 2025, even though overall sales surged to historic highs. While gross lottery ticket sales reached $6.6 billion, the percentage of those funds directed to public education declined significantly, prompting questions from state officials regarding the lottery’s long-term financial model and legislative goals.
Why North Carolina’s lottery contributions fell
The audit conducted by State Auditor Dave Boliek highlights a critical divergence between gross sales and net education contributions. In fiscal year 2023, the lottery generated $4.3 billion in gross sales and transferred 23% of that revenue to the state’s education fund. By fiscal year 2025, gross sales grew to $6.6 billion, representing an increase of over 50%. Despite this substantial growth, the percentage of sales transferred to the state dropped to 16%.
In absolute terms, the actual money received by the education fund did not match the massive rise in ticket sales. Contributions essentially flatlined, moving from $1.09 billion in fiscal year 2024 down slightly to $1.08 billion in fiscal year 2025. The following table illustrates the shift in the lottery’s financial performance over this two-year period:
| Financial Metric | Fiscal Year 2023 | Fiscal Year 2025 |
|---|---|---|
| Gross Lottery Sales | $4.3 billion | $6.6 billion |
| Education Fund Transfer Rate | 23% | 16% |
| Total Education Transfer | $1.01 billion (approx.) | $1.08 billion |
| Digital Instant Sales | $0 | $2.6 billion |
| Traditional Ticket Sales | $4.3 billion | Under $4 billion |
The audit credits the decrease in the percentage of sales contributed to state education to three primary factors:
- The rapid growth and popularity of digital instant games.
- A steady decline in sales for traditional, retail-based paper games.
- A greater availability of lottery games with higher average payout rates.
The impact of digital instant games on prize payouts
Digital instant games, which players purchase and play directly on mobile phones or computers, did not exist in North Carolina during fiscal year 2023. Within two years, these digital options became a dominant source of lottery revenue, pulling in $2.6 billion in sales for fiscal year 2025. This rapid growth means digital games now make up roughly 40% of everything the lottery sells.
Unlike traditional terminal draw games, where prize structures vary as detailed in the Powerball payouts explained guide, digital instant games operate under a fixed, higher payout structure. These digital products are designed with an average payout rate of approximately 87%. For every dollar spent on a digital instant game, roughly 87 cents is returned directly to the player in prizes, leaving only 13 cents for operating costs, retailer commissions, and the state education fund.
Because of this high payout structure, the lottery’s total prize expense climbed from 66% of gross sales in fiscal year 2023 to 76% in fiscal year 2025. While players are winning back a larger portion of their money, the margin available to fund public state initiatives has narrowed significantly as a percentage of overall sales.
Traditional retail ticket sales experience a decline
As consumer preferences shifted toward digital accessibility, traditional scratch-offs and draw games experienced a decline in overall revenue. Traditional ticket sales dropped from $4.3 billion in fiscal year 2023 to just under $4 billion in fiscal year 2025.
This transition has had a direct impact on the education fund. Traditional paper tickets and scratch-offs carry much lower payout rates compared to digital instant games, meaning they generate higher net profit margins for the state. As players choose to buy tickets on their phones rather than at a retail counter, the average profit margin per dollar spent on the lottery drops.
The statutory target and recommendations for the legislature
North Carolina state law sets a non-binding target for the lottery to transfer approximately 38% of its revenue to the state’s education fund “to the extent practicable.” Historically, the lottery has maintained a long-term transfer average of about 27%. The decline to 16% in fiscal year 2025 represents a historically low rate for the state, even though the sheer volume of sales kept the absolute dollar contribution close to previous years’ levels.
State Auditor Dave Boliek noted in the report that North Carolina laws regulating the lottery were not originally drafted with mobile, digital instant games in mind. As a result, the audit recommends that the North Carolina Education Lottery work alongside the General Assembly to clarify the state’s primary strategic objective. Legislators must decide whether the goal of the state lottery is to maximize the absolute dollar amount transferred to public education, maintain a strict minimum transfer percentage, or balance high player prize payouts with state contributions.
How to access lottery games online
The shift toward digital instant platforms is part of a broader national trend where lottery jurisdictions make access more convenient for players. For players who prefer the convenience of participating from home, web platforms and mobile apps offer legal avenues to buy tickets for major multi-state drawings. Players looking to purchase lottery tickets online safely can use courier services to secure entries into drawings like Powerball and Mega Millions.
Frequently Asked Questions
Why is the North Carolina Lottery sending a lower percentage of sales to education?
The percentage decreased because digital instant games, which now make up 40% of sales, feature a high payout rate of 87%. This leaves a smaller percentage of each dollar available for the state’s education fund compared to traditional paper scratch-offs.
How much money does the North Carolina Lottery contribute to state education?
Despite the drop in transfer percentage, the high volume of total sales kept absolute contributions relatively stable, with the lottery transferring $1.08 billion to the education fund in fiscal year 2025 compared to $1.09 billion in fiscal year 2024.
What is the legal target for lottery transfers in North Carolina?
North Carolina state law establishes a non-binding guideline of transferring 38% of revenue to education “to the extent practicable.” The lottery’s historical average is 27%, with the fiscal year 2025 transfer rate dropping to 16% due to the rise of digital games.
Play responsibly. Lottery games are a form of entertainment, not an investment or a guaranteed way to make money.
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