NewsLocal NewsI-Team


Sports betting proceeds will flow to youth sports, but no one really knows how yet

'This is a work in progress'
Posted: 3:38 PM, May 02, 2022
Updated: 2022-05-02 19:38:42-04
Campbell County 54, Conner 28

CINCINNATI — You can go a long way on lessons learned from Little League Baseball, State Senator Cecil Thomas explained while describing the 1960s summers he played for Thomson MacConnell Cadillac at Owl’s Nest Park in Evanston.

“My coach, Mr. Brown, became a surrogate father,” Thomas said. “He taught me and all the other guys on the team responsibility. And baseball was secondary. If you wanted to play baseball you had to follow these rules. And I learned a whole lot in terms of, not just how to play the game but life in general.”

That’s why Thomas is proud he played a role in making Ohio the second state to use sports betting as a funding source for youth sports. Thomas served on the Senate Select Committee on Gaming, where he embraced the sports-funding idea in hearings. He also co-sponsored the sports-betting bill that passed in December and will lead to thousands of new gaming options by January 1, 2023.

The new law requires 98% of sport-gaming tax revenue to flow to a fund that supports public and private schools. Half of the money must be spent on K-12 education and the other half on interscholastic sports and extra-curricular activities.

It’s the first time Ohio lawmakers identified a specific funding source for extra-curricular activities, said Stephen Dyer, CEO of Education Policy Solutions, an Akron-based consulting firm. That makes it a big opportunity for high school athletic programs, not to mention bands, drama and chess clubs.

“It means that there’s significant revenue you don’t have to come up with somewhere else,” said Dyer, a former lobbyist for the Ohio Education Association. “It doesn’t have to come out of the hide of some other budget priority.”

But Thomas and Dyer share one major concern: The funding is subject to future appropriations by the Ohio General Assembly.

“They always say the devil’s in the details,” Dyer said. “It would be nice to know how it’s going to be distributed.”

It’s a simple question that’s surprisingly difficult to answer, despite calls and emails to Ohio’s House Speaker and Senate President, the Ohio Lottery Commission and Ohio Casino Control Commission. The Ohio Department of Education referred us to the Office of Management and Budget, which sent us a summary and copy of the bill. The bill says distribution of the funds will be “determined in appropriations made by the General Assembly,” but doesn’t say what process will be used to make those determinations.

“This is a work in progress,” said Thomas. “This has never been done before.”

Cecil Thomas played Little League Baseball at Owl's Nest Park in the 1960s.

But his Little League experience taught him the details matter, like the time he got picked off first base after drawing a walk in a tight game.

“I’ll never forget that play,” Thomas said. “It was a learning experience. Always pay attention to what you’re doing.”

So, when lawmakers return from Spring break May 18, Thomas plans to “initiate the conversation” with Sen. Kirk Schuring, R-Canton, who chaired the Senate Select Committee on Gaming. “There should be some continuous work on the specifics of what does this all mean? How should the money be distributed? Giving the Ohio Department of Education guidance how to do this. But most of all we want to be very transparent.”

How will it work?

The WCPO 9 I-Team is covering the expansion of gambling in Ohio because it will make state-sanctioned betting available in thousands of new locations and millions of smart phones in the next 12 months. Beyond the 9,000 new gaming machines now possible through an e-Bingo expansion for veteran and fraternal organizations, the Ohio Lottery aims to make 2,500 sports-betting kiosks available in bars and restaurants by year end. And the Ohio Casino Control Commission is writing the rules that will allow 25 online operators to partner with or compete against 40 retail, or brick-and-mortar sports books.

This expansion has the potential to create jobs and expand business opportunities for thousands of Ohio companies. It also has the potential to increase gambling addiction: A 2017 study by the Ohio Department of Mental Health estimated the number of at-risk and problem gamblers doubled after casinos and racinos opened between 2012 and 2014.

And then there’s that question about gaming taxes: How should sports betting proceeds be distributed?

Thomas would like to see public hearings on that question, leading to an approach that targets funding to the programs that need it most.

“I’ve seen schools that come to the games, and they have everything that you could ever imagine,” he said. “I would look at the most needed to the least needed.”

Dyer thinks funding should be removed from the appropriations process and linked to Ohio’s Fair School Funding Plan. That’s a new funding model for Ohio schools, approved by lawmakers last June after years of debate and study.

“It’s just going to be caught up in the sausage making of the biennial budget process, which is not really very pretty,” Dyer said. “I would prefer it was distributed through a formula that’s already been worked on for five years than to come up with something half-cocked at the last minute.”

Three gambling pots for education

The Ohio Legislative Service Commission estimates sports betting will generate $24 million in tax revenue in the 12 months ending June 30, 2024, the first full year of operation. But experts say the tax tally could reach up to $90 million per year once Ohio’s sports-betting market fully develops in 3 to 5 years.

The new sports-betting law allocates 2 percent of those tax dollars to problem gambling services and allows the Ohio Tax Commissioner recover administrative costs. The remainder goes to the sports gaming profits education fund, where it awaits future appropriation decisions by lawmakers.

That means the fund will likely make at least $11 million available each year to both education and extra-curricular pursuits. Thus, Ohio’s youth sports funding could exceed the $5 million a year that New York pledged from sports gambling taxes to a nonprofit grant program operated by the state’s Office of Children and Family Services.

Whatever the amount, the new sports betting fund will likely be the smallest of three gambling pots Ohio uses for education. Ohio Lottery profits contributed $1.3 billion to the Ohio Department of Education last year, accounting for 11% of all state expenditures. The Ohio Casino County Student Fund provided $106 million to Ohio school districts in 2021, based on student population estimates certified by the Ohio Department of Education.

The lottery and casino funds were identified as “potential models” that lawmakers could follow when they distribute sports betting revenue to schools, according to an April 27 memo to Rep. Bill Seitz, R-Green Township from researchers with the Legislative Service Commission.

“Under the Ohio Constitution, 34% of the revenue from the state’s tax on casino gaming must be used for education,” said the memo. “Each school district has the discretion to determine how its distribution is used, as long as it is used ‘to support primary and secondary education.’”

The Ohio Constitution also mandates that lottery profits be spent on “elementary, secondary, vocational and special education.” But the General Assembly disburses that funding in budget appropriations.

“The vast majority of lottery profits are combined with funds from (Ohio’s general fund) to support the foundation aid formula, the main source of state funding for public school operating costs,” the memo said. “Other appropriations made using lottery profits in the current biennium include funding for the Quality Community School Support Program, per-pupil funding for community and STEM school facilities, and the Accelerate Great Schools program.”

Dyer said lottery profits have been used by lawmakers in the past as an excuse to cut general fund contributions to schools. He worries the same thing will happen with sports betting proceeds. In addition, the Fair School Funding Plan was designed to address decades of inequities between school districts with high real estate values and those without.

The plan ties funding to the actual cost of educating a student, including transportation, mental health services and extra-curricular activities. Although he sees it as a big improvement over past education-funding approaches, Dyer said lawmakers failed to fully fund the plan in last year’s budget. That’s why he thinks it makes sense to dedicate the new sports betting proceeds to the Fair School Funding Plan.

“They have a nice roadmap to do this effectively,” he said. “There’s a line item in there for athletic co-curriculars. It’s about 160-170 bucks a kid. It’s not fully funded right now. Put that money in there, fully fund it right away and make things a lot easier for fully implement the whole plan in the next budget cycle.”

That’s the way he’d like it to work, but it isn’t what he expects.

“They tend to wait ‘til the last minute to do anything,” Dyer said. “Realistically, it’s probably going to get taken care of in the budget next year. School districts will find out a day before they have to implement it. That’s my guess.”