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Eyes on the prize: Many debate why Hawaii isn’t in on the lottery action

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Honolulu Star-Advertiser

7 Feb 2016

By Shannon Tangonan stangonan@staradvertiser.com

Patrons lined up to buy Powerball lottery tickets outside the Primm Valley Casino Resort’s Lotto Store on Jan. 12, near Primm, Nev. The jackpot grew to over $1 billion; Hawaii was among the states not participating.

The frenzy over the record $1.5 billion Powerball jackpot stirred the interest of nearly the entire nation last month. But there would be no lottery fever for Hawaii residents, no lines snaking outside convenience stores to buy tickets — and it led many to question why.

Hawaii is one of six states that do not sanction lotteries. In Hawaii, it’s not for lack of trying. Veteran lawmakers say legislation to establish a lottery has been introduced year in and year out — going back more than a century — to no avail.

The 2016 legislative session is no different, with bills introduced in both the House and Senate with at least one specifying areas where lottery revenue could be directed: for homelessness and health care issues and public education.

This year’s push is bolstered by the lure of record-setting jackpots and the state’s growing list of urgent needs that lottery revenue could support. Yet even then, skeptics say, the lottery’s fate is doomed.

“The chances of that happening is like the chances of winning the lottery,” said Senate Majority Leader J. Kalani English. “Even if by some miracle it passes the Legislature, the governor would more than likely veto.”

Gov. David Ige, a staunch gambling opponent, believes the benefits of a lottery would not exceed the costs.

“It’s better for our economy that we don’t allow gambling or lotteries,” Ige told the Star-Advertiser in an interview last week, noting that giving the OK to a lottery leaves open the door for gaming venues much like those established by Native American organizations in other states.

Tom Yamachika, president of the Tax Foundation of Hawaii, said if the state were to allow a lottery and a future Native Hawaiian community is federally recognized similar to that of a Native American tribe, that group would fall under the Indian Gaming Regulatory Act (IGRA).

Under IGRA, in a lottery state, the group or “tribe” would be able to institute gaming up to “Class II,” which includes bingo-type gaming and “non-banked” group card games, meaning there would be no playing against “the house,” according to Yamachika. Also under that federal act, casino gaming and slots would not be allowed if only a lottery were established in Hawaii.

“For casinos, video poker, the state would have to permit that same type of gaming,” Yamachika said.

Ige’s opposition also is based on the venture requiring hefty startup costs.

“It’s a very expensive proposition. The actual revenue generated is typically 20 to 25 percent of the gross lottery sales.”

Ige also argues that the money consumers spend on the lottery would take away from funds spent in other areas.

“You would be taking out of the economy whatever is sold in lottery tickets,” Ige said. The lottery, he said, is unnecessary.

“I don’t think we need gambling to be the best destination in the world.”

Yet the state he describes as the “best destination in the world” has the highest per-capita rate of homelessness in Honolulu, aging infrastructure and public school classrooms that need cooling — just to name a few needs.

House Speaker Joe Souki, who has long been a lottery advocate, said the lack of adequate revenue for those very needs underscores the need for both a state lottery and participation in the multi-state Powerball.

“I think people are more fascinated with the Powerball,” said Souki, one of eight House members who have introduced a bill to establish a lottery. The proceeds could be used for education, health and social programs, he said.

“I’ve met many of my constituents who would want to have a lottery … there was one who said, ‘Please pass a lottery before I die’ and, poor thing, he passed away,” Souki said. “We transfer over a billion dollars to Las Vegas every year. That should tell you how much people love to gamble.”

To join the Powerball, a state would become part of the MultiState Lottery Association (MUSL), a nonprofit association owned and operated by its 36 member lotteries. Each member offers one or more of the games administered by the organization and all profits are

It’s better for our economy that we don’t allow gambling or lotteries . … You would be taking out of the economy whatever is sold in lottery tickets. … I don’t think we need gambling to be the best destination in the world.” Gov. David Ige About his opposition to lottery and gambling in Hawaii

Retained by the state lottery and used to fund projects approved by the state legislatures.

MUSL Chief Financial Officer J. Bret Toyne said only government-sponsored lotteries can become members of the association with approval of its board of directors.

“Startup costs to create and operate a lottery would be specific to the state of Hawaii,” Toyne said via email.

Those costs include staffing, vendors to provide the lottery computer systems and retailer terminals, costs to produce and distribute scratch tickets, lottery retailer fees for selling the games, and marketing expenses, Toyne said.

Additionally, each member lottery contributes an allocated percentage of the MUSL annual budget.

“Historically, a typical lottery’s contribution to the association’s budget equates to less than onetenth of 1 percent of that member lottery’s annual Powerball sales,” Toyne said.

“Typically lotteries return between 25 to 35 percent of sales for beneficiary uses after all expenses are accounted for,” he said.

In California, where the state lottery has been in business for 30 years, Powerball has been offered only since April 2013. The state’s lottery commission determines what games are offered, but joining the Powerball was spurred by consumer demand for the larger jackpots, said California Lottery spokesman Alex Traverso.

“On average, we provide over a billion dollars a year for California’s public schools. That sounds like a lot of money, but it’s only 1 to 1.5 percent of what our schools need. It’s very modest, but it helps. I don’t think that any school in the state would say they could do without our money,” Traverso said.

The California Lottery generated $5.5 billion in the fiscal year that ended June 30, 2015, and of that, $1.4 billion went to California public schools.

But lottery critics contend the game of chance preys on those who can least afford lottery tickets.

State Rep. Karl Rhoads, who chairs the House Judiciary Committee, has been a consistent opponent of gambling, including the lottery. “The research bears out that lotto is just a tax on poor people and the odds of winning are so low that you’re better off saving $5 a week,” Rhoads said.

Traverso, however, said that has not been the case in California. The California Lottery does annual tracking surveys of its participants or buyers and has found that lottery players for the most part mirror the demographic breakdown of the state in terms of income, education and other categories. “When the jackpot was $1 billion, everybody was buying tickets,” Traverso said. “It didn’t matter what your background was.”

Locally, legislators such as Rhoads are waiting for direction on how to proceed with lottery legislation such as House Bill 1830, which was introduced by Souki and seven other House members. “I think leadership is still talking about what to do. As a committee chair, if they decide they want to hear it, something might happen. It’s hard to say no to leadership,” Rhoads said, noting his committee members tend to lean against gambling, but the opinions are “not really set in concrete on lotto.”

Dianne Kay, president of the Hawaii Coalition Against Legalized Gambling, which is made up of diverse organizations including the Honolulu Police Department and religious groups, said research bears out that 20 percent of the population buy 82 percent of lottery tickets, and those people are disproportionately lower-income residents including the elderly and less-educated.

“It puts state government in the gambling business … we think that the state should protect its citizens, not exploit them,” Kay said.

Karl Frisch, 63, a retired seafood importer who lives in both Kihei and Florida, said he plays the lottery every now and again when in Florida and doesn’t understand the state’s resistance to establishing the game here. “The amount of income that could maybe go to education or go to infrastructure — I think there’s just a lot of money we’re not taking advantage of,” he said.

Arguments that the lottery takes advantage of those who can least afford tickets are “ridiculous,” Frisch said. And it’s no secret, he said, that Hawaii residents enjoy gambling.

“How often do you see in your newspaper these junkets to Las Vegas all the time?” he asked. “At least with the lottery, a good portion would stay in Hawaii.”

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