Lottery & Casino Gaming in Maryland Stephen Martino, Director - - PowerPoint PPT Presentation

Lottery & Casino Gaming in Maryland

Stephen Martino, Director March 12, 2015

Maximizing revenue for Maryland's good causes by promoting the responsible sale

• f lottery games and from the thorough,

transparent regulation

• f

gaming.

Agency mission statement

Economic Benefits

Lottery

All Maryland Lottery revenue goes to the state’s General Fund

Casinos

Revenue is shared with casino operators, Maryland’s Education Trust Fund, and other dedicated funds.

The Maryland Lottery

• In 1972, the citizens of Maryland approved a constitutional

amendment to begin a government-run lottery, resulting in a lifting of the state’s 151-year-old ban on state-run lotteries.

• The Maryland Lottery was created in 1973 with the sole

purpose of generating revenue for the State of Maryland.

• There are more than 4,500 Lottery retailers across the state in

all types of businesses, including convenience stores, bars/taverns, gas stations, liquor stores, fraternal

• rganizations, grocery stores and casinos.
• The Maryland Lottery holds drawings seven days a week/365

days-a-year.

Lottery Highlights

Fiscal Year 2014* Highlights:

• Sales:

$1.72 billion

• Prizes to players:

$1.02 billion

• Revenue to the state:

$521 million

• Retailer commissions:

$122 million

• Operating expenses:

$56.5 million

* July 1, 2013 through June 30, 2014

Sales by Lottery Game

MD Player Demographics* - Age

AVERAGE AGE High-frequency players 49 Low-frequency players 49 Non-players 49 *MD Lottery Segmentation Study, The Key Group, 6/2014

MD Player Demographics* - Education

• High frequency players tend to be less educated compared to low-frequency and non-players.
• Non-players are the most educated segment.

*MD Lottery Segmentation Study, The Key Group, 6/2014

MD Player Demographics - Household Income

*MD Lottery Segmentation Study, The Key Group, 6/2014 AVERAGE HOUSEHOLD INCOME High Frequency Players $86,000 Low Frequency Players $89,000 Non-Players $83,000

• The majority of Lottery players fall in the middle income categories ($50K - $99K).
• Approximately one quarter of lottery players have high household incomes ($100K or higher)
• Low-frequency players have the highest average household incomes.

Perception of the Maryland Lottery

MARYLAND LOTTERY PERCEPTION TOTAL SCORE (out of a possible 50 points)

High Frequency Players 31.5 Low Frequency Players 28.4 Non-Players 23.8

The perception of the Maryland Lottery is lower with the non-players across all statements particularly in their view that it is “fun and exciting” and “encourages responsible gaming”.

MD Player Demographics - Study Findings

*MD Lottery Segmentation Study, The Key Group, 6/2014

• Lottery game play crosses over all socioeconomic borders.
• The segmentation study indicates lottery players (high and low frequency) and non-

players have similar demographics and lifestyle attributes across all the various income and residence location segments.

• Lottery play has less to do with where one lives or what activities they enjoy but is

more dependent on their attitudes towards the lottery, gaming/gambling, and risk.

• 63% of the Maryland population plays the lottery, of which 16% are jackpot-only

players.

• 18% of the population in Maryland will not play the lottery games.

Fiscal Year 2015 Year-to-Date Lottery Sales and Revenue

FY15 YTD % Change from FY14 YTD Sales $1.217 billion +3.8% Revenue $358.6 million

• 1.4%
• While revenue is slightly down, we continue to see a shift in traditional lottery

player behavior as YTD scratch off sales are up 15%.

• An independent study revealed that the closer a player lives to a casino, the lower

his/her propensity is to play lottery. (Cummings - Walker, 2014.)

• Keno is the most negatively impacted by proximity to a casino.

○ Keno makes up 16.8% of annual sales, and FY15 YTD sales are down 1.5% or $3.1 million.

• Total annual effect of all six casinos is estimated to be -$95.5 million (-5.5%)

National Disbursement

Where does the majority of lottery revenue go in the U.S.?

• PreK-12 and Higher Education: Arkansas, California, Florida, Georgia, New

Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas, Vermont, Virginia, Washington

• Environment: Colorado, Minnesota (44%)
• Senior Citizens: Pennsylvania
• State General Fund: Arizona, Connecticut, Delaware, Washington, D.C.,

Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota (56%), Missouri, Montana, North Dakota, Rhode Island, West Virginia

• Property Tax Reduction: South Dakota, Wisconsin

Revenue - National Comparison

*FY2014

National sales rankings*

Rank State Population FY2014 Sales

1 New York 19.7 million $7.314 billion 2 Florida 19.6 million $5.368 billion 3 California 38.3 million $5.034 billion 14 MARYLAND 5.9 million $1.724 billion 42 South Dakota 800,000 $54.9 million 43 Montana 1 million $53.3 million 44 North Dakota 700,000 $27 million

Revenue - National Comparison

*FY2014 National PER CAPITA sales rankings* Rank State Population FY2014 Sales Per Capita

1 Massachusetts 6.7 million $4.824 billion $721 2 Georgia 10 million $4.022 billion $403 3 New York 19.7 million $7.314 billion $372 8 MARYLAND 5.9 million $1.724 billion $291 42 Montana 1 million $53.3 million $52 43 Oklahoma 3.9 million $191 million $50 44 North Dakota 700,000 $27 million $37

Casino Gaming in Maryland

Casino Gaming in Maryland

• In 2007, Maryland’s General Assembly enacted legislation to allow

Marylanders to vote on a limited number of slot machines in the state at specified locations in Anne Arundel, Cecil, Worcester, and Allegany Counties, and Baltimore City.

• On November 4, 2008, 58.7% of voters statewide approved the referendum

to expand gaming in the state.

• In August 2012, the General Assembly enacted legislation to allow

Marylanders to vote on a sixth casino location in Prince George’s County, table games, and 24-hour operations at all casinos.

• In a 2012 referendum, 51.9% of voters approved the gaming expansion.

Purpose of the Gaming Program

• Raising revenue for the state’s Education Trust Fund, which

supports education of children in public schools from pre- kindergarten through grade 12; public school construction and improvements; and construction of capital projects at community colleges and higher education institutions.

• Funds also go to:
• Horse racing Purse Dedication Account (PDA)
• Racetrack Facility Renewal Account (RFRA)
• Minority and Women-Owned Businesses Account
• Maryland Lottery and Gaming Control Agency Operations
• Local impact aid

Revenue Discussion

“The Education Trust Fund is a nonlapsing, special fund to be used for continued funding of the Bridge to Excellence formulas and programs, including the GCEI. The fund may also be used to support capital projects for public schools, public colleges and universities, and community colleges. In light of the substantial structural deficit currently forecasted for fiscal 2009 through 2013, it is assumed that all of the available ETF proceeds are used to support operating programs and therefore offset general fund expenditures.”

• 2007 Special Session SB 3 Fiscal Note

Are lottery/gaming funds supplemental or supplanted?

http://mgaleg.maryland.gov/2007s1/fnotes/bil_0003/sb0003.pdf (pg. 19)

Current Maryland Casinos

Casino Revenue Distribution FY2014 - $833.3 million in revenue

Since the inception of slots program in Maryland, contributions from slots revenue to the various funds and accounts continue to increase.

Gaming Revenue Contributions

Gaming Program Contributions to the State of Maryland TOTAL: $2,409,639,685 Designated Accounts Total

Casino Operators

$1,068,415,982

Maryland Education Trust Fund

$1,012,218,242

Horse Racing Purse Dedication Account

$128,633,675

Local Impact Grants

$101,563,325

Maryland Lottery & Gaming Control Agency

$38,560,854

Racetrack Facility Renewal Account

$32,548,519

Small, Minority, Women-Owned Businesses

$27,699,088

Horseshoe Casino Baltimore Maryland Live! Hollywood Casino at Perryville Casino at Ocean Downs Rocky Gap Casino and Resort MGM National Harbor Total Authorized Slot Machines

3,750 4,750 2,500 2,500 1,500 3,000 16,500*

Slot Machines Awarded**

3,750 4,750 1,500 800 850 3,600 15,250

Slot Machines Currently Authorized

2,200 3,922 850 800 577 8,349

Although 16,500 slot machines are authorized statewide, casinos have been requesting to reduce the number of slot machines on their gaming floors.

Slot Machine Count by Casino

*Per State Government Article § 9-1A-05(a)(2), the state may not exceed 16,500 machines total. **Per State Government Article § 9-1A-36(i)(2), the “Video Lottery Facility Location Commission may allocate [slots] in a manner that is different from the allocation provided in paragraph (1),” given certain factors are met.

Horseshoe Casino Baltimore Maryland Live! Hollywood Casino at Perryville Casino at Ocean Downs Rocky Gap Casino and Resort MGM National Harbor** Full-time employees 1,630 2,478 199 196 337 3,095 Part-time employees 379 446 151 35 127 995 Total 2,009 2,924 350 231 464 4,000

Currently*, there are approximately 5,978 casino related jobs at five casinos. When MGM National Harbor opens, it is estimated that another 4,000 jobs will be added.

Casino Employment

*as of 2/28/2015 **due to open in mid-2016

Casino Participants Lottery Participants Total Number of Participants 740 102 The Maryland Lottery and Gaming Control Agency operates voluntary exclusion programs (VEP) for individuals who wish to ban themselves from Maryland casinos or the Maryland Lottery.

• Casino voluntary exclusion:

○ Voluntarily excluded from entering any Maryland casino, as well as cashing checks and using credit cards, and removed from all casino direct marketing lists.

• Lottery voluntary exclusion:

○ Ban themselves from receiving Lottery prizes or any direct mail/email promotional materials as well as second chance drawings and reward programs.

Responsible Gambling

*as of 2/28/2015

Public Policy Objectives

To ensure that Maryland’s lottery and gaming program:

• Grows in a responsible manner while remaining a consistent

source of revenue and economic development for the state

• f Maryland; and
• is conducted with transparency, integrity and

professionalism to ensure safety, security and fair play.

Public Policy Obstacles

“Maryland Sen. Paul Pinsky (D-Prince George’s), who has long been a vocal opponent of gambling in the state, said he’s not sure why there has been an uptick in negative feeling about gambling, but he thinks it may have to do with the very visible troubles faced by casinos elsewhere.”

Public Policy Obstacles

In Maryland, more voters object to growing casino industry, poll finds The Washington Post 2/15/2015

“As we’ve seen, Atlantic City is getting crushed,” he said. ‘They’re closing casinos every day. Delaware is being hit. It may be people starting to realize that we are suffering or we will be suffering those same things.” He said: “I don’t want to be in an I-told-you-so mode. I just have always said, you don’t build your economy in a sustainable way on gambling. You build it with jobs that have more permanence and hopefully you’re creating a societal value.”

Public Policy Obstacles

“(Massachusetts Attorney General Maura) Healey supported a failed attempt to repeal the 2011 gambling law and won office last year on a platform that included an aggressive stance toward the casino industry.” “I bring a real healthy skepticism to this industry,” Healey told the News Service Thursday. “I have expressed my concerns about potential negative impacts on consumers, on workers; what we might see in terms

• f organized crime, money laundering, human trafficking and the like.”

| Springfield, MA

By Andy Metzger, State House News Service Published: March 6, 2015

Public Policy Obstacles

Testimony of MD State Senator Joan Carter Conway

SB495 Video Lottery Facilities - Table Games - Distribution of Proceeds

Public Policy Obstacles

Maryland Casinos Accused of “Bait and Switch” 1/30/2015

Public Policy Obstacles

During the committee hearing, Sen. Julianne Ortman, R-Chanhassen, told Minnesota Lottery Director Ed Van Petten that she thought the ATM sales were particularly ‘outrageous.’ “I definitely draw the distinction between offering lottery tickets for sale, versus shoving them in your face and targeting certain individuals to buy them,” Ortman

• said. “It’s a very clear distinction, and when you made that leap I think you

absolutely needed to come back and ask for authority through the legislative process and through statute.”

MLGCA Regulatory Approach

What regulatory approach best accomplishes this?

• Enforcement-focused that is punitive and that stresses fines and penalties

for regulatory violations, or

• Compliance-focused that seeks to eliminate risk by ensuring that licensees
• bserve regulatory requirements and standards?
• What are the roles of the regulator and those that are regulated?
• How does the state approach the regulation of legal, proscribed activity?

The MLGCA’s regulatory mission works to ensure that all casino practices follow the law and that all operations are conducted with transparency, integrity and professionalism to ensure safety, security and fair play.

MLGCA Regulatory Approach

Most important questions that a regulator can ask when making rules:

What public good are you trying to advance? What potential harm are you trying to mitigate?

MLGCA regulatory review process

• Annual invitation to gaming industry to propose changes to or elimination of

regulations that are cumbersome, inefficient or outdated by technology or

• ther risk-mitigation efforts.
• Proposals reviewed by agency to evaluate impacts. Does it promote a public

good? Does it mitigate a potential harm?

• If so, agency initiates rule-making process to adopt changes.
• If not, agency works with industry to refine proposals or abandons changes.

Questions?