Rep. Hynes State House Report January, 2007 Casino Gambling - Part I A new year dawns and Governor Deval Patrick is rolling the dice. He is staking his gubernatorial legacy, perhaps his political career, on expanding gambling in Massachusetts, something no other governor has so decisively embraced and which traditionally has received mixed reactions from both the general public and legislators. But with increasing public acceptance, if not support, Patrick is moving forward on his plan, even suggesting he could include some of the anticipated gambling revenues in his Fiscal Year 2009 budget due out at the end of January. The Patrick Plan: The governor proposes the location of three destination, resort-style casinos in three distinct regions of Massachusetts: the southeast, metropolitan Boston area, and western Massachusetts. He estimates an overall total private investment of upwards of $3 billion and the creation of 20,000 permanent jobs. Patrick's plan requires that each casino developer would pay a negotiated licensing fee that would start at $200 million for each license and would be valid for 10 years. In addition, each casino would be required to pay 27 percent of all gross gaming revenues generated annually. The governor estimates that the three casinos would generate between $1.5 billion and $2 billion in gross gaming revenues per year, paying, thus, $400 - $540 million in new taxes. Additionally, Patrick argues that sales and other taxes generated by the casinos, as well as the income taxes from an additional 20,000 permanent jobs, is something the Commonwealth should enthusiastically embrace. Governor Patrick specifies in his legislation how he will utilize the new state revenues achieved from these enhanced gambling taxes. He requires that from the gross gaming tax, 2.5 percent be set aside to establish a trust fund to assist problem gamblers; another 2.5 percent to assist the host community and the surrounding areas with additional resources to meet demands created by the casinos; and a non-defined portion of the revenue to ensure that the State Lottery is "held harmless" and will, in fact, grow at a rate of no less than 3 percent per year. By far, however, the bulk of this new revenue - estimated at $400 million - is dedicated to two functions: half ($200 million) for property tax relief and the other half to augment efforts to accelerate road and bridge maintenance and repairs across the Commonwealth. The governor announced his plan in September, filed legislation detailing the proposal in October and is arguing for timely legislative action. Thus far, Senate President Therese Murray has indicated support while House Speaker Salvatore DiMasi, a long-time opponent of expanded gambling, has not concealed his disagreement, although he publicly comments that he is open-minded on the governor's proposal. The governor's bill has been sent to the Joint Committee on Economic Development and Emerging Technologies. The Senate and House chairs of this committee mirror the attitudes of their respective leaders. The committee has yet to hold a public hearing but under legislative rules is required to make a final report on the bill by March 19. At the same time, however, the Legislature's Joint Committee on Bonding and Capital Spending did hold a public hearing in December on the matter. There are at least three reasons supporting the governor's proposal and three reasons opposing his plan. We'll examine each of these in our next installment and ask you to comment as well. Contact me at Rep.FrankHynes@hou.state.ma.us and let me know of your opinion on casino gambling. As we consider these pros and cons, there is one overarching issue which could define and influence the outcome: the ability of the Mashpee Wampanoag Indians to, independent of state control and regulation, site a destination-resort casino in Middleborough. Now that the tribe has received official federal recognition, strong assertions are offered that should the tribe obtain the authorization to place their Middleborough land into a federal trust, they will be free to develop casino gambling at that location. Recently, a federal official stated that it is likely the Mashpee Wampanoags will achieve federal trust status for the land, although when that will be remains uncertain. If this is true, should not the state license and regulate it in the manner Governor Patrick proposes, rather than sit on the sideline without any control or revenues, as has happened with the Seminole casino facility in Florida? I look forward to pursuing this proposal, with your input, during the coming weeks. Back to top of page Rep. Hynes' State House Report December, 2007 (Part Two) Auto Insurance Reform: The Patrick Administration's new Insurance Chief has issued revamped regulations for the auto insurance industry. This will move Massachusetts away from its lone role as the only tightly regulated state, in which the actual insurance rates paid by automobile owners are set by the Insurance Commissioner. The new system is referred to by Governor Patrick as managed competition in which he expresses hope that all Massachusetts drivers will benefit by lowering rates for good drivers and a more dynamic market with a variety of options in policy features. The proposal, when first unveiled, fell subject to vocal criticism claiming that the insurance industry would use various socioeconomic factors and credit scores in determining a driver's rate. The ensuing public backlash resulted in statements by the Insurance Commissioner prohibiting such practices, notwithstanding the practice being prevalent in other states. Commissioner Burnes recently announced that the new rates under this new "competitive" system would average a decline of a little over 7%, prompting Attorney General Martha Coakley to claim that it was not enough and that if the old system had remained in place a 10% decline in rate prices would have been achieved, due in part to reductions in auto theft and fraud. This new system will play out over the next year and will be closely watched. The overall objective is to reduce Massachusetts'drivers high auto insurance rates through competition and attracting larger national firms (Geico, Allstate, State Farm, etc) into the Massachusetts market. Homeowner's Insurance: The Commission we established in this year's budget "to review the state of the homeowner's insurance market" filed its report with the Legislature a few days ago. Homeowners in Marshfield and Scituate, like many coastal communities, are becoming well aware of the increasing costs of property insurance. The "crisis" in this insurance market is sparked by the property insurance industry's predictions of an increased likelihood of a major, financially devastating storm hitting the Massachusetts coast. Private insurers are increasing prices and in some cases, refusing to renew policies because of potential catastrophic financial risk. Many homeowners have been forced into the state's FAIR Plan, which acts as the home insurer of last resort and is funded by both the industry and rates on homeowners. These rates have increased in some areas by as much as 25%. Among its recommendations, the Commission would establish (1) a Catastrophic Fund and (2) a state agency to study the accuracy and reliability of the tools the insurance industry uses to determine a home and neighborhood's future risk of damage from a catastrophic storm. Congressman Barney Frank is seeking to establish a national catastrophic event fund and the state of Florida has established such a fund. Such funds are supposed to reinforce or backstop an insurance company's financial exposure in a major storm event, thus, limiting a policy holder's premiums. Abstractly such a Catastrophic Fund has appeal but the devil is in the financing. State officials have for several weeks been warning agencies and the public of a growing budget deficit and declining revenues from a very sluggish economy. Additionally, rate payers are unlikely to tolerate sharp increased in premiums to seed such a fund, even with the promise of long term stability. The demand that there be public scrutiny of the determinants an insurer uses in denying a policy renewal or in increasing premiums has more promise. In my own case, when my 19 year long property insurer refused this year to renew my policy, I found out that this insurer used an agency based in California whose computer models advised him that my home was at risk in a "great storm," whereas a similar Massachusetts based agency's computer models made no such claim. Economy and Budget: The recent volatility in the stock market, the devaluing of the dollar against other major nation's currency, the decline in the housing market, and related industries, fueled by the sub-prime mortgage woes and credit crisis, do not auger well for the state's near term fiscal health. Governor Patrick is proposing capital program initiatives for roads and bridges, state colleges and other public infrastructure. The cutbacks in federal funds, as well as the continuing increase in health care, threaten the state's ability to afford its new health care program of universal health coverage. Thus, the confluence of necessary challenges and rising expectations meets the hard economic realities of struggling growth. The Governor's budget chief is warning that existing basic government continuation, without any expansion - mainly health care and other "uncontrollable" costs - will outpace revenue growth significantly, leaving a structural budget gap of close to one billion dollars. The House Speaker, Sal DiMasi, is forecasting deeper budget cuts in the next year, calling for greater savings and efficiencies. For local cities and town this is a troubling forecast, since little, if any increase in Local Aid can be expected if these projections remain true. Counteracting this, however, are two forces. First is the historical commitment the Legislature has shown in funding Local Aid as its first priority. This is reinforced by Governor Patrick's determination to limit the burden of the local property tax, most effectively done when state aid to a municipality increases. The second force is the reality of an election year. State legislators up for reelection in 2008 want, very much, to promote increases in state aid as a product of their hard work and advocacy. I serve on the House Ways and Means Committee and we'll be getting our look at the Governor's first full budget proposal at the end of January. Only then will we be able to more clearly evaluate the impact of the present economy on the state's cities and towns. Direction on Energy: The House has approved a sweeping Energy bill designed to overhaul state energy policy and promote clean, renewable, and efficient standards. The measure is a collaborative effort between the Governor and his Energy Secretary, Ian Bowles, House Speaker Sal DiMasi and his Energy Committee Chairman, Brian Dempsey, and the Senate's Energy Committee Chair, Quincy Senator Mike Morrissey. The bill sets a number of goals: to reduce non renewable energy consumption by at least 10 percent over the next 10 years; to reduce greenhouse gases by 20% by 2021; and by 2020, to meet 20% of the state's electricity needs with renewable energy sources. The bill would provide specific help to municipalities to achieve these goals at the local level while establishing a new Division of Green Communities to serve as the primary agent of state aid for cities and towns. The Senate will debate the bill early next year. Overall this bold measure recognizes that the state cannot sustain its economic and environmental health with exclusive dependence on traditional, finite energy sources. It must promote renewable clean energy for its own good. Back to top of page |