Despite handing out more than $1 billion in lottery winnings last year, Massachusetts is facing a crisis.
COVID-19 has caused a massive drop-off in lottery profits, similar to the damage seen in other economic sectors. But that’s not the only thing worrying state officials.
State leaders worry about outdated system
Massachusetts Lottery Executive Director Michael Sweeney found himself giving both a warning and a plea to state lawmakers this week: Help, or else see the likely end of what was once a top American lottery.
It’s a predicament Massachusetts faces as it reels from the effects of COVID-19. But it’s also a situation unlikely to dissipate. America could, in the coming years, normalize social distancing and a lack of hand-to-hand interactions.
A substantial absence of in-person, cash sales at retailers has crushed the lottery in recent weeks. Without changes, that could continue in Massachusetts, even after COVID-19.
“I do think we face a significant threat of becoming somewhat obsolete, particularly as other gaming opportunities continue to avail themselves of the technology that’s out there, everything from DraftKings to other areas including casinos,” Sweeney told media and state officials during a virtual Lottery Commission meeting Tuesday.
“We do receive what I would characterize as a significant amount of business from the states that border us, particularly New Hampshire and Rhode Island. It would only make sense that as both of those lotteries go online, there will be some level of decrease (in Massachusetts).”
For weeks, losses have highlighted need for change
WBUR in Boston reported as far back as April 30 the bind in which COVID-19 has placed the Massachusetts Lottery.
By mid-April, lottery sales had dropped roughly 33% since early March and fallen more than $73 million behind its predicted profit pace, according to the radio station.
The first week of March generated $111.6 million in lottery sales. The week ending April 18 finished with just under $75 million, according to data provided by Sweeney.
The lottery ended April with a month’s net profit of $71.6 million, more than $22 million less than April 2019.
It’s a situation some in the state feel has been exacerbated by legislative inaction. WBUR, for instance, noted lawmakers have been “cool” to embrace ideas like cashless payments and online sales.
Diminishing revenues have shined a harsh spotlight on “the limitations and vulnerability of the lottery’s all-cash, in-person business model,” State Treasurer Deborah Goldberg remarked at a budget hearing attended by legislators.
“The ability to process cashless payments and to sell our products online would have undoubtedly helped to mitigate our losses.”
What can be done to mitigate the crisis?
It is likely that future action, possibly spurred by the pandemic’s devastating effects, could bring needed relief. Without such changes, however, Massachusetts’ lottery could find itself in dire straits.
Other states, like neighbor Rhode Island, have offered residents instant games and Keno online, something Sweeney has called “the only logical business model to follow in this world,” according to Masslive.com. New Hampshire has also shifted elements of its lottery online.
Goldberg, meanwhile, has similarly called for online and non-cash lottery options. Such a change would take unprecedented approval from Massachusetts lawmakers but could, said the treasurer, result in “immediate impact.”
“Everyone is looking for: where are we going to get revenue from?” said Goldberg.
“We have to note, and I said it in the last meeting but it’s only continued, that the states that do have an online lottery have had incredible increases in sales. One day in March in Michigan had not a $1 million gross, but a $1 million net.”
Both Massachusetts Gov. Charlie Baker and Goldberg’s office have, since the start of 2019, introduced language that would modernize the state’s lottery system and bring it online. The proposals, which have received pushback from small business owners, remain in legislative committees.