As prepared for delivery:
Chair Ferrante, Chair Lesser, and Members of the Committee, thank you for the opportunity to contribute to this very important conversation. I appreciate how thoughtful and deliberate this committee has been in its research and approach to such a complex issue.
I know that you have heard a lot about the implementation of sports betting nation-wide. Massachusetts now has several different examples from which to learn and improve upon.
Sports betting is currently up and running in eight states [Nevada, New Mexico, Mississippi, West Virginia, Pennsylvania, New Jersey, Delaware, and Rhode Island] and in three of these states, the state Lottery oversees its operations [Delaware, West Virginia, and Rhode Island].
One of my primary responsibilities, as your Treasurer, is to ensure a consistent and growing source of unrestricted revenues to all 351 of our local communities.
Additionally, I believe in a vibrant business community that increases economic growth and potential revenues to our state.
In the case of new and competing forms of gaming, I hope that as this Committee contemplates legalizing sports betting and the continuing operations of Daily Fantasy Sports, you take a look at its potential revenues to the state and develop a balance that enables the Lottery to continue to deliver to our cities and towns.
I just spent time last week in Rhode Island in my role as Senior Vice President of the National Association of State Treasurers. It was very interesting to hear about sports betting there.
Although it was great for us here in Massachusetts when the Patriots won, tax collectors in Rhode Island felt quite differently. Their state’s sports book lost $2.35 million on that game. And overall, their tax revenues have fallen far short of projections. They expected to generate more than $1 million per month through sports betting, but have actually only realized $50,000 per month.
And the other states are no different. West Virginia has netted a quarter of projected monthly tax revenue. Mississippi and Pennsylvania are taking in half.
And in West Virginia, a contract dispute has resulted in tax revenue of just $862,000 for September 2018 through March 2019. That falls far short of the annual projection of $5.5 million.
While sports betting certainly presents an exciting business opportunity for entrepreneurs, it is not a panacea for delivering consistent local aid.
Their businesses are profit driven which is not a bad thing. However, when we at the Lottery refer to “profits”, those profits translate to an additional aide in the classroom, managing snow and ice in a tough year, public safety, or numerous other needs of our local communities.
When the Legislature introduced casino gaming, the legislation required that prior to an applicant receiving a license, they were to present a plan to mitigate any impacts on the Lottery and partner with the Lottery on cross-promotion.
So far we have found that this framework has resulted in a productive – not to mention profitable – relationship. The Plainridge slot parlor is one of the Lottery’s highest performing retailers. We hope to see similar results at some point at MGM in Springfield, and also at Encore in Everett when it opens this summer.
I respectfully request that the Legislature establish the same framework for the Lottery’s relationship with respect to sports betting and daily fantasy sports operators. It is critically important that the Lottery be held harmless in order to protect critical local aid dollars to cities and towns.
Additionally, the expanded gaming law also required casino licensees to contribute, alongside the Lottery, to the Public Health Trust Fund. In partnership with the Department of Public Health, the Trust Fund provides resources to study and address problem gambling behavior. The Legislature should require sports betting and daily fantasy operators to join us in these important efforts.
Also, the Lottery through its Intercept Program is able to collect from prize winners any unpaid taxes and debt owed to the state, as well as child support owed to families. In fact, in 2019 YTD we have collected $1,043,820 from 1,277 people. Since this program’s inception, $19.6 million has been captured. This program is unique in its application.
As the Committee considers the continued operation of daily fantasy sports and whether to allow online and mobile sports betting, I would like to renew my request for the authorization to bring the Lottery online.
When I came into office four and a half years ago, having been a local elected official, I fully recognized how critical the Lottery was to all our communities. I immediately began to explore a broad range of ways to increase profits.
We rationalized business operations and made significant investments in our retail partners. We better utilized and deployed our marketing strategies and thanks to a $40 million technology upgrade approved by the legislature, we replaced outdated equipment – installing interactive digital terminals at 7,500 retail locations across the state.
The Massachusetts Lottery is the most efficient in the country. We spend less than 2 percent of revenues on administrative costs [$100.3 million in FY18].
And these efforts have translated into a consistently strong return to our local communities. For the fourth straight year, we topped the $5 billion mark in gross revenues with $5.29 billion in sales. Two years ago, we broke the $1 billion mark in profit – a personal goal of mine – and it looks like we may break the $1 billion mark again this fiscal year.
We are proud of the Lottery’s accomplishments. It is high-performing and well-positioned in an increasingly competitive environment. Yet even as we continue to deliver strong numbers, growth has not kept up with inflation, and the need for resources at the local level. To continue to perform at our best, we need the flexibility to meet the demands of a changing marketplace.
The gaming and entertainment environment is different than at the Lottery’s inception in 1972. It is now a very mature business model, and although we will continue to maximize performance and deliver to our communities, we must do more. Without the authorization to evolve with a changing digital marketplace, the Lottery’s ability to deliver unrestricted local aid will deteriorate.
The Lottery needs to go where new AND old customers are: online and on their phones.
We need to provide the Lottery with the tools and resources necessary to keep or win these customers, utilize digital marketing, and provide frictionless transactions through cashless purchasing options.
I understand full-well that progress will not be realized without partnership. As a former retailer, I want to make sure we enhance the business of our retailers too, particularly our convenience store operators and gas station/quik-marts. Done correctly, an online Lottery will help them as well.
We have already begun conversations with other states – Michigan and Pennsylvania in particular – to learn more about how iLottery has enhanced retail sales, which it has.
In Michigan, retail sales have grown alongside online sales. And in Pennsylvania, retail sales have grown by 7 percent since the introduction of an online Lottery – outpacing previous growth.
I am confident that we can achieve similar results here in Massachusetts.
I would like to thank you all again for your time and attention this afternoon. My office and I are available to assist you in any way and we look forward to continuing those strong partnerships moving forward.
I welcome the opportunity to continue this conversation and am happy to take any questions that you may have.