Experts weigh-in on lottery

September 13, 2017

By Bill Britt
Alabama Political Reporter

Soon after taking office, Gov. Kay Ivey disbanded the Alabama Gaming Task Force along with other commissions authorized by former Gov. Robert Bentley. Ivey’s administration saw the gaming committee as another way to toss a thorny issue on an ever-growing trash heap of legislative avoidance. According to several members speaking on background, the task force was never going to offer a concrete recommendation but merely a laundry list of options. Over the next several months, The Alabama Political Reporter will publish a series of interviews with lottery experts to understand how to best implement a lottery.

APR will not seek moral justification for a lottery or gambling, as the state already has gaming at three large casinos operated by the Poarch Band of Creek Indians and a couple of smaller operations in Macon and Greene Counties.

APR aims to offer some of the hard-won wisdom gained by those who have established lotteries in other states, as well as industry specialists who understand the most efficient ways to practice it.

Recently, APR spoke with Charles McIntyre, the executive director of the New Hampshire Lottery Commission and current leader of The North American Association of State and Provincial Lotteries and with Rose Hudson, President/CEO of the Louisiana Lottery Corporation.

“Most lotteries are started because there is either a need for revenues or there’s a need to stop something that’s not okay,” said McIntyre, who served as a state prosecutor before heading New Hampshire’s 50-year-old lottery.

There is little doubt Alabama’s government needs more revenue as the state struggles to pay for essential services. There is another problem: tribal gaming operated under federal regulations is exempt from paying taxes. Add to that the confusion, and some would say dishonesty brought on by former Gov. Bob Riley’s bingo wars, and the problem grows even larger.

On two separate occasions, McIntyre testified before the task force sharing his insight on gaming and what New Hampshire learned over its five decades of operating a successful statewide lottery. McIntyre advises the state be clear on oversight and accountability. His ideas are shared by Hudson, who believes, “The structure of the lottery is, first and foremost, the most important thing.”

Hudson and McIntyre agree the legislative process must be transparent to give voters confidence, while not yielding to temptation to kill the lottery through overly detailed constitutional amendments.

To enact a lottery, the state Legislature must pass legislation that allows the people to vote to amend the state’s 1901 Constitution, which currently outlaws games of chance. Section 65 states, “The legislature shall have no power to authorize lotteries or gift enterprises for any purposes, and shall pass laws to prohibit the sale in this state of lottery or gift enterprise tickets, or tickets in any scheme in the nature of a lottery; and all acts, or parts of acts heretofore passed by the Legislature of this state, authorizing a lottery or lotteries, and all acts amendatory thereof, or supplemental thereto, are hereby avoided.”

During the 2016 Legislative Session, Sen. Jim McClendon, R-Springville, offered a 27-word bill that would have amended Section 65 to remove the prohibition on a lottery. However, after weeks of wrangling, special interests killed the legislation by adding paragraphs of so-called clarification which divided lawmakers.

Hudson recalls a similar experience in Louisiana when she worked for the state Legislature during the process that led to authorizing the state’s lottery.

“I was working for the Legislature when the lottery passed, so it’s kind of interesting watching from another perspective,” said Hudson. “It was this kind of perfect storm of legislative will that moved it through the process without the bill becoming tainted, without it becoming amended, you know, to do all kinds of nefarious stuff that can happen during a legislative session.” Both Hudson and McIntyre agree that passing a clean constitutional amendment is the key to a lottery’s passage in each state.

Like Alabama, the States of New Hampshire and Louisiana required a vote of the people to start the process toward offering a statewide lottery.

“I loved the way it happened here [in New Hampshire],” said McIntyre. “It was very local, controlled, very grassroots, which is pretty typical for New Hampshire.”

Once a constitutional amendment passed authorizing a lottery, “each city and town had the opportunity to say yes or no to it,” said McIntyre. “And most, the vast majority said it was okay. So for us, it’s been, you know, five decades of operations. It’s just a part of the universe for us now.”

In New Hampshire, all lottery proceeds go to education. Before a lottery was enacted, each school district was responsible for funding its local schools without aid from state government. Since its start, New Hampshire’s lottery has contributed $1.7 billion to education.

Hudson says, in practice, Louisiana’s lottery revenues went to schools, but it was not new money added to the education budget. There was a lot of debate in the Louisiana Legislature on where the funds should go. “There were so many calls on that money during debate and the hearings. And it happens it every state, you know, anything from general funds to education to the elderly, veterans, etc. They could not come to a consensus on the dedication,” Hudson added. Eventually, Louisiana lawmakers passed legislation dedicating lottery funds to education, something Hudson believed should have been part of the original enabling bill. “States that have started lotteries after us really learned, lessons from their older brothers and sisters,” said Hudson.

Both Hudson and McIntyre agree that a lottery’s governance is of utmost concern, not only to make sure there is a regulated system which operates beyond reproach, but also has the flexibility to change with the times.

“If the state passes a lottery the first thing is to do is hire someone who knows what they’re doing, who’s done it before,” says McIntyre. He believes there should also be, “[S]ignificant oversight in the Legislative body, whether it’s a joint committee or another specific group of the Legislature, to make sure that they’re doing everything right.”

Like McIntyre, Hudson thinks setting parameters is essential to long-term success. “The structure of the lottery is, first and foremost, the most important thing,” says Hudson. “I think one of the things that Louisiana did right was setting our lottery up with a corporate structure, with the appropriate checks and balances.” Louisiana’s lottery corporation presents its budget to a joint legislative committee once a year, and its books are audited by the legislative auditor. “They don’t deal with our budget like a state agency in terms of combing through it and making amendments,” said Hudson. “It’s an up or down vote.” Hudson says she uses the presentation as a “kind of a state of the lottery opportunity.”

She also has to receive legislative approval to add new games, but it’s a very streamlined process. “If we are going to initiate any new online games, so let’s say, there’s a multi-state game called Win for Life, if we wanted to launch, or join that, we would have to go to the oversight committees.”

In New Hampshire, the lottery is audited seven months out of the year. “Auditors visit my building, go through all of our books, everything we spent,” said McIntyre. “People need to know the operation is legit.”

McIntyre and Hudson said they enjoyed coming to Alabama and offering what they learned over the years.

“Lotteries are borne out of the sensibilities and the sensitivities of every state, so they’re crafted each differently because they reflect the people of each state,” said McIntyre. “So, what works one place, doesn’t work another place,” but he believes there are good models Alabama can draw on for the best practices. Hudson also sees the wisdom in learning from others examples and finding what works best for that state.

Passing a clean constitutional amendment, setting appropriate oversight and understanding the types of games that work well with the state are all important factors that lead to success.

© Copyright 2017 Alabama Political Reporter