December 7, 2017

State's lottery revenues falling

After crossing the $1 billion mark in fiscal 2017, State Lottery profits will likely dip below that in the near future, Treasurer Deb Goldberg told lawmakers at the first hearing on the fiscal 2019 budget Wednesday.

Lottery profits will likely fall to $968 million in fiscal 2018 and $965 million in fiscal 2019, Goldberg told the House and Senate Ways and Means committees. Goldberg said one reason for the dip is anticipated payments on winning tickets from prior years.

Plenty of people dream about what they would do if they won the lottery. Goldberg, who oversees the state-sponsored games of chance, has designs on a particular lotto machine that spat out a $758.7 million Powerball ticket last August.

"I know we're fighting over where it's going to live, but I think I have a little leverage. It will be in my office after it tours the state. Its name is Lucky," Goldberg said at the hearing in the Gardner Auditorium. "I welcome all of you to come visit it because that machine and all of the rest of them will end up in the lottery museum that probably someday will be built in some state somewhere."

Lucky is an older model of machines that are on their way out as part of a $65 million effort to modernize Lottery terminals at convenience stores, gas stations and restaurants around the state.

Other state lotteries have built online platforms for wagering and Goldberg wants legislative authority to do the same in Massachusetts but she did not make a plug for her proposal in testimony delivered to two of the most powerful lawmakers – House Ways and Means Chairman Jeffrey Sánchez and Senate Ways and Means Chairwoman Karen Spilka - and others on the committees that play a role in most major policy decisions.

Sen. Eileen Donoghue, a Lowell Democrat, invited Goldberg to discuss online gaming, asking if the declining revenues were attributable to a "lack of modernization," and later specifically noting Goldberg's online lottery proposal (H 26), which has been pending before the Committee on Consumer Protection and Professional Licensure for all of 2017.

"We are continuing to submit that request, yes," Goldberg responded. She said she plans to show data that online games should "increase traffic" to brick-and-mortar stores. The treasurer said those stores would be an integral part to any online venture, but convenience store owners have resisted legalization of online Lottery sales out of concerns that they will lose customers.

The Lottery has dipped its toe into online games, offering customers a second chance app where they can check whether a ticket they bought at a store is a winner on a second-chance drawing. Winners would need to visit a store to cash in, according to a Treasury aide, who said the Lottery is doing everything it can within the bounds of the law to build an online presence.

Instant tickets, which make up more than 70 percent of Lottery sales, will "continue to flatten or decline year over year," Goldberg reported. She said Keno revenues are currently up more than 7 percent so far in fiscal 2018.

"We are closely watching the competition, especially near our northern border where some of our highest-producing retail agents reside," Goldberg said. "That includes New Hampshire, where seven communities recently voted to allow Keno, and their Legislature authorized online gaming as part of their state budget this past year."

Lottery profits provide funding to cities and towns, which rely on state aid to carry out functions of local government. The panoply of scratch tickets, Keno contests and multi-state number drawings that make up the Lottery will get more competition for the Massachusetts gambling dollar when MGM Springfield and Wynn Boston Harbor open casinos in Springfield and Everett in the next year or two. The Lottery sells tickets at Plainridge Park Casino, a horse track and slots parlor. Goldberg said the Wynn resort would have greater impact.

"Plainridge is not Wynn. Wynn is going to be very exciting, shiny. It's going to have every product line," said Goldberg. She said the Lottery is planning "enormous support" for retail agents that will compete for customers nearby casinos.

The state's pension fund has reached $70 billion after a 13.2 percent return in fiscal 2017, said Goldberg, who suggested the anticipated annual rate of return would probably need to be lowered from its current 7.5 percent. Changing the return rate could alter the unfunded pension liability and funding schedule. Goldberg told the News Service she couldn't say what those impacts will be until after receiving a New England Pension Consultants study due in January.

Before the committee, Goldberg said the state has a "large" unfunded pension obligation but "we are on track to be fully funded by 2037."

Administration and Finance Secretary Mike Heffernan was Goldberg's Republican opponent in 2014, losing to the incumbent Brookline Democrat 55-41. On Wednesday Heffernan praised Goldberg from the dais, calling her "a good friend and a good treasurer."

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