The Legislative Audit Council released its review Tuesday of the South Carolina Education Lottery, how it's run and where the money it brings in goes. It found a few problems, but found that the lottery is following state law. Gov. Mark Sanford would like to see that law changed, though.

Looking at operations, the audit found that the lottery is controlling administrative costs, which have been less than the 15 percent allowed by law. The audit found that the lottery could further reduce costs with changes in the use of cellphones and vehicles. Lottery director Ernie Passailaigue says those steps have already been taken, with cellular costs cut by more than half.

As for spending lottery proceeds, the audit says, "Generally, lottery proceeds have been used as required by law." However, state lawmakers allowed some state agencies to ignore the law because of the state's budget problems. Specifically, "The state's school districts and South Carolina State University were allowed to use lottery funds for general operating purposes," which is not usually allowed.

The audit also found that the first $1 million in unclaimed prize money was not used to set up a program to prevent and treat problem gambling, as required by law. While the money was available since November 2002, the contract had not been awarded as of August.

That contract has been awarded since then, to the state Department of Alcohol and Other Drug Abuse Services.

While the audit found that the lottery is following the law, Gov. Mark Sanford would like to see the law changed. "We would love to see, in terms of big picture, more money go to early education, rather than later. The tragic reality is an astounding number of folks don’t make it through high school in South Carolina, so college is the least of their worries."

He also wants to add state sales tax to lottery tickets, to bring in more revenue.

But lottery officials researched that idea, and found that no other lottery state adds the sales tax to the price of lottery tickets. Minnesota includes sales tax as part of the one-dollar ticket cost.

Saskatchewan, Canada implemented a 10 percent sales tax on lottery tickets in July 1989. But the tax resulted in a 13 percent drop in ticket sales, so it was repealed just four months later.

Besides hurting sales, adding the sales tax to lottery tickets could "kill the goose that lays the golden eggs", as one lottery commissioner put it.

Powerball generates the most money for the SC lottery. But the multi-state association that runs Powerball does not allow states to add sales tax to the price of a Powerball ticket.

The state would have to ask for a waiver. Director Passailaigue says other states have asked and been denied. "If we did not get that waiver, then we could not be a part of Powerball. That’s about a third of our product mix right now."

That would mean a loss of millions of dollars for education, rather than the increase that adding the sale tax intended.