Keno proposal: How big a gamble would the state be taking?

Hartford - If the state ever finds itself in court defending its reasons for introducing keno into its lineup of games of chance, its argument would likely resemble the debate heard Tuesday during an informational forum at the Legislative Office Building.

"Keno is a lottery game," Paul Young, executive director of the Division of Special Revenue, told the state's Public Safety and Security Committee.

"It is a casino game," said John Meskel, director of operations for the Mohegan Tribal Gaming Commission. "It's very close to what we play at the casino. The reason we play it at the casino is because it's a complement to the casino games."

"Even if keno is a lottery," said Jackson King, general counsel for the Mashantuckets, "we have to determine whether it is a video facsimile."

For now, the state legislature is juggling those conflicting opinions and what-ifs with millions of dollars at stake and a mandate to raise $1.3 billion in revenue to close a widening budget gap.

As of Tuesday, when the committee held the forum, it hadn't received a definitive answer on whether the state's use of keno would void its contract with the two tribes that run casinos.

"There's no way we can say with any degree of certainty how the court would rule on that, if the game was introduced and the tribes challenged it as violating the Memo of Understanding," said Deputy Attorney General Carolyn K. Querijero, who was at the meeting in place of Attorney General Richard Blumenthal. "There have been some cases dealing with whether keno is a lottery game or a casino game, and they've gone both ways."

If a court did find the state's use of keno to violate the Memo of Understanding, then the state's compact with the tribes would be void, and the two casinos would no longer be obligated tp pay the state millions of dollars that go into the General Fund each year.

Querijero and others told the committee on Tuesday that it could be difficult to use keno as a quick revenue generator because if the tribes did sue the state, the money from keno would likely be put into escrow until the case is decided or settled. And that, Querijero said, would likely take years.

Robert Genuario, Gov. M. Jodi Rell's budget director, told the committee that keno could generate about
$60 million a year in revenue. The proposal being considered would put keno in 600 to 1,000 establishments throughout the state, each of which would also be required to sell the state's other games of chance.

Keno is a game of chance in which players pick a series of numbers and bet they will match numbers randomly drawn by a central computer. Winnings vary with the amount of the wager and the number of drawn numbers a player matches.

The idea met a skeptical audience in the members of the Public Safety and Security Committee, which held a public hearing immediately following the informational meeting.

Genuario said keno could generate up to $400 million in revenue toward the $1.3 billion the state needs in "securitization" to close its budget gap. Securitization is the pledge of future revenue streams that the state's General Fund is not dependent upon.

"It does not solve the entire problem," Genuario said. "No one revenue stream that we found does. But it is a component, and in order to get to $1.3 billion of financing, a variety of revenue streams are going to have to be compiled in order to get to that amount."

Genuario also acknowledged that the state's dire budget straits are the catalyst for the keno proposal. "Make no mistake about it: If it were not for the need to generate $1.3 billion worth of securitization, it is very unlikely that the keno proposal would be before you," he said.

But committee members said they are uncomfortable with the idea, which they felt would add to the burden of the state's social services departments, potentially violate the state's gaming compact, and might not generate the revenue that proponents claim it would.

"I'm really disappointed that the thought here is that we're going to game our way out of a fiscal crisis," said Rep. Linda Orange, D-Colchester, adding that lottery revenues were originally earmarked for education and have instead disappeared into the state's General Fund.

"So tell me, Bob, what happened to it?" Orange asked. "And what's going to happen to this if it were initiated; what's going to happen to this 10 years from now? Is it something that's just going to go into the General Fund and everybody fights and picks over it?"

Rell first proposed keno last year, then abandoned the idea. She revived the proposal in her State of the State address last month at the start of the legislative session, projecting the electronic game would provide $20 million for the state in fiscal 2011 and $60 million a year thereafter. The governor's plan allows for "securitizing" future revenues based on the projected income.

Genuario also said that, although the administration believes the Connecticut Lottery Corp. can introduce keno without new legislation, it doesn't plan to do so without legislative approval.

"This is a proposal that is part and parcel of a 2011 budget-adjustment package," he said, "and if the legislature should determine, in working with the governor, that another revenue stream is preferable to generate $1.3 billion, then we would honor that decision."