Earlier this spring when Terry Rich was appointed by Governor Chet Culver to serve as the new CEO of the Iowa Lottery, he stated that his goal was to enhance socially acceptable lottery products like Powerball and scratch tickets. While Mr. Rich might have had the best of intentions, the reality of Iowa’s budget crisis has some lawmakers looking to the lottery to provide more revenue for the state.
In September, TheIowaRepublican.com broke the news that the Iowa Lottery had polled Iowans on three controversial measurers – adding a mega-millions game, lowering the age requirement to play lottery games from 21 to 18, and instituting new lottery games on the internet that would accept debit or credit cards as forms of payment.
Each of these proposals would create additional revenue for the state though the lottery. The spokesperson for the Iowa Lottery, Mary Neubauer, made it clear that none of the issues included in the poll were recommendations of Lottery CEO Terry Rich or the Lottery itself.
Late last week, Rep. Pat Murphy, Speaker of the Iowa House, indicated a willingness to bring back video lottery games known as TouchPlay. The Iowa Lottery’s Touch Play video games were successful in pumping tens of millions of dollars into the state’s coffers, but it was also controversial with many Iowans.
Local gas stations and grocery stores were transformed into make shift casinos as a row of TouchPlay machines, which resemble slot machines, lined the walls. It became impossible for Iowans to purchase a gallon of gas or a gallon of milk without being confronted by these new gambling machines. Iowans were outraged over the massive expansion of gambling. In time, the legislature voted to ban video gambling, and then-Governor Tom Vilsack signed the ban into law before leaving office.
It should come as no surprise that lawmakers have once again turned to the lottery to find a new source of revenue during these difficult economic times. The state is facing record amounts of unemployment, a sluggish economy, and a budget gap of a billion dollars, which lawmakers will be forced to deal with in the next legislative session. This also is not the first time Governor Culver or the Democratic legislative leaders have looked to the lottery to find solutions to the state’s budget mess.
Last year, Governor Chet Culver entertained the idea of selling or leasing the state lottery to help cover the giant budget shortfalls that have become common under his administration. The Iowa Lottery currently generates more than $50 million of revenue for the state every year. By selling the lottery, the state would have received a large up-front payment, plus 22% of adjusted gross revenues.
The main proponent of selling the lottery last year was Iowa casino operator Dan Kehl. Kehl, the CEO of Riverside Casino in Riverside, met with Governor Culver on December 9, 2008, to discuss the lease or sale of the lottery. Also attending the meeting in which the sale of the lottery was discussed was Lorne Weil, the Chairman of Scientific Games Corporation, along Iowa Democratic operative, Jeff Link, and Culver’s campaign chair and current member of the Board of Regents, Bonnie Campbell.
There is no doubt that Iowa Democrats will expand gambling in the state to help them deal with the budget mess that they created. The sale/lease of the lottery and TouchPlay were met with major objections from the public. However, that doesn’t mean Iowa Democrats will not expand gambling in Iowa by lowering the age requirement to play lottery games, adding a new mega-millions game, reinventing some limited form of TouchPlay under a new name, or full blown on-line gambling if the current federal ban on such on-line gaming is repealed. Federal legislation for such a repeal is pending.
The disappointing fact about all of the debate surrounding the lottery is that Governor Culver and the Democrats continue to fail to realize that the state’s budget problems are not caused by a lack of revenue, but because of their own uncontrolled spending.
At his annual fundraiser last week, State Auditor Dave Vaudt provided some troubling figures about state spending under Governor Culver. Vaudt said, “In fiscal year 2006, for every dollar the state brought in, it spent $1.01. Vaudt then made an analogy between the state and a family earning $50,000 a year. Vaudt noted that had that family spent $1.01 for every dollar they earned, they would have a $500 balance on their charge card. Vaudt then said, “In the current fiscal year, for every dollar the state brings in, it is spending $1.14. Again, if that family making $50,000 a year spent like the state has, they would have to put $7,000 on their charge card.”
While some lawmakers will see the lottery as an easy fix to the state’s financial troubles, the truth is that expansion of the lottery would only provide a band-aid for the state’s budget problems. At its highpoint in 2006, TouchPlay netted the state almost $30 million dollars in revenue. The projected budget gap is projected to be over a billion dollars in FY 2011. Governor Culver and legislative Democrats need to stop their quest for a quick fix and join their Republican colleagues in offering budget cutting proposals.
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