Programs face gap in casino payouts

When Governor Deval Patrick unveiled his casino plan last month, he said three destination resort casinos would generate $100 million to help host communities and their neighbors ease traffic and fight crime, and to pay for public health programs like compulsive gambling treatment and prevention.

But when the bill appeared last week, the amount of money earmarked for community mitigation and public health programs was only a fraction of what the governor promised: $27 million.

Patrick aides said the discrepancy was a mistake, an error committed during long days of drafting and revising the 77-page, landmark bill. The administration said nothing publicly about the error, until it was asked to explain the differences yesterday by the Globe.

"We found a drafting error shortly after the legislation was filed," Patrick spokesman Kyle Sullivan said in a written statement, "and we will be submitting corrective language that is consistent with our plan once the bill is referred to an appropriate committee."

The governor has said repeatedly since he publicized the proposal last month that the community impact mitigation and public health trust funds would each receive 2.5 percent of the casinos' gross revenue. It is a crucial political selling point for the governor, intended to ease worries about the negative effects of introducing legalized gambling in three regions of the state.

The mitigation money would help local communities pay for any increase in the cost of police and fire, transportation, water and sewer services, and criminal prosecutions. The public health fund would pay for gambling prevention and addiction services, domestic violence and child welfare programs.

Using the governor's original assumption that the three casinos would generate $2 billion in annual gross revenue, there would be $50 million available for mitigation and $50 million available for public health programs.

The bill as it was introduced in the Legislature on Thursday, however, uses a drastically different formula. It directs that the trust funds would each get 2.5 percent of the casinos' "operating license payments" made to the state. Operating license payments to the state are expected to be 27 percent of the gross revenue. Using that formula, state officials would have only $13.5 million available for mitigation and $13.5 million for public health programs.

Even if the bill is corrected to funnel the full $100 million to the mitigation and public health funds, a debate is simmering as to whether that would be enough to cover all the promises the governor made, especially his pledge to ensure that cities and towns do not lose money when their share of state lottery revenue is diminished because of casino competition.

Patrick generated his financial projections on lottery proceeds from a 2003 report by State Treasurer Timothy Cahill's office that said slot machines would cut lottery proceeds by nearly 4 percent in their first year.

"The lottery provision of the legislation is based on a credible independent analysis commissioned by the state treasurer," Sullivan said yesterday.

But Cahill, who runs the state lottery and would serve on the new Massachusetts Gaming Control Authority that would oversee the casinos, said yesterday he is unsure that Patrick's casino bill guarantees cities and towns enough money to pay for the local aid they have come to expect from the lottery. Though the governor has said casino proceeds would offset any competitive losses in lottery revenue, , there would be only $40 million a year set aside to cover those losses under the formula contained in the bill.

"It's not going to be generous enough for cities and towns," Cahill said. "I can guarantee that."

Others, including Massachusetts Taxpayer Foundation president Michael Widmer and state Representative Daniel Bosley, chairman of the Joint Committee on Economic Development and Emerging Technologies and a gambling opponent, pointed to the same problem.

"It's a positive that the administration is sticking to its original promise on the [community impact] mitigation," Widmer said. "But the consequence is we don't have enough money to do everything else they promised."

Widmer estimates that based on the lottery's current slow growth rate and the likelihood it would suffer significant competitive losses, the state would need to spend $100 million a year to make up for lost lottery aid.

"That's a conservative estimate," Widmer said.

Bosley said the state's take of gambling revenue will be inadequate to pay for most of the programs and services the governor says he wants to fund.

"They're short in all of the accounts," he said. "There is not anywhere near enough for the lottery. There isn't enough for public infrastructure, mitigation, or all sorts of social ills. The only thing they don't require in this bill is for the casinos to give away a puppy when people leave. It's pie in the sky, and they're not going to do this."