Democrats consider legalizing Keno to fill last-minute budget hole

Scrambling to find more revenue to balance the next state budget, Gov. Dannel P. Malloy’s administration and Democratic legislative leaders are considering legalizing Keno, a form of gambling that could require consent by the state’s two tribal casinos.

Sources close to budget negotiations said the talks centered on a plan to raise $30 million to $40 million in new revenue.

A tentative budget deal struck last Friday for the next two fiscal years ran into trouble earlier this week when more than 50 Democrats in the House of Representatives balked at an administration proposal to raise at least $80 million by auctioning the rights to serve certain electric customers.

The Malloy administration, which declined comment on the possibility, has not had recent discussions about Keno with the Mohegans or Mashantucket Pequots, but a spokesman for the Mohegans said the topic was covered in talks about a year ago.

The tribes have exclusive rights to casino games under a compact signed 20 years ago during the administration of Gov. Lowell P. Weicker Jr. The Connecticut Lottery has taken the position that Keno is a form of a lottery, not a casino game. The tribes’ position is that Keno is covered by the compact.

But Charles Bunnell, the chief of staff for the Mohegans, said the tribe would not object to the legislature including a Keno plan in the budget — so long as the state is aware it would have to quickly negotiate a revenue-sharing agreement with the tribes.

“The tribe’s position is we’re not obstructionist,” Bunnell said.

Not a new idea

Malloy had been exploring legalizing Keno — an electronic game of chance that other states allow in bars, restaurants and Keno parlors — in December 2011 as part of an effort to create a “more aggressive lottery.”

But by February 2012, Malloy said he had no intention of proposing Keno or any other significant expansion of gambling at that time.

“He is an aggressive person. He believes that government should be moving faster and more efficiently,” Malloy’s then-senior policy adviser, Roy Occhiogrosso, said at the time. “I don’t see a connection between that statement and Keno.”

In fact, a year earlier the Lottery’s board of directors voted unanimously for a resolution that “endorses the Connecticut Lottery Corp.’s effort to pursue appropriate state approval to implement Keno.”

House Minority Leader Lawrence F. Cafero Jr., R-Norwalk, said the consideration of Keno was a sign of desperation to balance the budget.

“What’s next, cockfighting?’’ Cafero asked.

Malloy’s predecessor, Gov. M. Jodi Rell, twice proposed launching Keno as a way to shrink a growing deficit in the last two years of her tenure, 2009 and 2010.

Her administration estimated the annual revenue from the game in 2010 at $60 million, which it proposed to monetize, or borrow against, to immediately raise $400 million. The game would have been licensed for up to 1,000 bars, restaurants and other venues.

In the early 1990s, the state signed a legal compact with the Mashantucket Pequot tribe – which owns the Foxwoods Resorts Casino. Under that deal, the state dropped its legal opposition to gaming in exchange for 25 percent of the annual slot machine revenue.

That deal was modified in the mid-1990s after the Mohegan tribe opened the Mohegan Sun casino.

In 2010, then-Deputy Attorney General Carolyn K. Querijaro told the legislature’s Public Safety Committee that launching Keno would a huge gamble.

“There’s no way we can say with any degree of certainty how a court would rule,” Querijaro said three years ago. “I am not a gambler, but this seems to be a big gamble.”

The 2010 Keno proposal also raised concerns among advocates for a strong state response to compulsive gambling.

Addictive game

The Connecticut Council on Problem Gambling has raised concerns about introducing Keno to Connecticut, arguing that electronic gambling is one of the most addictive forms of gambling.

Because Keno is typically available in restaurants, bars and other public places, allowing it in the state would mean exposing children to gambling and greater challenges for people with gambling problems who try to avoid temptations, said Mary Drexler, the council’s executive director.

In March 2010, after Rell proposed Keno, a Quinnipiac University poll found the game opposed by 70 percent of voters, with only 27 percent in favor.

Drexler, who is from Massachusetts, said she’s seen parents in restaurants there letting their children fill out the Keno cards. The younger people start gambling, she said, the more apt they are to have a problem in adulthood.

“Parents are going to be thinking, ‘Well, if the state is sanctioning this, it can’t be all that bad,’” Drexler said.

Drexler said it’s a concern when states view expanding legal gambling as a way to address deficits.

“So we’re looking at the fiscal impact of gambling and what it can bring to a state, but what we’re not looking at is the social impact, and that there would definitely be an increase, most likely, in gambling activity, which could lead to addiction,” Drexler said. “Nobody’s paying attention to those social costs, and right now there’s very limited dollars in prevention and treatment.”

The state spends about $1.9 million to address problem gambling, Drexler said. Her organization gets the bulk of its funding from voluntary payments by the casinos.

Mark Pazniokas contributed to this story.