This article studies the effects of earmarking state lottery profits for education. Because educational expenditures generally exceed the funds earmarked for education by a wide margin, nothing prevents state legislators from using earmarked funds to replace rather than augment funds that would have gone to education in the absence of earmarking. Conventional economic reasoning therefore implies that this policy should have no effect on overall educational spending. However, this study found that $1 of lottery profits earmarked for education increases current educational spending by roughly $0.79, whereas a nonearmarked dollar of lottery profits increases educational spending by only $0.43. Furthermore, the hypothesis that a dollar of profits specifically earmarked for noneducational uses has no effect on educational expenditures cannot be rejected. States that operate lotteries may want to reassess their existing legislation regarding the use of lottery proceeds given the economic implications of their earmarking policies. (Contains 21 footnotes, 4 tables, and 1 figure.)