Use lottery winnings to fix the roads? It won't go as far as you think

Yesterday we found out who took home the largest Powerball jackpot in Wisconsin history. And it was pretty cool that the winner was someone who has a long time to put it to good use - a 24-year-old guy named Manuel Franco from West Allis who quit his job within 2 days of winning the $768 million drawing.




The Milwaukee Journal-Sentinel noted that Franco took the "cash up front" option, which reduces the overall amount he'll be paid. But it's still more money than any of us will ever see, and it's an amazing contrast to the insecurity he was dealing with before his numbers came up.

His financial worry up until this point: "Trying to get that bank account to $1,000 was my biggest concern," Franco said.

Franco said he's played Powerball routinely since he turned 18.

Franco said he has been assembling a team of advisers to guide him through the sudden riches since the March drawing. Franco said he's taking the $477 million lump sum payout. The money — $326 million after state and federal taxes — will be wire transferred to Franco in the coming days, Wisconsin Lottery officials said.

In wake of Franco's announcement yesterday, a legislator who represents part of West Allis has an idea what the state of Wisconsin could do with the money it’ll receive from the big jackpot.

“This is a once in a lifetime opportunity not only for the lucky West Allis winner, but it’s also a once in a lifetime opportunity for the state,” [State Sen Tim] Carpenter said. “When the state collects its income taxes for this win, I want it to be directed to funding Local Road Aids. It’s one of the top issues I hear from constituents the most – the shabby condition of many of our local roads.”

“This bill would put that money directly into addressing one of our most pressing needs without the need for increased taxes,” said Carpenter. “The non-partisan Legislative Fiscal Bureau estimates that of the state tax liability that results, if the winner takes the $477 million lump sum payment, that would be a $36.5 million windfall for Wisconsin.”

“That $36.5 million should be dedicated to local road aids,” Carpenter said. “This is a tremendous opportunity for the state to be wise in using that sudden influx of money for an issue we all care about – the improvement of our local roads all around the state.”

So how much of an impact would come from a one-time bump of $36.5 million into the local road fund? If we assume Carpenter means General Transportation Aids, which the Legislative Fiscal Bureau defines as money “paid to local governments (counties, cities, villages, and towns) to assist in the maintenance, improvement, and construction of local roads,” that amount totals $459.7 million for this year. A $36.5 million boost would increase that amount by 7.9%, which isn’t bad and very much needed in a time of significant Scottholes around the state.

It would also be the first time since Scott Walker and the Wisconsin GOP came to power in 2011 that the state would have an increase in such aids for 2 straight budgets. In fact, it wasn’t until Walker’s last, desperate pre-election budget that the amount of money going into the GTAs surpassed the amount that local governments got when Walker took office in 2011.

Then you go into Governor Evers’ DOT budget, and he is proposing an increase of $45.97 million a year starting in 2020, an even 10%. This is one of many areas where DOT spending would go up in Evers’ budget to accompany an 8-cent increase in gas tax, and the amount of $505.7 million in GTAs would be maintained for 2021.

So is Carpenter proposing a $36.5 million increase on top of that 10% bump that Evers proposes, or would it replace most of the 2020 bump on a one-time basis, allowing that Transportation Fund money to be used elsewhere (or banked)? That $36.5 million would also be the approximate cost of 1 cent increase in the gas tax, so maybe that gets phased in a bit for 2020 or something.

What’s also interesting is that Carpenter is asking for a transfer from the General Fund, when Evers’ budget gets rid of the transfers from the General Fund that had been going on for the last several years (including $41.6 mil in this fiscal year). Maybe that works on a one-time basis, but it leads the question as to what happens in future years, especially as Evers’ DOT budget spends $80 million more than it takes in for 2020-21, which depletes most of the money it carries over .

The other point I want to make on this $36.5 million “windfall” is that it is really small in the big picture of the state budget. It’s 0.2% of all taxes and revenues that are slated to be collected for the 2019 Fiscal Year, so it’s hardly a game changer for state finances. But Carpenter has a point in that the money might be a nice help if it gets targeted into one program in particular.

You know what's also going to benefit from Franco's win? The funding for the lottery itself, and what it can give away, as the added ticket sales adds to the bottom line for Wisconsin’s lottery fund. This article that came out before the record drawing of $1.6 billion in 2016 gives a good explanation as to how the proceeds from a multi-state game like Powerball get distributed, and some of it will come back to Wisconsin.

…As of Tuesday afternoon, the drawing had generated $2.265 billion in ticket sales, according to the Texas Lottery Commission, which is currently administering Powerball—a multi-state lottery in which 44 states participate. The largest portion of the money doesn’t go to education, or any other government program. It goes to the winners. That’s 50%, or roughly, at this point, $1.13 billion. (You may have heard the jackpot has reached $1.5 billion, but that is only if you take the 30-year annuity payout.) The retailers sold the tickets get 5% as commission, or just over $113 million. Another 5% goes back to state lottery administration. The rest, just over $900 million, goes to state governments, which gets allocated to each state based on their percentage of ticket sales, for government spending.

In Wisconsin, that "government spending" goes to property tax relief, and a 10% jump in sales in the 2018 Fiscal Year helped to increase the projected tax cut by nearly 40% for last year, and will keep the next 2 years at higher levels as well.

Projected property tax relief from Wis lottery
Dec 2017 $170.3 million
Dec 2018 $236.8 million
Dec 2019 (proj) $218.1 million
Dec 2020 (proj)$218.2 million

But another item that has boosted the Lottery Credit is $40 million in regular tax dollars that Republicans jammed into the Lottery fund starting last year to try to keep property taxes down. Maybe we could use that $36.5 million in state taxes that Mr. Franco will pay to be applied to the Lottery Credit instead, and save/use those General Fund dollars for something other than shell games - especially since the lottery is supposed to be self-sustaining.

Bottom line - while Manuel Franco is likely set for life to take care of any needs he may have, the same isn't true for Wisconsin state government despite the extra tax revenue his winnings may give. Nope, our capacity can only be meaningfully changed through law making or a great economic boom, and given how the ALEC-GOPs have generally refused to do anything to lead to either of these things, I wouldn't count on that changing in the near future.