Last of three parts

COLUMBIA — Derrick Ray watches customers buy lottery tickets and has mixed emotions.

As manager of Columbia’s 4-Corners Shop ‘n Save, a small grocery in Washington County, he knows the lottery is good for business. Last year the store sold $237,000 in draw games and instant tickets, or about $488 for every person in town. The store receives commissions and sometimes bonuses. And many who buy lottery tickets also pick up a Slim Jim, a pack of cigarettes or even a week’s worth of groceries.

But Ray also sees downsides.

“We must have 20 to 25 regulars who buy every day,” he said. “Sometimes I feel bad selling those people tickets. I guess I shouldn’t. It’s their choice, right?”

Such questions about the costs and benefits of Maine’s state-run lottery have received little public scrutiny. In part, that’s because the lottery operates like an independent business within state government, making most decisions internally, with minimal legislative oversight and an eye toward the bottom line, interviews and documents revealed.

“They basically run their own business,” said state Rep. Louis Luchini, D-Ellsworth, chairman of the legislative committee that oversees the lottery. “From an oversight perspective, they’re authorized to more or less do what they want.”

At the same time, the lottery generates $50 million annually for the state’s general fund, 1.5 percent of the total. That revenue, which otherwise would need to come from higher taxes, has shielded the lottery from the kind of legislative probing directed at most state agencies, which are drains on the state budget.

But the lottery has real costs for the poor, addicted and unemployed, a Maine Center for Public Interest Reporting investigation has found. An analysis of lottery sales revenue, examined in conjunction with Cornell University, shows that Mainers living in towns with low incomes and high unemployment spend far more on lottery games than those living in the most affluent communities.

Officials emphasize that many of the programs funded by lottery dollars are used to pay for services important to all Mainers, from conservation to education.

“The question I would pose, and I’d say this to a legislator: If you want to get out of the business of the lottery, or spirits business, you’ve got to be able to replace the lost revenue,” said Tim Poulin, the lottery’s deputy director. “Where are you going to find that money?”

MANY MORE WINNERS THAN LOSERS?

The winners far outnumber losers, lottery officials said.

“When you play the lottery, everyone wins. Retailers win. And so does Maine’s general fund,” Poulin said.

Since 1974, the lottery has paid out $2.8 billion in prizes to its players. Store owners who sold winning tickets have received $327 million in commissions and bonuses. And the general fund, the state’s primary operating budget, has taken in more than $1.1 billion, according to the lottery’s December 2014 financial statement.

Maine’s lottery has 23 full-time employees, plus a director and deputy, officials said. Sixty percent of its revenue goes back to the players in prizes ranging from a few dollars to more than $100 million.

“Some of my own friends say ‘You’re worse than a casino,’ ” Poulin said. “But actually, we’re better. The percentage we give back to players is more than a casino might provide.”

The game’s losers, however, receive much less attention.

None of the lottery’s $230 million in annual sales revenue is dedicated to studying, or defraying, the lottery’s social impacts on Maine’s poor, unemployed and working class. The state does not know how many people are addicted.

Former Republican lawmaker Peter Mills, who paid close attention the state’s involvement in gambling over 15 years in the Maine Legislature, said the money generated by the lottery has made it nearly immune to scrutiny.

“The state is drunk on the revenue,” Mills said. “The political backdrop is, no one cares about these people. They have no constituency. The fact that this money should be spent on groceries for their children doesn’t seem to matter.”

POLITICIAN’S DREAM – FEW COMPLAINTS

Many states, recognizing these well-researched pitfalls of a public-run lottery, earmark sales revenue for education and other aid programs, with an eye toward making a “vice” pay for a public good, according to a 2007 study of state lotteries.

Pennsylvania has dedicated a portion of lottery revenues to a prescription drug program. Wisconsin has earmarked lottery funds for property tax relief. Kansas allocated $15 million of its $208 million in lottery sales to problem gambling assistance.

But in Maine, revenue from lottery sales is mingled with taxes on income, cigarettes, sales and corporations, then deposited into the state’s general operating fund, where it becomes impossible to track how it is used, said Maureen Dawson, a state legislative budget analyst.

“It’s kind of like having multiple sources of income all going to the same checking account, then trying to figure out which source paid for the toaster you bought,” she said.

Aside from setting aside a small portion – less than 1 percent – for conservation, Maine legislators have consistently voted down proposals to dedicate revenues to specific causes, beef up oversight of the lottery or earmark revenue for problem gambling, a review of bills pertaining to the lottery shows.

In 1995, a bill titled “An Act to Dedicate the State Lottery Funds for School Funding” was voted down. A 1999 bill called “An Act to Reduce Hunger in Maine” also failed. Legislation to create games to fund school scholarships, pay for quality early childhood care and education, and benefit breast cancer education all failed as well.

“It’s a politician’s dream,” said Cornell researcher David Just, an economist who has studied the costs and benefits of lotteries nationwide. “No one complains about raising taxes, and there’s no accountability for what it’s used for.”

‘VERY CONCERNED ABOUT THE ETHICS’

Maine’s lottery generates government funding that might otherwise require raising taxes, anathema to elected officials everywhere. Yet when presented with the findings from this research, lawmakers from both parties said they wondered whether the ends justified the means.

“What we’re doing is a squeezing a sponge here,” said state Sen. David Burns, R-Whiting. Washington County, which Burns represents, has the state’s highest rates of unemployment and poverty – and its biggest-spending lottery players, the data show. Residents spend as much as $1,300 per person per year in some towns.

“The amount of money we get back from the lottery is not proportional to the poverty we have in Washington County,” Burns said. “We’re taking money from people who can least afford it. I’m very concerned about the ethics of this.”

State Rep. Beth Turner, R-Burlington, also from Washington County, worries that lottery revenue comes too easily, encouraging what she sees as wasteful state spending.

“I look at government like a household,” she said. “The more you make, the more you spend. With a $50 million hole (if there was no annual lottery revenue), we might prioritize things a little differently.”

Luchini, the Democrat who co-chairs the legislative committee that oversees the lottery, said a more careful look may be warranted.

“It makes sense that if the state is going to legalize gambling in a lottery, there should be something done to calculate the social costs. Because it certainly doesn’t come without a social cost,” he said.

REVIEW DELAYED – FOR EIGHT YEARS

The big money and high stakes have raised concerns before.

In 2007, lawmakers asked the Legislature’s investigative arm, the Office of Program Evaluation and Government Accountability, to answer questions about lottery operations.

Among the questions: What was the original legislative intent for use of lottery funds, and has that changed over the lottery’s history? What does the Maine lottery consider when making decisions about games to be offered and how they will be marketed? Who has responsibility for making and overseeing those decisions?

A backlog of work has delayed the study, Luchini said. But he said lottery officials are just doing their job.

“If there is a policy question here, that falls to the Legislature,” he said.

The Maine Center for Public Interest Reporting is a nonpartisan, nonprofit news service based in Augusta.

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