Push to allow online lottery ticket sales in Missouri adds new issue to budget talks

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Missouri Senate Appropriations Committee Chairman Lincoln Hough, right, and Vice Chairman Rusty Black speak with state budget director Dan Haug April 16 during a break in committee work (Rudi Keller/Missouri Independent).

A provision quietly tucked into the state budget last week to allow the bulk online purchase of lottery tickets has set off a flurry of lobbying on both sides of the issue as lawmakers finalize their work this week on Missouri’s $49.5 billion spending plan. 

The change, which was added by the Missouri Senate Appropriations Committee without any public debate, would open the door for lottery courier services — companies that charge fees to buy lottery tickets on behalf of customers. The business model has proven controversial in other states, even sparking a criminal investigation in Texas. 

The Senate finished debating the state operating budget about midnight on Tuesday of last week and by Thursday, lobbyists were bending the ears of lawmakers with seats on the conference committee that will decide the provision’s fate.

Lobbyists working for casinos and the bill to allow video lottery games — groups generally at odds — are opposing it. The major lottery courier companies like Jackpocket and Lotto.com have hired veteran Jefferson City lobbyists to push for their interests in Missouri.

“I had six or seven people come pull me off the (House) floor to talk about that language specifically,” said state Rep. Betsy Fogle of Springfield, the ranking Democrat on the House Budget Committee. “They are concerned with doing it through the budget and making the argument that we’re legislating through the budget and that should be a statutory conversation.”

All budget decisions must be made before this week’s 6 p.m. Friday constitutional deadline. Conference committees on 13 spending bills making up the operating budget must settle differences on hundreds of items, including the lottery language, and close the $1.6 billion gap between the House and Senate on total spending.

The lottery provision in the Senate budget — about 125 words in all — directs the Missouri Lottery to launch a three-year pilot program “allowing the digital delivery of lottery tickets by lottery couriers through a brick and mortar licensed retailer to adults physically present in Missouri at the time of order.”

The language also exempts the sales from lottery rules barring retailers from altering the price of tickets. Courier services typically add a 15% to 25% surcharge on the cost of tickets.

That is far more than licensed lottery retailers make selling tickets. Lottery retailers are paid a 5% commission on the tickets they sell and 2% for cashing tickets up to $600.

“It doesn’t say that our Missouri lottery has to utilize this,” said Senate Appropriations Committee Chairman Lincoln Hough, a Springfield Republican. “It just kind of opens it up for them to use it if they wanted to.”

There are 45 states that have lotteries, but only nine allow lottery courier services. Some allow courier services to deliver their tickets anywhere in the world, while others, like the provision in the Missouri budget, only allow it for residents of their state.

Questions raised about courier operations led the Texas Lottery Commission last week to ban ticket sales through couriers, Texas Public Radio reported. The issues being confronted in Texas included an April 2023 drawing won by a consortium led by London-based trader Bernard Marantelli, which bought all 25.8 million possible number combinations to win a $92 million prize.

Lottery sales in Missouri fell by $50 million in the most recent fiscal year and transfers from sales to education programs are down 15% in the current year. The lottery provides about 4% of the state’s total education funding.

The Missouri Lottery, through a spokeswoman, declined to comment on the proposal.

Hough said he did not know about the issues in Texas when he added the language and the lottery director was indifferent to the idea.

“My guess is it probably comes out,” Hough said.

In the four months leading up to last week’s debate, Hough met with a parade of visitors to his office where they discussed budget requests in private.

Almost every change made by the Senate committee to the House’s version of the budget was done by Hough directing the decision. He made cuts, stated the new sections for earmarks and the other 12 members generally were silent.

In all,  the Senate put 169 earmarked items into the operating budget while cutting 57 of 105 House earmarks.

New state Sen. Joe Nicola, a Republican from Independence, complained at the end of the budget debate that the Senate should have more than five hours to debate the budget because of its complexity of the budget and the often-obscure language used to identify the target of earmarks.
The lottery courier language that appeared in the budget for the first time in the Senate Appropriations Committee is an example of the issue he has with the process, Nicola said.

“The whole chairmanship and the whole committee, and the way senators have to ask for budget items, all of that is bogus,” Nicola said. “It’s all deal making, bogus stuff.”

Hough defended the Senate budget process as transparent because each budget item, as proposed by the governor, was aired in a public hearing and the changes were announced in public.

“We run as open and transparent a budget process as there is in this business,” Hough said. “We go through requests from not just specific senators but also representatives and stakeholders and advocacy groups all over the state in a very open way.”

Nicola visited him to ask for budget items, Hough noted at a news conference Thursday.

“I visited with Senator Nicola a number of times on a number of specific items that I will more than gladly remind him are actually in the budget now, per his request,” Hough said. “So, in my opinion, I think it probably worked pretty well for him.”

Senate leadership from both parties said they are comfortable with that process and back Hough.

“I give credit to Sen. Hough, who’s run a good process there,” said Senate Minority Leader Doug Beck , a Democrat fromAffton. “Everybody has their say in it.”

What to some may appear to be mysterious is actually hundreds of hours of work and attention to detail that should be admired, O’Laughlin said.

“We’re in a strong position heading into conference with the House, and I’m confident that we’ll finish with the budget that Missourians can be proud of,” O’Laughlin said.

The biggest change needed in the budget process, Nicola said, is for the public to easily know which lawmaker or stakeholder asked for an earmark.

In the U.S. Congress, members put their earmark requests on their web sites. U.S. Rep. Emmanuel Cleaver, a Kansas City Democrat, has six projects costing $21 million on his infrastructure list, while U.S. Rep. Sam Graves, a Republican from Tarkio, has $322 million on his list for the current fiscal year. 

The legislature should also publish the name of the lawmaker or entity requesting money, Nicola said.

“As much transparency as we can have, I am completely for,” Nicola said. “Transparency to our constituents and to everybody else of what’s going on here.”

Missouri is sitting on an historically high surplus of general revenue, with $3.8 billion on hand at the end of April as well as another $1.4 billion that can be spent like general revenue.

Both the Senate and the House spending plans would reduce that surplus. The Senate would spend $15.7 billion on operations, the House would spend $14.4 billion and both are well above the $13.6 billion estimated as general revenue receipts for the coming year.

But with current revenues almost 2% from last year, the call on the surplus could grow. Based on revenues through Friday, that difference could be as much as $100 million.

Before the conference committees meet, Hough and House Budget Committee Chairman Dirk Deaton will meet privately to find agreement on as many items as possible and present those decisions at the meeting, which has yet to be scheduled.

The biggest issues that must be resolved are $300 million the Senate added money for public schools, plus $107 million for child care that the House did not approve. The Senate also spent more on state employee pay raises and higher education.

The House approved $50 million to expand a tuition scholarship program for private schools that the Senate omitted.

Democrats, who hold fewer than one-third of the seats in the General Assembly, are generally pleased with the budget, preferring the Senate version on several items. But House Democrats feel their negotiating position on two of the biggest — foundation formula funding and money for private school tuition scholarships — was undermined when House Speaker Jon Patterson rejected some of their selections for the negotiations.

During a news conference last week, Democrats said most of their caucus supports the Senate spending proposals on public schools and child care and opposes the scholarship funding.

But the party did not get its preferred representatives on the 13 conference committees — one for each spending bill — because instead of including the ranking Democrat from appropriations subcommittees, as recommended, Patterson chose another member.

The biggest surprise was the selection of state Rep. Marlene Terry, a St. Louis Democrat who does not sit on the Budget Committee but has sided with Republicans on school choice bills.

“To come down to the very end of this process and feel disrespected at the end is a huge disappointment to me,” said House Minority Leader Ashley Aune, a Democrat from Kansas City. “It’s a huge disappointment to our budget team, and to say that I am a little frustrated by it would be probably an understatement.”

Patterson said he appointed Terry because she is his Democratic appointment to a school funding task force created by Gov. Mike Kehoe and a long-time school board member. She also supports the scholarship funding, he noted.

“I want Rep. Terry to fight for school kids in the best way that she knows how. I think she is supportive of that,” Patterson said.

The conferees must also determine the fate of earmarked spending — items delivering money to a specific location or program at the request of individual lawmakers, state institutions or lobbying interests.

“I wouldn’t anticipate that all investments for our local nonprofits and for communities back home will see themselves across the finish line,” Fogle said.”But we as Democrats will be at the table to try to make sure that we’re making the fiscally responsible investments in our nonprofits, in our communities back home, whether it be an infrastructure investment or an investment with a nonprofit whose whose goal is to provide pathos out of poverty for families.”

Defending the earmarks at a news conference Thursday, Hough said that many provide only a portion of the money needed for a project and require local and private matching funds to spend the state funds.

“This invests,” Hough said, “in apprenticeship programs, workforce development programs, infrastructure projects all over the state.” 

This post was originally authored and published by Rudi Keller from Missouri Independent via RSS Feed. Join today to get your news feed on Nationwide Report®.