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Lottery begs lawmakers not to reduce its authority

ANNAPOLIS — The Maryland State Lottery and Gaming Control Agency is asking lawmakers to kill legislation that would strip the agency of some regulatory authority.

SB 272, cosponsored by more than half of the powerful Senate Budget and Taxation Committee, would prohibit the lottery from selling online versions of its products unless allowed by the General Assembly. Until recently, the agency planned to roll out such a program — dubbed iLottery — but the governor’s office ordered it to stop work on the project after retailers complained.

Jaclyn L. Vincent, the lottery’s director of gaming research and chief of staff to Director Stephen L. Martino, told the Senate panel Wednesday that 13 states have or are considering Internet lottery programs and that reducing the lottery’s authority could hinder future efforts to implement an online lottery program that could generate millions of dollars for the state.

“We completely understand and absolutely agree that the legislature should be involved,” Vincent testified. “The concern is: Making a statutory change creates an inflexible situation for everyone.”

But members of the budget committee were annoyed that the lottery had been poised to launch iLottery — an enormous expansion of gambling, some have said — without direct legislative oversight and without the support of retailers, some of whom receive a commission for acting as agents for the lottery.

“Many of us were blindsided,” said Sen. Nathaniel J. McFadden, a Baltimore Democrat and the committee’s vice chairman. “Those agents are an important part of the communities that we serve.”

Sen. James E. “Ed” DeGrange Sr., D-Anne Arundel, said he was “extremely disappointed” because it did not seem that retailers were heavily involved in developing the Internet program, a sentiment echoed by about a dozen lobbyists and small business owners who testified in favor of SB 272.

Peter Gragnano, who owns a 7-Eleven store in Beltsville, said much of his business stems from people who come to his store to buy a lottery ticket and buy something else while there. So he was dismayed when in a meeting last year it appeared the lottery had already made up its mind on Internet sales.

“The one I was at — they later characterized it as a town hall meeting, but it really wasn’t,” Gragnano said. “It was almost like a sales meeting. … They said they were moving ahead, they didn’t ask any questions.”

The lottery set a record for revenue for the 15th consecutive year in fiscal 2012, selling $1.795 billion worth of tickets. Some 4,200 retailers combined to earn more than $118 million, according to agency figures. But competition from Maryland Live Casino at Arundel Mills mall has hurt ticket sales, endangering the lottery’s record revenue streak. Internet gambling was seen as one way to lift sagging sales, but Gragnano said regulators would damage what made the lottery successful by going online.

“This is going to hit the brick and mortars that put them there where they are,” Gragnano said.

Vincent emphasized that the agency wasn’t moving forward with the project, but wasn’t in a position to answer many questions from lawmakers. Vincent was working in the office of House of Delegates Speaker Michael E. Busch, D-Anne Arundel, last year. Some members of the committee weren’t pleased that Martino, who Vincent said was presiding over a quarterly agency meeting, did not attend Wednesday’s hearing.