If Alabama approves a state-sponsored lottery, it will be heading down a well-worn path — one trod by 44 states so far.
But one element of the lottery proposal by Sen. Del Marsh, R-Anniston, remains unusual: the Legislature would be able to spend the cash at its own discretion, rather than marking the money for a specific purpose, such as college scholarships.
"It is uncommon for states not to earmark the money," Thomas Garrett, a University of Mississippi economist who studies state lotteries, wrote in an email to The Anniston Star. "Most states earmark for education or economic development."
Marsh, the president pro tempore of the Senate, introduced a bill last week that would create a state-run lottery, which Marsh claims would bring $332 million in new revenue into the state budget. Marsh's bill would also allow tabletop gambling — now prohibited under state law — at four dog tracks in Alabama, and would authorize Gov. Robert Bentley to begin talks with the Poarch Creek Band of Indians on a compact to allow, and tax, gambling at casinos on tribal land. A public hearing on the bill is scheduled for Tuesday in a Senate committee.
(See GOP proposal would open door to lottery, casinos in Alabama, Lottery Post, May 5, 2015.)
It didn't arrive out of the blue. Alabama faces a deficit of at least $265 million next year in its General Fund, the budget that covers all state agencies except for schools. The budget gap has even normally anti-tax Republicans considering tax hikes — Gov. Robert Bentley has proposed $541 million in tax increases, while a House GOP plan would raise various taxes by $129 million.
Scholars who study gambling say it's not so unusual for states to turn to lotteries when budgets are tight. What is usual, though, is to campaign for a lottery without setting aside at least some of the money for a specific purpose.
Many lottery states — including Georgia, Florida and Tennessee — market their state-run games as "education lotteries" reminding customers that the proceeds will go to college scholarships or K-12 classrooms. Many other states split the money, with some for the general fund, some for schools, and some for economic development, senior services or state parks.
There's a reason for that, said I. Nelson Rose, who teaches gambling law at Whittier College in California. The rise of state lotteries in the past 50 years, he said, is part of a "third wave" of legal gambling in American history — one driven largely by lobbying by the companies that make scratch-off tickets and other lottery-related equipment.
"The spread of lotteries was facilitated by companies that were involved with lotteries," Rose said. "They would go state-by-state and find a group they could partner with, a constituency that wanted lottery money."
With money for a proposed lottery earmarked to a specific group, Rose said, lottery proponents could tie the passage of a lottery to a specific policy goal and a group of voters.
By 1999 — the last time Alabama held a statewide lottery vote — lotteries had become nearly synonymous with state-funded college scholarship programs, but that tie wasn't enough to convince voters, who rejected the lottery plan.
The state remains one of seven without a lottery. Mississippi and Utah, like Alabama, are widely believed to have rebuffed the lottery largely because of widespread religious objections to gambling. In Nevada, arguably the nation's most gambling-friendly state, casinos have lobbied against the lottery as potential competition. In Alaska and Hawaii there's no neighboring state where residents can slip across the border to buy a ticket — an argument that has helped lottery proponents in other states.
'With our money'
Marsh made exactly that argument in an op-ed column he released last week. In the column, Marsh wrote that Alabamians are already giving away hundreds of millions of dollars by driving to Georgia, Florida and Tennessee to play the lottery.
"They receive those benefits while creating new jobs for their people, new investments for their towns and cities, new hotels, restaurants, entertainment facilities, new tourism dollars," Marsh wrote. "All for them and none for us. With our money."
Attempts to reach Marsh were unsuccessful. Marsh has in the past said that the lottery could create a "growth source of revenue" for the General Fund which has often faced budget shortfalls because it draws its money from slow-growing taxes.
Garrett, the University of Mississippi economist, isn't so sure.
"State lotteries are not a panacea for budget woes," he wrote in an email to the Star. Garrett said states with lotteries tend to have budget problems similar to states without lotteries, largely because of an unwillingness to control spending.
Other games to play
Critics of the Marsh lottery plan have also pointed out that a lottery couldn't be set up in time to generate revenue for the next budget year, though Marsh has said the state could borrow against future lottery revenues to cover the 2016 budget.
The proposed pact with the Poarch Creeks, however, could generate immediate revenue. The Creeks have offered a payment of $250 million if the state declines to expand gambling at sites outside its tribal casinos — in essence, preserving the Creeks' share of the market for gambling.
The tribe is now engaged in a legal battle with the state over the gambling already allowed at its casinos, and critics of the proposed deal claim the Creeks are trying to head off a loss in court.
"Why would we want a gambling compact with the Indians when we have a chance to shut their casinos down?" said Joe Godfrey, executive director of the Alabama Citizens Action Program, an anti-gambling group.
Attempts to reach Poarch Creek officials for comment were unsuccessful.
Any proposal being floated now, by either the state or the Poarch Creeks, is still an opening offer. Just where negotiations would take a gambling compact is hard to predict.
It's possible a deal could bring state and tribal leaders back to the negotiating table regularly. In 2007, Florida's governor, facing a budget crisis, inked a deal with the Seminoles, but it took years for lawmakers to agree on a compact. Now that deal is expiring and the state is back at the negotiating table.
Still, outcomes vary from state to state, in part because some states deal with multiple tribes, said Susan Nolan, director of the National Coalition of Lawmakers from Gaming States, a group that represents legislators in states with legalized and regulated gambling.
"It's different from state to state, and I don't know that there is a pattern," Nolan said.