Treasurer Goldberg Joins Committees on Ways and Means and the Executive Office for Administration and Finance for Virtual Economic Roundtable
BOSTON -- Today, State Treasurer Deborah Goldberg joined the Massachusetts' House and Senate Committees on Ways and Means and the Executive Office for Administration and Finance for a virtual economic roundtable to discuss the fiscal implications of the coronavirus (COVID-19) pandemic on the Commonwealth. Treasurer Goldberg discussed the challenges faced by our state and communities and how the Treasury continues to provide critical services, without comprising the important work of the office. Below are the Treasurer's remarks prepared for delivery:
Wednesday, October 7, 2020
As prepared for delivery: Secretary Heffernan, Chairman Michlewitz, Chairman Rodrigues, and members of the Committee, thank you for convening this Economic Roundtable to discuss the challenges faced by our state and our communities.
In these unprecedented times I hope that this update from some of the areas within the Treasurer's Office will give you helpful information and insight into revenue predictions as you begin to finalize the state budget. These granular building blocks inform the larger economic picture at hand. While none of us can predict the future of our economy, know that my office continues to work overtime to adapt to the current crisis. Pension Fund Economies and markets globally are severely impacted by the pandemic and widespread economic shutdowns. I want to assure stakeholders again that PRIM is fully operational and well-positioned to navigate this challenging market. The PRIT Fund continues to be healthy with no liquidity issues. We are fully able to meet our benefit obligations. In fact, I am pleased to report that despite a very difficult, volatile, and uncertain investment environment, the PRIT Fund net asset value grew by $1.5 billion (2.3% gross, 2.0% net of fees) in Fiscal Year 2020 to $75 billion. These gains are a result of a carefully constructed investment strategy that has consistently performed well in both up, and perhaps more importantly, down markets. While we have not yet received the Q1 numbers, markets were strong in the September quarter and we expect further positive returns.
The COVID-19 pandemic did lead to the sharpest sell-off in history. As you may recall, in just 20 days in March, the S&P 500 fell 34 percent. However, since the March lows, the market has staged the fastest-ever recovery from a major correction. But one must remember, as Former Chair of the Federal Reserve Ben Bernake has repeatedly stated, the stock market is not the economy. This overall economic crisis has caused severe damage and the challenges in restarting are enormous. It will likely take us a long time to fully recover and the fundamentals may have a very different "look". As Chair of the PRIM Board, I recognize the concerns and hardships that public employees, retirees and their families are experiencing as a result of these events. We expect and have planned for more volatility. During this crisis, PRIM will continue to monitor and manage the portfolio with prudence and care.
Massachusetts State Lottery Turning now to the Massachusetts State Lottery. As you may recall, sales of all Lottery products dropped sharply at the outset of the pandemic. For the first two weeks of April, in the midst of the stay-at-home advisory, Instant Ticket sales were down more than 30 percent, plummeting to their lowest level in at least the last 15 years. Weekly sales of Keno, popular at restaurants and bars, were down more than 50 percent. Overall sales in the months of March, April and May decreased by a combined $244.6 million compared to the same period in Fiscal Year 2019. Strong performance prior to the pandemic and solid sales in June helped to mitigate total Fiscal Year 2020 Instant Ticket sale losses, ultimately resulting in a $27.2 million (or 0.74%) decrease from Fiscal Year 2019. Keno sales, the Lottery's most profitable product, decreased by $76.2 million (or 7.2%) year-over-fiscal-year. Draw games experienced the most dramatic drop off. Mega Millions sales were down $78.6 million (or 50.9%) and Powerball sales fell by $62.4 million (or 47.1%).
In the face of these losses and significant operational challenges, the Lottery team and our dedicated retail partners adapted quickly to the new environment. As a result of our collective efforts, the Lottery generated an estimated $986.9 million in net profit for the Commonwealth in Fiscal Year 2020. At a time when we face mounting challenges, these resources are even more critical for the budgets of our cities and towns. While the Massachusetts Lottery experienced a 10.6 percent decrease in net profit in Fiscal Year 2020, states with online purchasing options have seen sales and revenue increases. In New Hampshire, online sales of Mega Millions and Powerball tickets are up a combined 100% Fiscal Year 2021 to date. Similarly, eInstant Tickets are up over 100%. Worth noting, sales of Instant Tickets at retail in New Hampshire are also up 20%! In Michigan, when comparing August 2020 to August 2019, the iLottery program saw a 132 percent increase in net gaming revenue. And in Pennsylvania, iLottery net gaming revenue increased more than 100%, while traditional sales at retail increased by over 7% in Fiscal Year 2020. Under the current circumstances, the Lottery projects $940 million in revenue for Fiscal Year 2021. If the Commonwealth does experience a COVID-19 resurgence and needs to reinstate retail restrictions to preserve public health, our customers' inability to pivot to online sales, will cause the Massachusetts Lottery to again see significant lost sales across all product lines. States with online lotteries will be better positioned to recover revenue in any such future crisis.
To keep current operations running, without interruption, the Lottery has had to undertake an extensive modernization effort, before its obsolete system fails. This requires migration of much of its core business functions from a legacy mainframe system to a new secure system. The legacy system is well beyond its useful life and should a failure occur, many of the Lottery's critical business systems will not be recoverable. This project is almost at completion, but required an additional $15 million capital authorization from the Legislature, which is now pending before the Economic Development Conference Committee. Capital funding will run out at the end of November. If the Lottery is unable to complete this project, the disruption to current operations will only compound the challenge of generating revenue for the state during this pandemic. As we manage ongoing uncertainty and technological changes, your continued operating and capital support of the Lottery is essential.
ABCC Back in the Spring, the pandemic and the necessary declaration of a state of emergency resulted in the abrupt closure of all restaurants and bars for on-premises consumption of food and alcohol. This unprecedented situation dealt a significant blow to the more than 9,000 licensed establishments in our state. Recognizing the strain on these licensees and their employees, the ABCC took immediate administrative action and issued an order relative to outstanding bills owed by impacted license holders. Working with the Massachusetts Restaurant Association and the Massachusetts Wholesalers, the ABCC implemented a payment plan for impacted businesses which served to alleviate shutdown-related cash flow constraints. Immediately, upon the shutdown, the agency was able to successfully transition to a 100% remote work plan with no interruption to operations. Since March 10th, the ABCC has held Zoom meetings and conference calls with more than 300 municipalities, along with industry organizations and attorneys. Through this effort, they have been able to assist over 1,000 individuals and provided substantial guidance and technical support to industry stakeholders. The agency continues to process all pending applications, respond to public record requests and subpoenas, and conduct both in-person and remote hearings regarding pending applications and adjudicatory matters.
As the Governor has issued and revised Executive Orders regarding the operation of licensees, the ABCC has immediately issued advisories providing clear guidance for both licensees and municipalities. In Fiscal Year 2020, the ABCC brought in $5.11 million. The outlook for Fiscal Year 2021 is not as strong. While too early to predict with precision, industry experts estimate that we may see upwards of 20-25% of retail licensees and 10-15% of state licensees not renew. Such a precipitous drop would result in a reduction of revenue of 10-15% for Fiscal Year 2021. The team at the ABCC will continue to monitor the impact of this pandemic on local businesses. We stand ready to work with you to find innovative ways to assist and revive these local and statewide economic engines.
Unclaimed Property Unclaimed Property anticipated a total reversion of approximately $81 million. Despite the many challenges posed by the pandemic, the Division exceeded expectations by over $20 million. The final Fiscal Year 2020 transfer to the General Fund totaled over $101 million. Looking ahead to Fiscal Year 2021, we have not made any adjustment to our projected reversion of $81 million. The Massachusetts Unclaimed Property Division continues to lead nationwide, and was uniquely positioned to pivot to remote work with no disruption to the customer experience. When we updated our database system and our public-facing website in 2016, we utilized the bidding process to include a move from an internal server based system, which could only be used on premises, to a secured-cloud-based system. This move enhanced our ability to have a trouble-free transition to remote work.
Employees have been working remotely since the beginning of March, with the same functionality as if they were on site. Because of this, I am happy to report that during this time we have reunited tens of thousands of individuals with over $54 million in unclaimed cash, along with millions of dollars in stock and mutual funds. Veterans' Bonus With your support, the Veterans' Bonus Division has launched a new $500 bonus for Massachusetts National Guard members that were activated to combat the COVID-19 crisis, without the need for any additional appropriation. Over the last two weeks, we have already received over 1,000 applications. Our team is hard at work processing payments and paying out bonuses. By visiting VetsBonusMA.com service members and Veterans can check their eligibility, apply for bonuses, and upload the required supporting documents from wherever they are.
Office of Economic Empowerment
The Office of Economic Empowerment [OEE] has worked proactively to adapt programming to meet people where they are: at home on their computers and phones. Our website offers COVID-specific financial literacy tools and resources. And, we are providing free online training and webinars on relevant topics. We continue to enroll families in the BabySteps college savings plan, with almost 50 percent (47.4 percent) checking the box on the birth certificate form. Over 2,500 accounts have been opened, and we have seen a continued interest in saving, despite the financial pressures of the pandemic. Cash Management Our cash management department has continued to operate at 100% to make sure our bank accounts are swept, and cash is moved uninterrupted to fund all of the Commonwealth's business needs. Working with our partners in the Administration and the Comptroller's Office, we monitor our daily cash position and will provide the cash flow letter once there is a clear budget picture for Fiscal Year 2021.
Operations Before I conclude, I want to take a moment to highlight the work of the incredibly dedicated people who work across the treasury offices. After the complete shut down was over, and with all safety measures in place, we began to bring back the majority of our staff on alternating schedules. There is no more than 25% of our team physically in each office at one time. And of course, those with extenuating circumstances have continued to work remotely. The decision to do so was not taken lightly, but our strategy has worked. With rigorous safety procedures and precautions in place, we strongly felt that as public employees we must be available and responsive to the people we serve. Conclusion Thank you again for inviting me to testify this morning. I look forward to many more conversations about these issues in the weeks and months ahead. I hope to collaborate with you, as we address these challenging times. I am happy to answer any questions.