Senate Budget Committee Quizzes Acting Treasurer on State of State’s Pocketbook
5-10-16
By David Cruz Correspondent
It’s the Senate Budget Committee, so, theoretically, their minds are on your money and your money is on their minds, and so it was, today, in the middle of the Trenton budget process, that senators took their turns quizzing the acting state treasurer and his staff on a myriad of potential revenue enhancers and revenue drains on the state budget, be it returns on pension investments or future casino revenues.
“The actual rate of return on pension investments since 1990 has been cyclical,” said Sarlo. “Based upon these recent trends since 1990 are we expecting a bad year based on the cycles, every six or seven years?”
Acting State Treasurer Ford Scudder said that while the fund’s performance does vary, “Obviously there are going to be years within that that are above or below. I would note over the past five years, ending at the end of 2015, we’ve been out performing our statutory rate of return by over $10 billion, so that’s adding over $10 billion to the pension fund.”
So, that’s a positive, right — $10 billion? But the pension system is still underfunded by the standards set in the 2011 pension deal, and Chairman Sarlo wanted the treasurer to look into his crystal ball.
“Are you comfortable and confident enough, now that we have moved to this 10 incremental payments, are we going to continue to make those payments and at the end of the 10 years, have we really reduced the unfunded liability?” asked Sarlo.
“If we are able to make those payments by the end of that 10-year period, we will start being on an upward trajectory of bringing the unfunded liability back to zero over time,” replied the treasurer.
But how much money is contributed to the pension plan and how those benefits are determined is still an ongoing debate, one not to be settled here today, so Senators switched their attention to the long-stalled American Dream project in Bergen County. The treasurer said despite the current lack of work going on there, developers are coming up with a plan for a new hotel. And then there’s always the possibility windfall to be expected from casino gaming expansion to the north, right?
“And we’re going to get a casino very shortly, if the voters approve,” chuckled Sarlo. “Jersey City is no longer interested in one, so we’re going to put one at the Meadowlands.”
In a lot of ways, today’s session sounded like a group search for extra change under the sofa cushions. But this is Trenton and any change found under the cushions has likely already been accounted for, and then some.
Deval Patrick was clear-eyed on what should happen to the state’s third casino license: No one should get it.
He told me so, and I got a whole column out of it last December. The reason: When Beacon Hill crafted the gambling law, it was the Legislature’s intention that the state would have up to three resort casinos.
With two licenses spoken for, in Springfield and in Everett, Patrick believed that the state should hold off on a decision for the Southeastern Massachusetts license, until we knew the outcome of the Mashpee Wampanoag tribe’s efforts to build a casino in that area. The tribe doesn’t need state permission, so it didn’t make sense to Patrick to risk the possibility of having two gambling palaces so close to each other.
“I think the Gaming Commission has to make the call on this,” Baker said. “Frankly, I think there should be a third-party independent entity that processes all this information and makes the call.”
Yes, our governor is once again deftly staying neutral on a controversial topic. But with all due respect, governor, this isn’t the Olympics.
Not that the state Gaming Commission isn’t capable, but this one decision is too big to leave up to a five-member body whose focus is to nurture our nascent casino market. What’s at stake is the future of legalized gambling in Massachusetts. Build too many gambling palaces, and the market may fall like a house of cards.
In my mind, the governor is the independent voice on this, and from what I can tell his opinion will be much needed. Because, as with all things casino in Massachusetts, it’s complicated.
Here’s why: The Patrick administration inked a pact with the tribe in 2013. It says that if the state gives the Wampanoag exclusive rights to the southeast region, the tribe would agree to pay a 17 percent tax on its gambling revenue. Otherwise, the tribe wouldn’t have to pay a dime to the state because its casino would be on federal land.
The pact is still in effect, but it was struck with the executive office. The Gaming Commission sees its job as deciding whether to hand out the final commercial license or not. It can’t just cut a deal with the tribe. But its action would trigger the terms of the pact.
Talk to the Wampanoag and their representatives, and they have a different interpretation of the agreement. Once the tribe has land in trust — which the federal government approved Friday — the state cannot proceed with the third license.
“There is no discretion, as we see it, available to the Gaming Commission to issue another license. We don’t anticipate that they will,” said the tribe’s lobbyist, Bill Delahunt, the former congressman from Quincy.
Talk to the commission, and it’s not so cut and dry. It wouldn’t elaborate, saying only the legal ramifications of the pact will be discussed at the Thursday hearing on the license for the southeast region.
Even with the land in trust, the Wampanoag face other legal challenges related to their right to the land and whether they can proceed with a $500 million tribal facility. Then there are the garden-variety lawsuits that always arise when you try to build a casino in someone’s backyard.
But Arlinda Locklear, the tribe’s lawyer, is confident.
“Obviously people can — and often times in this country do — file frivolous lawsuits,” Locklear said. “We can’t say that there won’t be one filed against this decision, but what we can say is that even if such lawsuits are filed, the odds are very slim to virtually nonexistent as to them being able to stop the development from going forward.”
Now Baker did say something that could shape what happens to the southeast region. “I believe the market will ultimately decide what works and what doesn’t here,” he said.
If that is the case, the market is sending some signals. Only one contender is left in the race for the final license, and George Carney and Neil Bluhm still fervently believe the southeast region can support two casinos. They realize their commercial casino would be at a disadvantage because the tribe wouldn’t have to pay taxes or the $85 million licensing fee. This matters because this means the Indian casino can invest more money in its facility and give bigger payouts to customers.
But Carney and Bluhm, who are proposing a $650 million casino in Brockton, have run the numbers. Their casino can bring in about $400 million in annual gaming revenue without a tribal competitor and $330 million with one. In their eyes, that’s a bet worth making.
Candidate Baker was clear on how he felt about legalized gambling. He liked the idea of one casino — and let’s see how it goes. In particular, he was fond of Springfield getting its chance at slots and blackjack to reverse its fortunes.
Governor Baker wants nothing to do with casinos, but I’m not sure how long he can stay out of the game.
Pro-gambling forces for years have argued that Massachusetts is losing out in the casino sweepstakes and forcing its residents to travel outside the state’s borders to place their wagers. On Wednesday, the tide will begin to turn as the first facility to serve gamblers under the state’s 2011 casino law is set to throw open its doors in Plainville, a day after New Bedford voters go to the polls and decide whether that city will compete against Brockton for the last remaining commercial casino license. House Speaker Robert DeLeo’s ascension in 2009 cracked the door wide open for casino proponents and Massachusetts is now about to begin learning about the advantages and disadvantages of expanded gaming. While proponents have touted new jobs and tax revenues, critics of casinos have warned that gambling addiction problems will grow and take their toll on families. Plainridge Park Casino’s opening comes two days after Gov. Charlie Baker and Attorney General Maura Healey lay out plans to address another type of addiction – recommendations from an opioid working group are due out on Monday.
The milestone in the state’s casino era headlines the upcoming week, as pressure mounts on a six-member conference committee working on a $38.1 billion budget. There are just 11 days remaining before the dawn of the fiscal year that they’re budgeting for. An interim budget is in the works to keep the state’s bills paid while talks continue. Last year, when Gov. Deval Patrick saw that negotiators might not strike a deal on time, he filed a one-month, $4.6 billion budget on June 23 and lawmakers promptly passed it. Administration and Finance Secretary Kristen Lepore said Friday the administration likely plans to file a two-week interim budget on Monday and hopes that it will be passed and signed into law by June 29.
An early retirement program sought by Gov. Charlie Baker drew far fewer applicants than expected and Baker this week wouldn’t say whether layoffs are likely, saying only that “we’re in pretty good shape.” He added, “We still have some work to do to figure out the close of fiscal ’15 and the opening of fiscal ’16 and by the way you know we don’t have a budget yet from the House and Senate. They’re still in a conference committee so we don’t know exactly what the sort of entirety of this thing is going to look like until they conference that out and send it to us.” Baker will have ten days to review the budget, expected to authorize about $38.1 billion in spending, before signing it and announcing any amendments and vetoes.
For Henry Epp’s conversation with State House News Service reporter Matt Murphy about the week ahead on Beacon Hill, click the audio player above.
The first slot machine has yet to be played in Massachusetts, but already a huge amount of casino money is sloshing around in a special fund set up by the Legislature to prop up a sport that has all but disappeared in the state: horse racing.
Suffolk Downs, the only thoroughbred horse track remaining in New England, is certain to close as gamblers have steadily turned to other forms of legalized wagering and the track’s owners have grown tired of absorbing millions of dollars in annual losses.
Even so, thoroughbred racing — basically homeless and unable to support itself — now has more money than it knows what to do with, thanks to the political deal struck four years ago that opened Massachusetts to casinos.
In all, the thoroughbred horse racing industry is projected to receive about $18 million a year from casinos, earmarked to support races that may never come to pass, trainers of horses that may never run, and jockeys who may never ride them.
“Casinos are supposed to benefit the entire state, not just certain segments,” state Senator James B. Eldridge, an Acton Democrat, said last week.
He said the state casino law should be amended to put the money now designated for the horse racing industry to better use.
Already, a $5 million slice of the $195 million paid by casino developers to the state in licensing fees is tied up in a fund with no apparent legal way to spend it. But that is only the first chunk of cash with an uncertain use, absent a stunning reversal in horse racing’s popularity.
When the state’s first casino opens on June 24, it will begin funneling almost $15 million a year into the same fund, according to current projections. And when the state’s three resort casinos come on line in the next few years, they will bump up the total contribution to about $18 million a year, according to current projections.
Governor Charlie Baker said through a spokesman that his administration is committed to “closely reviewing and monitoring” how well the casino law works for possible improvements.
The mastermind of this casino-fueled boon for horse racing is House Speaker Robert A. DeLeo. While proponents of casinos were selling the idea as a way to create jobs and tax revenue for the state, DeLeo, who has deep personal and political connections to horse racing, insisted on the stipulation that tens of millions of dollars in future casino tax revenues go to support an industry that now employs fewer than 2,000 workers.
DeLeo’s father was maitre d’ at Suffolk Downs, and his legislative district of Winthrop and parts of Revere includes a portion of Suffolk Downs and is home to many of its workers.
Before the law was passed in 2011, DeLeo sought to justify the subsidy as a means of preserving jobs not only for horse owners, trainers and jockeys, but also for veterinarians, hay farmers, feed suppliers, blacksmiths, and others who support racing.
“If we can give those people a boost with some additional income, those horses will stay here in Massachusetts and the people at those tracks will keep those facilities going,” DeLeo said in support of the pending bill.
But it’s hard to imagine how the arrival of casinos will spur a rebound in horse racing. As legalized Las Vegas-styled gambling has proliferated from two states to 39 states in recent years, the amount of betting at Suffolk Downs — the truest measure of a track’s success — has plummeted by almost one-third. So, too, has the number of horses available to race there. And attendance has become so anemic that it is not even counted.
The phenomenon is by no means limited to Massachusetts: Few new tracks have opened to thoroughbred racing in the United States in the last 25 years, and many of the country’s best-known tracks date to the 1930s or earlier.
“Younger people don’t like the track because it’s not as exciting as casinos,” said Denis P. Rudd, a Robert Morris University professor who has studied the gambling industry. “You can play a slot machine every second, but you can bet on a horse race only every 20 minutes.”
The Suffolk Downs owners insist that they are done with racing. They are busy considering how best to develop the 160-acre site for a different use. But in the meantime, they are going along with a plan to hold one day of racing per month in July, August, and September, as a sort of last hurrah for an 80-year-old track that once drew crowds of up to 40,000 fans. During its heyday, Suffolk Downs featured daily racing five months a year.
DeLeo, asked last week about the generous funding of the horse racing industry, said the possibility of three days of thoroughbred racing in 2015 made it “premature to consider altering” the funding formula.
Some vestiges of the horse racing industry live on in Massachusetts. A far less popular form of the sport features a driver in a little buggy being pulled along by a horse. But harness racing has lost almost half of its market in recent years.
The state’s sole harness racing track is now owned by the state’s slot parlor, Plainridge Park Casino in Plainville, which is set to make history later this month when it introduces casino gambling in the state. In a way, the Plainridge casino operator will be paying itself by turning over a portion of its slot machine earnings to the state in taxes, only to have the state return it to the Plainridge track operator as a subsidy. Under the casino law, the harness track stands to receive $6 million a year when all four casinos are open, significantly less than is intended for thoroughbred racing.
If horse racing becomes extinct in Massachusetts, the money reserved for it under the casino law can accumulate in an escrow account for up to three years. After that, how to spend what could be tens of millions of dollars is quite uncertain, according to the state Gaming Commission, which has control over the escrow account.
“The resolution to that would depend on any number of currently unknown variables,” the commission said in a statement.
Gov. Baker: Leave Brockton casino competition up to the experts
Marc Vasconcellos/The Enterprise |
Massachusetts governor Charles Baker, center, with Plymouth County sheriff Joseph McDonald, left, and Plymouth County district attorney Timothy Cruz, on Thursday, June 11, 2015 spoke briefly at the Plymouth County Human Trafficking Training Conference at the Shaw's Center in Brockton.
BROCKTON – Gov. Charlie Baker was only a few yards from the site of a proposed Brockton casino, but he refused to touch it.
Standing inside The Shaw’s Center on Thursday, Baker said it is “not my place” to pick sides in the battle over the state’s final casino license.
“I would never weigh in on a question like that. It’s not my place,” Baker said, outside a conference on human trafficking behind held at the center across from the Brockton Fairgrounds.
“The statement of intent here was to not have governors making decisions like that, to have a separate independent commission that would be making those decision based on the data that they have,” Baker told The Enterprise.
“They’ve been working it for over a year,” he said. “They live with it every single day and it rightly should be a decision that would be made by them.”
A $650 million resort casino pitched for the fairgrounds is vying with a similar-sized hotel and casino proposed for the waterfront in New Bedford. The five-member Massachusetts Gaming Commission has final say over the awarding of the license.
Baker disagrees with how the state is approaching casino gaming – he would have preferred one casino as a test case – but said his view is that “the gaming commission will do their best to make sure that whatever decision they make” for the region “is the one they think is the most appropriate one.”
Brockton voters narrowly approved the fairgrounds project last month. New Bedford has a referendum scheduled for June 23.
Earlier on Thursday, at the Greater New Bedford Chamber of Commerce, Baker said the gaming commission ought to “let the market decide” whether this region of the state ought to have a casino.
Recent comments by some commissioners have raised concerns that they might be applying their own judgment about whether the market can support another casino. The issue, Baker said, should be decided by the free market. Region 3 is entitled to one commercial casino under state law, and anything outside of that would be the commission exceeding its authority, said the governor.
"Let the market decide. Let the market decide,” Baker said. “Seriously. The whole point behind setting the thing up in the first place was so you would have an independent, apolitical, data-driven decision-making process that presumed three sites.”
The commission has already awarded casino licenses for projects in Everett and Springfield. It also gave a slot parlor license to Plainridge Park Casino in Plainville, which is scheduled to open June 24.
Baker does not plan to attend that opening, but told The Enterprise he swung by Plainridge recently. The gaming facility is off Route I-495 and features 1,500 slot machines and electronic table games as part of an existing horse track and simulcast center.
“The only thing I will say is they have a lot of work to do between now and the 24th to throw the doors open,” Baker said, “although it looks pretty cool.”
The New Bedford Standard-Times contributed to this report.
BY SAM DORAN AND MICHAEL NORTON
STATE HOUSE NEWS SERVICE
The Massachusetts Lottery is preparing for challenges posed by the opening of the Plainridge Park slots parlor later this month, and the coming of full-fledged casinos in the near future, according to Treasurer Deborah Goldberg.
During a Greater Boston Chamber of Commerce forum this week at the Renaissance Boston Waterfront Hotel, Goldberg, who oversees the Lottery, said the agency "cannot be complacent" and must go beyond just advertising to increase profits in the face of casino gambling.
Like her predecessors, Goldberg will face pressure during her four-year term to boost Lottery profits, which lawmakers and governors over the years have relied upon to increase aid to cities and towns.
While her predecessors have only had to measure up the potential of casinos to dent Lottery receipts, the threat is real for Goldberg.
Goldberg plans to install new wireless technology to replace obsolete hardware and terminals and to meet with retailers as part of what she says will be an "innovative and savvy" approach. With respect to the new slots parlor, she said she wants to know whether people will be "spending all their money at Plainridge and only buying gas" at nearby gas stations and convenience stores that serve Lottery patrons. Goldberg said she'll be mindful of the needs of Lottery retailers.
Local communities put Lottery revenues to use, Goldberg said, pointing to this past winter as an example. Harsh weather decimated some local budgets and municipalities were able to "plug some of those holes" with unrestricted funds from the Lottery.
Fellow government employee Steve Crosby, the chairman of the Massachusetts Gaming Commission, which is licensing casinos and helping to grow the new industry, is scheduled on June 23 - the day before Plainridge, in Plainville, opens - to address a chamber breakfast.
Lottery Executive Director Beth Bresnahan is preparing to leave the agency at the beginning of July, and Goldberg in late May named her deputy general counsel, Michael Sweeney, as interim director. Sweeney has worked in the Treasury since 2010 and before that worked as planning director for the city of Lawrence.
In February, just after Goldberg took office, her team lowered expectations of Lottery profits earmarked for local aid by $35 million for the remainder of this year and next year due to spending cuts made by Gov. Charlie Baker and the Legislature to close a budget shortfall.
Bresnahan at the time said the Lottery needed to cancel three instant tickets that were scheduled for release, costing the state $12.4 million in profits in fiscal 2015 and $22.5 million in fiscal 2016.
With over 70 percent of Lottery sales coming from instant tickets, officials said net profits for the budget year that ends on June 30 were expected to total $935.4 million, down from $947.8 million.
In March, making the case to lawmakers for a $10 million Lottery ad budget that she predicted would lead to higher profits, Goldberg said that at $8 million, the Massachusetts Lottery ranked last in the nation in advertising dollars as a percentage of sales.
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