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Is it game over for the Texas Lottery?

Aug 2, 2014, 8:31 pm

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Texas Lottery

Some Texas lawmakers say it may be time to scratch out the lottery.

More than two decades after Texas voters legalized the game of chance in the state, a group of lawmakers will soon start reviewing whether to end at multibillion-dollar industry that pumps more than $1 billion a year into schools.

Critics say they fear that the game financially hurts some of the most vulnerable Texans and doesn't do enough to help the state. Supporters disagree and question where $1 billion a year can be found to replace revenue lost if the entrenched business is shut down.

Some "believe the lottery was a trick and the state of Texas was sold a bag of goods that hasn't delivered," said Rob Kohler, a consultant with the Dallas-based Christian Life Commission of the Baptist General Convention of Texas, which opposes gambling.

"It's gobbling up folks' money that they could otherwise use to buy food, pay health insurance or send their kids to camp."

Gary Grief, executive director of the Texas Lottery Commission, said he looks forward to the legislative review.

"I'm hopeful that the work we've done here at the agency will be recognized ... and that they decide to keep us in business," he said.

At the same time, he said he realizes this that it won't be review of the agency's efficiency.

"It's more a philosophical [review] of whether it's ... good to have a state-operated gaming program," Grief said.

Critics have long sought to end the Texas lottery, and the issue came to a head last year when members of the Texas House, in an unexpected move, voted to do so.

Within hours, as questions arose about how to replace the money that flows from the lottery into the state's public schools, legislators shifted gears and continued the lottery.

But they said there must be a study about the possibility of phasing out the game someday and determining how that would affect Texas financially.

Ten lawmakers recently named by House Speaker Joe Straus and Lt. Gov. David Dewhurst will soon study the impact of eliminating the lottery as well as review charitable bingo and the distribution of money that bingo games generate.

A report on their findings is due to the Legislature by Dec. 1.

"I want to go in and look at all of this," said state Rep. Giovanni Capriglione, R-Southlake, one of the recently named committee members. "Right now, people are split on this. Some think we should do away with it. Others are saying if we do, that leaves a big hole in education funding.

"What replaces that revenue? That's the $2 billion question."

State Sen. Kelly Hancock, also named to the committee, said he's ready to get to work.

"We will take a look at this," said Hancock, R-North Richland Hills. "We are fortunate that the Texas economy is strong, which does allow us to look at this and decide if it's something we want to continue."

The early days

In 1991, the state faced a huge tax hike to counter a budget shortfall.

State lawmakers, after years of rejecting the possibility, eventually decided to ask voters whether they wanted a lottery.

More than three-fifths of Texans said yes.

In 1992, the first Texas lottery ticket was sold. The program has generated around $21 billion for the state since then, state records say.

Before 1997, lottery proceeds went into the state's general revenue fund. Since then, they have gone to the Foundation School Fund, which is administered by the Texas Education Agency, according to the Lottery Commission.

Overall, the lottery has contributed more than $16 billion to the school fund, including more than $1 billion a year for the past decade, commission records say.

"The lottery is not a panacea," then-Gov. Ann Richards said in 1992. "It is not the answer to all the fiscal challenges facing this state and I have never said that it will solve all our problems.

"But we should not lose sight of the bottom line in any discussion of the lottery," she said. "The bottom line is money for Texas."

Sixty-three percent of lottery proceeds go to prizes, 26.1 percent to the foundation school fund, 5 percent to retailer commissions, 4.4 percent to the lottery administration and 1.4 percent to other state programs, such as unclaimed prizes, according to the commission.

Some local lawmakers have different opinions about the lottery.

State Rep. Charlie Geren, R-Fort Worth, said the lottery generates about $1 billion a year for public education.

"I don't have the problem with the lottery," he said. "But there are some people who do."

Count state Rep. Lon Burnam, D-Fort Worth, among those people.

"The lottery is basically a tax on working-class people to help the Legislature avoid properly funding schools," he said. "We had to keep it around during the 2013 legislative session because we didn't have a plan to replace the education funding, but the Legislature should make a plan and end the lottery.

"There's more than enough money coming in if you don't give away the farm to cut Texas' already meager business taxes."


The lottery isn't the only focus of the legislators' study.

Charitable bingo, and the distribution of money it raises, will be studied.

Texas lawmakers approved state-regulated bingo in 1981 to raise money for charities, and more than $1 billion has been paid to Texas charities through the game, according to reports from the charitable bingo operations division of the Lottery Commission.

In 2013, bingo sales in Texas topped $719 million, and nearly $550 million went to players. Last year, sales declined $3.9 million from 2012, the highest sales year, records say.

Recent studies have indicated problems.

At least one review "revealed troubling facts that, while there are some charitable bingo operations that do a good job of paying out to charities, many more do not meet any reasonable standard for charitable giving," state Rep. Byron Cook, R-Corsicana, wrote in a letter to the Lottery Review Committee.

"Most disturbing, the review also revealed the fact that many charitable bingo operations pay nothing to charity," he said.

Geren said he doesn't have a problem with bingo. But he does have a problem with groups that call themselves charities and don't do charitable work.

"Some of the charities that use bingo aren't really functional charities," he said. "A couple of them have shut down in my district."

One, he said, was a volunteer fire department that "wasn't fighting any fires."

"I don't think it ever hurts if we look at things a little closer," he said.

Bingo has drawn media attention in Texas this year, including the attention focused on a plan that some feared would let bingo halls use devices similar to slot machines, and reports questioning whether charitable bingo has enough state oversight and whether nonprofit groups get their fair share from the game.

The previous director resigned this year, and Alfonso Royal became the new director of the Charitable Bingo Operations Division in July.

Royal, who has more than 24 years' experience handling financial duties for nonprofits, is a former budget and policy adviser in the Texas governor's office.

Legislative study

Grief said he believes tbat the commission has "run a great lottery."

He said he stands ready to help lawmakers as they begin their review. But at the end of the day, he said, he realizes this is a policy issue for Texas' elected officials.

Some say the lottery has been a key to raising money for important causes, such as more than $36 million for the Fund for Veterans Assistance, through the Veterans Cash lottery ticket.

"Since the ticket's creation in 2009, nearly 170 programs, helping more than 170,000 Texas veterans and their families, have been funded with the money raised," said state Rep. Chris Turner, D-Grand Prairie.

"Without access to the grants provided by the [FVA], many organizations across our state would be unable to help veterans and their families with housing assistance, PTSD counseling and transportation to medical facilities," he said. "The Veterans Cash lottery ticket is critical for the success of these programs and a tremendous way to show our support for the 1.7 million veterans across our state."

Capriglione said he hopes the committee will focus on the Lottery Commission and issues including scratch-off and electronic tickets and allowing new games in bingo halls.

"We are definitely not looking to expand the lottery," he said. "We want to provide guidelines to the commission and what we would like to see."

Texas lottery sales

A look at sales since the lottery began in Texas:

YearTotal lottery salesAmount given to state
1992$591 million$203 million
1993$1.8 billion$609 million
1994$2.7 billion$869 million
1995$3 billion$927 million
1996$3.4 billion$1.15 billion
1997$3.7 billion$1.89 billion
1998$3.1 billion$1.15 billion
1999$2.57 billion$969 million
2000$2.65 billion$918 million
2001$2.8 billion$864 million
2002$2.96 billion$956 million
2003$3.1 billion$955 million
2004$3.48 billion$1.04 billion
2005$3.66 billion$1.07 billion
2006$3.77 billion$1.08 billion
2007$3.77 billion$1.09 billion
2008$3.67 billion$1.03 billion
2009$3.72 billion$1.04 billion
2010$3.73 billion$1.09 billion
2011$3.8 billion$1.02 billion
2012$4.19 billion$1.096 billion
2013$4.37 billion$1.2 billion

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