Officials wrangle over lottery shortfall
The state lottery continues to fall short of budget projections, triggering finger-pointing among top elected officials and forcing the state to cover a local aid shortage that could reach hundreds of millions of dollars.
Lottery receipts were down by $119 million in the fiscal year that ended June 30. And treasury officials are estimating they will be short again by about $124 million in fiscal 2008.
Officials in State Treasurer Timothy Cahill's office say revenue growth in the lottery has been slowing, but that is not the big problem. Instead, they blame Governor Deval Patrick's administration and the Legislature for inserting overly rosy predictions in the budget.
"As the most successful lottery in the nation, we are mature and, as we've made clear for years, it's increasingly difficult to maintain record levels of revenue each year," said Alison Mitchell, Cahill's spokeswoman.
Total lottery sales in fiscal 2007 dropped 1.4 percent to $4.46 billion. The fiscal 2008 budget projects total sales at $4.55 billion.
In a letter to Patrick sent yesterday after the Globe questioned lottery revenue figures, Cahill said the state should not continue to expect increases in lottery proceeds year after year, building on "the incorrect and somewhat fanciful projection" from last year's budget.
"The Lottery is a mature business, with over 40 different instant games, two monitor games, and a series of on-line choices," he wrote. "Given this level of maturity, growth has been and will continue to be marginal at best going forward, and future expectations must remain reasonable."
To meet projections in the fiscal 2008 budget, he said, the lottery would have to grow by 14.8 percent, or $660 million.
Although treasury officials say they warned Beacon Hill budgeters to lower their expectations, administration and legislative sources said lottery staff members never urged budget writers to do so.
One administration source said the treasurer's staff had expressed some concern "about their ability to meet projections because of the underperformance of the year before, but voiced optimism they would ultimately meet the estimates."
A House budget source also said lottery officials did not object to the revenue estimate while this year's budget was being prepared.
House Speaker Salvatore F. DiMasi has raised worries about last year's lottery performance and the possibility it will not meet future revenue targets.
"The speaker remains concerned about the trend," said his spokesman, David Guarino. "We're going to work with the treasurer, the governor, and the Senate on this issue to determine exactly how much we can depend on the lottery in the future."
No matter how the lottery missed the number, the state will eventually have to make up the difference, either by transferring money that could be used for something else out of the general fund or by cutting lottery aid to cities and towns in the future. But the organization representing the state's cities and towns said the local officials are counting on that money, which is projected at $1.026 billion in the 2008 budget.
"We fully expect that communities will receive the full amount that's been budgeted this year," said Geoffrey Beckwith, executive director of the Massachusetts Municipal Association. "That's what they've built their budgets around and set their tax rates on."
If communities received less than the projected lottery aid this year, "it would send communities into a tailspin." he said. We don't expect municipal aid would go down. That would trigger a fiscal crisis."
Massachusetts Taxpayers Foundation president Michael Widmer said the lottery's stagnation means the state might have to lower expectations.
"This comes at a time when the state is facing a very tight budget for next year," he said. "It will be very difficult to continue to pay cities and towns a higher amount than the lottery is producing."
Lottery revenue projections have been high historically, specialists said, because the lottery consistently beat expectations. This year's projected shortfall could vanish if lottery sales pick up. In his letter to Patrick, Cahill said lottery sales are up $90 million from last year reflecting "a large Mega Millions jackpot in July and healthy sales of our newly introduced $20 ticket." 