Lottery tickets and payouts going to Maine residents on welfare

AUGUSTA — Maine residents on public assistance have spent hundreds of millions of dollars on lottery tickets — enough to win more than $22 million in prizes between 2010 and 2014, including eight jackpots worth at least $500,000 each.

The data on winnings come from a Maine Department of Health and Human Services memo obtained under Maine’s open records act. The agency cross-referenced a list of people who had won a Maine lottery prize of $1,000 or more against a list of people on state benefit programs: food stamps, aid to families and MaineCare. The estimate of total spending comes from Dr. David Just, a behavioral economist and state lottery expert at Cornell University.

“It’s pretty clear that there’s a lot of money from people on welfare cycling back to the state through the lottery,” said Just, whose research in Maine has shown that lottery sales increase with poverty and unemployment. “But the real story here is how much people had to spend in order to win these amounts.”

Given the long odds on winning, Just, who has studied lotteries in 39 states, estimated that benefit recipients statewide spent “hundreds of millions of dollars” on losing tickets in order to take home $22 million in winnings. Since 2010, nearly one of every four people who hit jackpots of at least $1,000 in the state lottery was receiving government benefits for the poor, according to DHHS data.

According to the memo, the winners were enrolled in at least one of the state’s three principal public aid programs: the Supplemental Nutrition Assistance Program (SNAP), known commonly as food stamps; Temporary Assistance for Needy Families (TANF); and MaineCare, the state’s Medicaid program. The identities of individual benefit recipients were not disclosed.

Sam Adolphsen, chief operating officer for DHHS, said that in most cases, there is no law preventing someone who receives public benefits from buying a lottery ticket. Nor could he say for certain that lottery winners had been automatically disqualified from benefit rolls.

“Under current rules, it is hypothetically possible to win a million dollars and stay on food stamps,” Adolphsen said.

Officials said a review of the lottery winners — part of a larger effort to ensure compliance with the eligibility rules for all public assistance programs — was still underway.

The agency memo describes a plan to tighten rules and immediately remove from the food stamp program anyone who has won more than $5,000. The proposal, which has yet to be announced publicly, is the latest in a larger effort by the LePage administration to reduce what it sees as waste and abuse in the state’s taxpayer-funded welfare system.

In fiscal year 2015, state and federal governments spent an estimated $2.87 billion on the benefit programs for Maine’s poor, according to DHHS data. The previous calendar year, nearly 1,000 Mainers on public assistance won $4 million in prizes of $1,000 or more in the state’s lottery; winnings for lesser prizes have not been determined and winnings for 2015 will not be available until next year.

“Taxpayer dollars should be going to the neediest people in the state and absolutely not subsidize gambling, in any fashion,” Adolphsen said. “Even $1 is too much.”

But a social activist and a key lawmaker said the blame rests with the government.

“I agree we shouldn’t allow people on these programs to buy lottery tickets, but this is a problem we created. Our state-funded lottery uses advertising to market itself very effectively,” said state Rep. Drew Gattine, D-Westbrook, chairman of the Legislature’s Health and Human Services Committee. “The state is selling something to people that they shouldn’t be buying and then they want to tell people they’re bad for buying it?”

“These are very poor people. Most of them have turned to the lottery because they see no other option,” said Chris Hastedt, policy director at Maine Equal Justice Partners, a group that provides legal aid to the poor. “They’re desperate.”

The issue is complicated not just by politics, but also by a tangle of complex and sometimes ambiguous laws.

Recipients of food stamps, for example, are not allowed to buy lottery tickets with their benefits, but they can with their own cash. For those on welfare, it is legal to spend cash benefits to gamble in the state-run lottery but not at a privately run casino. And MaineCare recipients, who receive subsidized health care, can spend their own money freely on the lottery.

“We can’t tell people what they can and can’t do with money they’ve earned, but we should be doing everything possible to ensure public money isn’t being diverted into things that aren’t helping people get out of poverty,” said Health and Human Services Committee Co-chairman Sen. Eric Brakey, R-Auburn.

For those who win, the prize must be reported to the state. But that doesn’t necessarily disqualify the winner from receiving benefits, according to Beth Hamm, a 27-year veteran of the Department of Health and Human Services eligibility division.

“This is where things get complicated,” she said. “There is no simple answer.”

Under the food stamp program, for example, there is effectively no asset test to determine how much the recipient has in bank accounts, so a lottery winner could theoretically remain qualified for food stamps. But under welfare, lottery winnings would likely make a person ineligible, though existing rules might allow a winner to use that money to buy a home and still receive benefits. And MaineCare has an asset limit, but it applies only to the blind, disabled and elderly, not families with children.

Federal laws, which also apply to most benefit programs, are unclear.

The 2014 Agricultural Act, for example, requires that households with “substantial” lottery or gambling winnings lose eligibility for food stamps. But the U.S. Department of Agriculture has yet to define “substantial,” complicating enforcement, Adolphsen said.

“They give lip service to making sure these tax dollars are used only for appropriate purposes, but they don’t follow up,” Adolphsen said.

A spokesman for the Agriculture Department said the federal government encourages states to enact their own regulations, though a change in the rules would have to be vetted by federal officials.

Some states have been successful in passing such rules.

In New York, a person who wins more than $600 in the lottery must use a portion of the money to repay public assistance received in the past 10 years.

In Michigan, a 2012 law required state officials to begin cross-checking lottery winners against a list of public assistance recipients each week. The following year, the state removed 810 lottery winners from benefit rolls, according to Bob Wheaton, a state spokesman.

“That saved taxpayers nearly $2 million,” he said.

The Maine Center for Public Interest Reporting obtained the DHHS report shortly after publishing an investigation that found players buying tickets in Maine’s poorest towns spend as much as 200 times more per person on lottery tickets than those living in wealthier areas.

In Washington County, where one in five people receive food stamps, lottery players in some towns spent as much as $1,313 annually on the lottery, according to state sales data. By contrast, players in Kennebunkport, a wealthy coastal town where fewer than 1 in 20 people receive food stamps, spent $6 per person on lottery tickets.

The average annual food stamp benefit in Maine is $1,249 per person.

The state has never studied the impact of the lottery or its marketing on Maine’s poor and unemployed, despite tripling its in-state advertising budget in the past decade, the investigation showed.

Hastedt, of Maine Equal Justice Partners, said the government encourages poor people to play the lottery, so it shouldn’t be surprised when they win.

“The great irony is that the administration is operating a lottery system that expressly targets people living in poverty … tempting them to dream a little about a better life for themselves and their children,” she said. “And now, it targets them … with shame and penalties for doing just what that state-financed advertising lured them into doing.”

Following the Center’s first stories on the lottery, some lawmakers of both parties called for closer scrutiny of the $230 million lottery, including an inquiry into whether the state may be targeting the poor in its advertising.

But for the lottery, which nets more than the state’s corporate income tax, less aggressive advertising could mean less money for state coffers — dollars that would otherwise need to be offset by higher taxes or reduced services.

“The lottery is a major revenue stream for the state,” said Cornell’s Just. “No one is likely to want to question this too closely.”

Dave Sherwood is a contributing writer to the Maine Center for Public Interest Reporting, a nonpartisan, nonprofit news service based in Augusta. Email: pinetreewatchdog@gmail.com. Web: www.pinetreewatchdog.org.