Alabama Governor Pauses Lottery to Get "The Facts"

Friday February 21st 2020

The future of an Alabama Lottery is effectively on hold until the end of the year after Gov. Kay Ivey ordered a report to get "the facts" on expanded gaming by December 31.

Alabama does not currently have a lottery. Competing gambling factions in the state have helped kill many past initiatives, most recently in 2019. With the lottery a political lightning rod, the governor has hit the pause button.

Ivey said she does not want to rush into giving the green light to a lottery or casino games until all the options and financial effects have been explored.

She created a Study Group for Gambling Policy this month to assess the impact of loosening gambling restrictions in the state. The volunteer 12-member group will be led by former Mayor of Montgomery Todd Strange. The group could report on a range of impacts, including the revenue gaming could generate but also potential costs.

"I am committed to, once and for all, getting the facts so that the people of Alabama can make an informed decision on what has been a hotly debated topic for many years," Ivey said. "Without a doubt, there will be ramifications if we eventually expand gaming options in our state, just as there are costs associated with doing nothing."

Some believe the first-term governor is reluctant to be the politician who introduces gambling in the state. "I think she kind of threw her stop sign out there," said Senate Minority Leader Bobby Singleton, Democrat of Greensboro.

Sponsors of two lottery bills in the Alabama Legislature say they will press ahead with the proposals despite the governor's decision.

Alabama losing money to states with lotteries

Every week, Alabamians head north, south, east and west, making journeys across state lines into Tennessee, Florida, Georgia, and Mississippi to buy lottery tickets.

Ivey says she's "fully aware" that Alabama is losing money as residents cross the border to play, as many lawmakers and lottery players say they'd rather see the money spent in-state.

Since Mississippi launched its own lottery, Alabama is one of only five states in the country without one, as well as the only state in the eastern half of the country and the Deep South without a lottery.

The Mississippi Lottery has exceeded revenue expectations, generating about $16 million since it launched on November 25, 2019. The state sold over half a million dollars of lottery tickets on January 30, the day it launched Powerball and Mega Millions.

Lottery requires amendment to state Constitution

In order to create a lottery, voters would have to approve an amendment to the Alabama Constitution, which bans gambling.

The last time a lottery was on the ballot was in 1999, when then-Gov. Don Siegelman campaigned to create one with proceeds for education. However, voters rejected his plan, and a lottery proposal has never been put to the public since then.

Before a lottery plan can go on the ballot, it needs at least three-fifths of the Alabama House and Senate to approve it - far more than just a simple majority.

Technically, the "legislation would require a Constitutional amendment, so this can bypass the governor and go straight to the voters," said Paul DeMarco, a former legislator who is currently chair of the Jefferson County Republican Party.

But state representatives and senators are likely to take their cue from the governor and vote down a lottery bill, he said.

Political reality means steep odds for lottery

The failure to get another lottery initiative on the ballot isn't for lack of trying. "By my estimation, we've had more than 180 bills regarding a lottery or expanded gaming since the late 1990s," said Ivey. Bills almost made it through the Legislature in 2016 and 2019.

But Alabama's factional politics around gambling have destroyed many previous proposals. There's a long-running tussle for control of any future gaming expansion in the state.

The fierce infighting has been compared to Game of Thrones' Westeros.

Legislators from counties that have passed constitutional amendments to allow racetracks and bingo want the rights to electronic gaming terminals for their areas included in a lottery bill.

However, the Poarch Band of Creek Indians, who also offer electronic bingo at their three casinos on tribal lands in Atmore, Montgomery, and Wetumpka, oppose this.

Poarch Creek offer $1 billion gaming compact

"The Poarch Creek Indians can bring Alabama a billion dollars," states a new marketing campaign the tribe is running.

The Poarch Band want a tribal compact with the state in which the tribe pays Alabama for exclusive rights to operate a lottery and casino games like blackjack and roulette, and is allowed to build two new casinos.

Robert McGhee, the vice chair of the Poarch Creek Indians, believes the tribe's plan can generate $1 billion in its first year: "We feel that with those license fees, and the lottery income ... and the tax, that it could be very beneficial for the state of Alabama for years to come."

But why does the tribe need exclusive rights?

McGhee argues that any alternative plan should have to compete on its merits, including whether it could deliver the $1 billion the tribe is touting: "Do we still pay a billion dollars if other operators are possibly included?"

However, there are other views. "I think it should all be a level playing field, and we all go in and we compete," said Luther Winn, the CEO of GreeneTrack, a dog racing venue that also offers electronic bingo. He wants to offer the same games as Poarch Creek; this would allow "for the maximum amount of money to be paid to the state."

Gov. Ivey wants to assess all options before moving forward. "We just want the facts about how much monies the state can expect to gain from a lottery, or if we do expanded gaming, or if we do a compact. And what the heck does a compact look like?" she asked.

Gambling deal requires compromise

Both the dog tracks and the Poarch Band have a lot of political influence, so any gaming plan would likely need the agreement of both sides.

It would be in their mutual interest to compromise, because without a comprehensive gambling proposal, all sides are leaving a huge amount of money on the table.

But so far, there's no sign of a plan that would get everyone's blessing.

"I believe the reason [past lottery bills failed] is that those other gaming entities did not want to see it put to bed," said Senate President Pro Tem Del Marsh, Republican of Anniston, who had previously introduced his own lottery bill.

He says it's all about who stands to gain from the bill. "They see the lottery as being their ticket, if you will, to getting agreement as to how gaming is handled in the state of Alabama."

But what do these other gaming interests have to do with getting a lottery bill passed?

"You have to get a bill out of the legislature," Marsh explained, saying there are "different factions" of politicians who were voted into office with the support of local gambling entities.

Compromise is called for, Marsh says. He believes a lottery bill needs a to be part of a broader gambling proposal that addresses the concerns of both the Poarch Band and the dog tracks. "If that can happen, and you get an agreement between those gaming entities and the Poarch Creeks, then I do believe that the passage of a lottery is more predictable."

As for whether the lottery bill will pass this session, "I'm not saying it won't happen," Marsh said. "I'm saying it's highly unlikely based on the personalities involved, without a package deal."

Paul DeMarco is also pessimistic. "I believe it's a long shot that anything happens this session - and then if something happens, you could see it being litigated in court."

He believes the future of the lottery won't be resolved anytime soon, and could still be under discussion in six months or a year. "I don't see anything moving forward ... without some agreement between all the parties," DeMarco said.

Meanwhile, Sen. Jim McClendon, Republican of Springville, launched a bill this month that would ban legislators from taking campaign contributions from anyone with ties to gambling. "I am not making claims of undue influence based on monetary contributions. But we must be wary of the appearance of undue influence based on campaign contributions," he said.

Legal complexities for a lottery

Some question whether allowing a legal exception for a lottery would also strike down the entire rule in the Alabama Constitution and open the door to all forms of gaming, including Class III casino games.

Class III is the highest federal gambling classification and includes lotteries, casino games, and racetracks.

This is a tough legal challenge, experts acknowledge. "The devil is in the detail," said former Alabama Supreme Court Associate Justice Glenn Murdock. "As Ricky told Lucy one time, 'there's going to be a lot of 'splaining to do.'"

What's next for the lottery?

Despite the governor's decision, Rep. Steve Clouse, the House sponsor of a lottery bill, said he will continue with the legislation because this year is the best time to get it on the ballot.

"Personally, I don't see the need to put the lottery in the study. There are 45 other states that have studied it," Clouse said.

"We've all got different opinions. My opinion is listening to my constituents. Most legislators are listening to their constituents. Most want a clean paper lottery bill with no issues attached to it."

"We are at the point where it's getting ridiculous," said Clouse, who is the House Ways and Means General Fund committee chair. "We have citizens from all four corners of the state and all four borders that are crossing state lines to buy multi-state Powerball tickets."

"If we wait until December 31, we've missed the November election. It's the most highly participated election in the state in a presidential year. We've got the factor of a hotly contested US Senate race. The time to do a lottery is this November."

Clouse says other lawmakers are currently reviewing his bill and he expects to file it within two weeks.

His bill would split lottery revenue between Alabama's Pre-K program and a fund to aid students in higher education. Clouse projects the lottery would raise $167 million per year.

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