CALIFORNIA'S 20-year rush for lottery riches is fizzling, but unlike the first Gold Rush, victims of this slump -- which the state has kept virtually secret -- are students in every public school, college and university.

Interviews and documents obtained by ANG Newspapers show the sales decline in an already lackluster lottery is forcing the state-run operation to quietly campaign for the first big rewrite of the 1984 lottery initiative. It is a highly controversial and politically charged gamble that would give players more money and teetering schools less now -- but perhaps more later.

Although the lottery provides less than 2 percent of the educational budget, schools suffering major cuts due to the state deficit were able to fund nearly 12,000 teaching positions and buy almost 3 million textbooks with lottery proceeds last year.

Reorganization supporters insist that slashing schools' share of gambling revenue about 10 percent and giving it to prize winners would reignite lotto mania, generating more money for schools. In other words, schools would get a smaller slice of the lottery-sales pie but -- hopefully -- the pie would be bigger, so education would get more in the end.

"Obviously, if the pie is much bigger, you're going to get a much better proportion," said Randy Cheek, the lottery's legislative liaison. "This would be good for California schools."

But foes claim it's too big a gamble, despite the fact the lottery hasn't been the gold mine for schools that was promised by promoters two decades ago and even though it is outperformed by virtually all other states' lotteries.

"Schools are counting every penny they have and, while the lottery does not give schools a lot of money, we just can't risk anything that would take any money away from education at this time," said Becky Zoglman, a California Teachers Association spokeswoman.

The battle has pitted supporters such as the lottery, gaming-supply firms, the California Association of School Business Officials and independent grocers who sell tickets against opponents such as the CTA, the California School Boards Association and an anti-gambling group.

It has not only divided the education sector, but has split legislators, including the delegation from the Bay Area.

Sen. Don Perata, D-Oakland, carried the lottery's proposal in a bill for a time, with some of his Democratic colleagues from the Bay Area voting against it, but has since handed the measure off to a Southland assemblyman.

The new bill is pending in the Assembly Governmental Organization Committee and is expected to face its first legislative test within weeks as the Legislature works toward its August recess.

Many in the education community have taken no position on the proposal, despite the lottery's pitches -- everyone from officials in the Alameda County Office of Education to those at the state Department of Education.

HE DEBATE has been spurred by the slump in lottery sales and resulting decline in allocations to education, though state officials haven't been open about that trend.

In the lottery's official report to the public for the last full fiscal year, 2002-03, director Anthony Molica said the state-run gambling operation "sold almost $2.8 billion in tickets and contributed over $1 billion to education for a third consecutive year."

The annual report details 2002-03 figures but contains no side-by-side comparisons with other years to allow the public to easily determine the year-to-year changes in sales or allocations to education.

On its Web site, the lottery states that "lottery ticket sales started out at about $1.8 billion in the first year, growing to a peak of $2.6 billion in 1989, declining until 1992, and have steadily increased since that time." And a special revenue document the lottery compiled to promote the legislation declared that "total sales at the California lottery have been flat since fiscal year 2000-01."

Actually, the $2.781 billion in 2002-03 sales was down $115 million from $2.896 billion in 2001-02; and down $113 million, from the $2.894 billion in 2000-01. In a document sent to the state Department of Education, the lottery predicted its sales for the current, 2003-04 fiscal year, would hit $2.8 billion -- again below the 2000-02 years.

Allocations to schools actually have fallen from $1.111 billion in 2000-01, to $1.064 billion in 2001-02, to $1.019 billion in 2002-03.

And under the lottery's forecast for the current fiscal year, which ends June 30, the allotment to education would fall again, to $1.002 billion.

Lottery experts point out the unpublicized slide isn't unique.

The California State Lottery, which kicked off its first game in 1985, has experienced plenty of ups and downs in its sales and in contributions to education, as is typical in the state-lottery industry throughout the nation.

But the slide in recent years has upset some in the education sector more because it has coincided with state funding cuts triggered by ongoing state deficit woes. That concern has been coupled with longtime criticism of the lottery for raising less per capita than many other state lotteries.

The lottery, in the special revenue document obtained by ANG Newspapers, itself details the problem. Scratcher-ticket sales per capita for nine other large states, with higher prize payouts, total $66 annually, compared with $35 a year in California.

"We have pushed and pleaded with the lottery to do something about the awful level of revenue they generate compared to virtually every other lottery in the country," said Kevin Gordon, executive director of the California Association of School Business Officials.

In figures adjusted for variables, K-12's lottery income dropped to $125 per student in the 2002-03 fiscal year, down from $135 per student in the 2001-02 fiscal year and $144 in the 2000-01 fiscal year, according to information supplied by the lottery, the state Department of Education and the Office of the Legislative Analyst.

Under the lottery's projection for the 2003-04 fiscal year, that will drop again to $120 per student.

At the same time, lottery revenue, as a total percentage of K-12 budgets, has fallen from 1.8 percent in 2000-01 to 1.5 percent in 2002-03.

Although the lottery provides a small portion of the overall school budget, declining revenues can mean million-dollar losses to school systems already suffering cuts due to the state deficit.

In Alameda County during the last fiscal year, for example, the lottery still generated a total of more than $35 million for K-12, with nearly $6.8 million going to Oakland Unified, $3.5 million to Hayward Unified, $4.2 million to Fremont Unified and $1.8 million to Pleasanton Unified. The lottery delivered a total of more than $25 million to Contra Costa County schools, nearly $14 million to schools in San Mateo County, and more than $18 million to San Joaquin County schools.

SCHOOLS RECEIVE the same per pupil funding level from the lottery, based on average daily attendance of students in each district. Schools have reported that the vast majority of lottery funds -- about 77 percent -- are spent on teacher salaries and benefits, and the rest on textbooks and other items.

The lottery figures its funds -- intended to supplement regular education funding -- provided school districts in 2002-03 with the equivalent of 11,517 full-time teachers and the ability to purchase 2.9 million textbooks.

The trend of spending lottery money on teachers' salaries developed over the past two decades, under pressure from teachers' unions and against the advice of a broad array of officials and educational experts who warned against applying fluctuating funds to ongoing expenses.

At least 34 percent of the lottery's total revenue from its six different types of games must go to K-12 education, community colleges, the California State University system and the University of California. And officials in higher education, also suffering deficit-driven cuts, say they need the money as much as K-12.

Proposition 37, engineered by gambling-supply firms and approved by 58 percent of the California electorate on Nov. 6, 1984, also requires that half of the lottery's revenue be returned to players as prizes and up to 16 percent be used for administration of the games.

But the lottery-authorizing constitutional amendment allows legislation altering its contents on a two-thirds vote if it furthers the benefits for education.

Under the latest version of the lottery's proposed revision to foster lotto mania, the prize percentage would climb to no more than 62 percent and schools' share would drop to at least 25 percent, leaving the remaining 13 percent for administration.

To ease foes' fears that the experiment could fall short of its goal of increasing contributions to education, proponents have included a guarantee that education support won't drop below the $1 billion allocated in recent years. If it does, the lottery has vowed to make up the difference from its relatively slim administrative budget.

Perata, the Senate majority leader, carried the first version of the legislation.

"I introduced it as a favor because, I thought, 'We have the lottery, we ought to get the most money we can out of it,'" Perata said.

The proposal split both Republicans and Democrats in the upper house. Of the Democratic Bay Area delegation, Perata, Senate leader John Burton of San Francisco and Sen. Liz Figueroa of Fremont voted yes, while Sens. Jackie Speier of San Mateo and Byron Sher of Palo Alto voted no. With the path in the upper house apparently blocked, proponents then radically switched tactics, asking a Republican in the lower house to carry the bill. The measure, by Assemblyman George Plescia of Poway, has yet to face its first legislative hearing.

THE LOTTERY and bill supporters -- such as GTECH Corp., an East Coast-based lotto machine maker that's pouring hundreds of thousands of dollars into lobbying for the measure -- insist bigger jackpots would bolster total lottery sales. "We've said from our experience throughout the world that this is something that would amend the lottery act to allow for greater prizes, which really generates higher player interest," GTECH spokesman Bob Vincent said.

"In California, this could be worth literally hundreds of millions of dollars more to education."

Two of the supporters stand to gain financially themselves -- GTECH, makes lotto machines that could be in greater demand, and the California Independent Grocers Association, whose members make money off ticket sales.

The lottery and other supporters point to, among other things, California's own successful experiment with boosting prize payouts for scratcher tickets and balancing out the overall required formula with funds from other games.

Meanwhile, foes of the bill -- like some school officials and the CTA, whose members get most of the lottery's education proceeds -- want greater assurances that the change affecting the entire lottery would be lucrative for education.

"We would like the guaranteed minimum to be based on a per-student amount," said Rick Pratt, a spokesman for the California School Boards Association. "If we just got that flat amount (the $1 billion guarantee) but enrollment grows, then we'll actually wind up getting less per student.

"If the lottery will amend the bill to guarantee us an amount per student, then we'll support it."

Another sector opposes the bill simply because of the increased gambling portrayed by supporters. The California Coalition Against Gambling Expansion says it would help make California the gaming capital of the world.

Despite the opposition, the lottery says it is pressing ahead, talking with educators, lawmakers and others, with high hopes that the proposal is ripe for acceptance.

"We feel this is a time when schools are having to cut back, not that we're going to be the panacea for all these school districts," Cheek said, "but we can perhaps save some programs and save some jobs."