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Massachusetts legislators looking into fairness of lottery fund distribution

May 29, 2019, 8:00 am

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Massachusetts Lottery

Massachusetts residents have been playing the lottery for nearly 50 years, enjoying both the risk and the benefits their towns and cities see. But some legislators are worried certain communities are getting more out of the game than others.

Every year, about 20% of the revenue the state lottery rakes in is distributed to the 351 towns and cities, according to the Massachusetts State Lottery's website. In 2018, the lottery returned $997 million to the state, which was the second-highest total in the commonwealth's history, a lottery statement said.

"The Lottery's performance is critically important to every city and town in the commonwealth," Treasurer Deb Goldberg, the chair of the Massachusetts State Lottery Commission, said in the 2018 statement. "I am proud of the work the lottery team and our dedicated retail partners have done to deliver over $2 billion in essential funding for unrestricted local aid over the last two years."

In the past, communities have used lottery money on snow removal projects, local road improvements, school services, programs for seniors, and parks and recreation projects, according to the lottery website.

But while all municipalities receive help, some legislators are arguing the breakdown isn't completely fair.

Rep. Andy Vargas, D-Haverhill, said the distribution process among cities and towns — which was laid out by the state Legislature years ago — has "produced tremendous inequities."

Haverhill is one of the cities that puts much more into the lottery fund than it receives, Vargas said. From 2013 to 2017, the city contributed a total of $270.3 million to the fund and got $44.1 million back — about 16% of its contribution - according to a 2018 WBUR graphic.

Vargas drew attention to the challenge especially faced by older, mid-sized cities.

"I think what's important to note is that Gateway Cities like Haverhill have less of an ability to raise revenue locally because our property values aren't as high as Boston or other places across the commonwealth that can lean on property taxes to fund critical city/town services," Vargas wrote in an email.

Fueled by these frustrations, Vargas — along with Rep. Antonio Cabral, D-New Bedford — filed legislation this session to create a commission to study and establish recommendations for a new local aid formula. The bill, he said, would study the distribution of general aid in Massachusetts, including that generated by lottery revenue.

"Specifically, the commission will study the amount of aid allocated to cities and towns, how the aid allocated matches up with the needs of the municipality, inequities across the state in regards to allocation, feasibility of accounting for changes in municipalities' tax bases when allocating aid, and alternative formulas that may produce a more equitable allocation across the state," Vargas wrote.

If the bill passes, the commission would aim to complete and submit their report by March 2020, he said.

The original formula — which according to a lottery spokeswoman was initially crafted by the Legislature in 1972 — was dependent on population numbers and property value. It hasn't been used since fiscal year 2010, according to a spokeswoman for Cabral. Still, legislators aren't happy with the current distribution process.

Every year, each community sees the same percentage increase — usually reflective of revenue growth — in their local aid package. Theoretically, the distribution process should work, Cabral said, but it doesn't take into consideration a municipality's ability to raise revenues. It only looks at the fixed costs of the city or town, he said, making it harder on communities that can't easily raise revenue locally.

The bill he and Vargas are proposing would change that.

This burden to change the outdated formula falls completely on the Legislature - the Massachusetts State Lottery doesn't have any input in the distribution of local aid, the lottery spokeswoman said. The agency is required to deposit its net proceeds into the commonwealth's general fund. Local aid is then distributed to municipalities by the Department of Revenue, according to the current formula.

"Lottery funds are distributed as part of the Unrestricted General Government Aid, which is subject to annual appropriation," a DOR spokeswoman said in a statement.

While neither the lottery nor the treasurer's office has control over the distribution formula, Emma Sands, a spokeswoman for Goldberg, said one of the goals this year is to continue emphasizing the importance of local aid.

"Our priority this session is focused on working with the Legislature to ensure modernization and growth of the Lottery, in order to maintain profits, stay relevant, and deliver maximum local aid dollars to communities throughout the state," Sands said in a statement.

Several legislators who signed on to support the Vargas's and Cabral's bill are hoping to act fast.

Rep. Aaron Vega, D-Holyoke, said he feels his district — which falls in another Gateway City — gets a much worse end of the bargain.

In Holyoke, residents contributed $138.4 million to the lottery from 2013 to 2017, WBUR reported. The town received a total of $45.5 million back.

"There could be the argument that districts that are supporting these revenues should get a little bit more," Vega said. "It should go to communities most in need."

But while he was happy to support Vargas's and Cabral's bill, he said he remains cautiously optimistic about the legislation.

"That's the right way to do things, but there's always a little bit of pessimism with that kind of process... How long will it take? Commission of who? How will it be represented?" he said.

Regardless, receiving more aid from the lottery would be an enormous help to his district, he said.

"Increased local aid for Holyoke could help us out with capital investments," Vega said. "Every year, we're buying new police cars, new fire trucks ... But we have no capital accounts and it all falls on us. We have no flex in our budget to really save or plan for a rainy day or plan for some catastrophe."

But even the commonwealth's biggest cities — like the state capital — seem to be receiving less lottery aid than they deserve, said Rep. Russell Holmes, D-Boston.

Boston by far contributes the most to the lottery fund — $2.7 billion between 2013 and 2017 — and received $849.6 million back. While Holmes acknowledged it was a large sum, it wasn't nearly close to the amount Boston residents were putting in.

"We should share with one another, but someone who's putting zero in should not get $6 million out... There should be a balance," Holmes said. "They're taking the proceeds of poor cities and giving them to richer cities... All of it goes to my police, my fire, my transportation, garbage pickup. All of those dollars go into the general fund and are used to improve the lives of people in this city."

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