After predicting this week that three "modest-sized resort casinos" would generate between $400 million and $450 million in tax revenues, Massachusetts Governor Patrick said, "We will dedicate that revenue to improving transportation and to reducing property taxes . . . by investing casino tax revenue in refurbishing and expanding our transportation systems, we accelerate the growth of economic opportunities in every region, we ensure the safety of our roadways and bridges, and we address effectively one of the greatest fiscal challenges we face — without an increase in the gas tax."
If Patrick actually does this, it would be both a first in modern times and a throwback to the founding of the nation and the building of its most famed public and private institutions. "It would be novel, that's for sure," Boston College economics professor Richard McGowan said this week over the telephone. "He would be the first person I'm aware of to ever try to use gaming revenues to try and repair roads and bridges."
A lottery helped establish the Jamestown colony. Lotteries helped erect buildings at what would become Harvard, Yale, Columbia, Princeton and Dartmouth. In the South, they helped erect the University of Virginia, the College of William and Mary, churches in Louisiana, and buildings that would become schoolhouses.
McGowan recounts in his 1994 book, "State Lotteries and Legalized Gambling: Painless Revenue or Painful Mirage," that several lotteries rebuilt Faneuil Hall after a fire. Lotteries raised money for the Continental Army (leaders dared not tax the colonists who were rebelling precisely because of British taxation).
More to the point of Patrick's proposal, lotteries helped America build the roads and waterways that helped the nation's commerce explode. "Massachusetts granted lottery authorizations for projects such as building bridges that would connect Ipswich and Gloucester . . . and another that would cross the Connecticut River so that farm produce and textile products could reach Connecticut from the Springfield area," McGowan wrote.
McGowan wrote that lotteries were key to funding most of the major canals of the early 1800s. "The Erie Canal opened up all of New York State and made New York City the chief port in the country, getting all the wheat and agricultural products from the Midwest and upper New York State," McGowan said. "Unfortunately, my home state of Pennsylvania didn't respond."
The practice of funding major public and private works through lotteries fell apart due to corruption. Thomas Jefferson once tried to hold a lottery to pay off his personal debts, which put a famous twist to his public stance that lotteries were not only "far from being immoral, they are indispensable to the existence of man." A federal Grand National Lottery to fund infrastructure improvements to Washington, D.C., was disgraced when the agent left with hundreds of thousands of dollars in supposed award money.
By 1860, the lottery was banned in all but two states. After the Civil War, Southern states, most notably Louisiana, revived lotteries to repair their infrastructures. Louisiana lottery tickets raked in as much as $500 million a year, according to the Baton Rouge Advocate. That lottery, supposedly charitable but never paying out more than half its gross revenues, was the largest business in the state. It died in the mid-1890s under charges of corruption and the federal government outlawing it from using the US mail system. The next state to operate a lottery would be New Hampshire in 1964.
So as it turns out, Patrick is actually repeating history. The question is how much of it will mirror yesterday. No matter what the original stated need for a lottery was - whether for a school, a canal or a road - the game of chance that built things, some of which stand today, ended in waste and fraud. If casinos indeed start pulling in nearly half a billion dollars a year, Patrick will be hard-pressed to have protections in place to keep the hands of politicians and private interests out of the till.
While there are plenty of successful examples of dedicated tax revenues that assist schools, transportation, and sports stadiums, there also is the sorry national example of state legislatures raiding the landmark tobacco settlement for all kinds of general fund purposes that have nothing to do with stopping smoking.
"If Massachusetts can protect the funds and have the best infrastructure in New England, that could be something," McGowan said. "But the politicians have to keep their hands off the money."