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Court Tosses Challenge To N.C. Education Lottery Act

RALEIGH, N.C. (CN) - The North Carolina Court of Appeals threw out a challenge to the state Education Lottery Act on the grounds that it is not a revenue bill that has to meet constitutional mandates.

Under the 2005 Lottery Act, the state gave the North Carolina State Lottery Commission $10 million to run the state lottery. The law earmarked a percentage of lottery profits for educational projects, with at least 50 percent pledged to the "general public," 35 percent to the Education Lottery Fund, no more than 8 percent to lottery expenses and less than 7 percent to lottery-game retailers. The remaining revenue would be used to reduce class size and fund college scholarships.

The North Carolina Family Policy Council, a taxpayer group and four individuals sued the state, claiming the Lottery Act violates the state constitution by using the state's credit, through money in the state treasury, to pay out lottery winnings.

But the appellate court said that the Lottery Act is not a revenue bill, and that raising revenue alone does not meet the definition of a bill that strictly levies taxes.

"(U)nlike the compulsory nature of a tax, a toll and participation in the lottery are activities freely undertaken by citizens of their own volition," Judge Wynn wrote.

Judge Calabria dissented, arguing that the Lottery Act is a revenue bill that needs to pass constitutional muster.

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