Could 'Kenogarten' be on its way out?

Meredith voters cast ballots at their Town Meeting in 2018 when they soundly rejected Keno by a vote of 116-34. Supporters have placed the Keno question back on the ballot this week in Meredith and 33 other towns.

CONCORD — The outcome of votes in 34 towns will go a long ways to determine whether Keno fully realizes the promise to deliver enough profits to offset much of the cost of full-day public kindergarten, according to lottery officials.

Meanwhile at the State House, a vigorous debate is underway as lawmakers consider whether it’s time to entirely sever ties between the electronic, bingo-like game Keno and kindergarten aid (dubbed “Kenogarten” by the media) and instead require that state taxpayers pick up the entire tab for districts that went from half- to full-day schooling for 5-year-olds.

The question of whether restaurants and bars should offer Keno appears on the ballot at town meetings this Tuesday or Saturday in towns from Whitefield in the Great North Woods to Brookline on the Massachusetts border.

State lottery observers note the list includes some large and destination tourist towns that could generate significant profit, including Londonderry, Merrimack, Windham, Wolfeboro and Meredith.

Since its outset in December 2017, supporters of Keno coped with critics pointing to state profits falling well below the estimated $9 million a year it was to generate in its first, full year of operation.

At present, the game is only expected to bring in about $5.5 million for this budget year ending June 30, 2019.

“The hope was that Keno would get us to full funding of kindergarten and give us what was needed to get us there. As we know now, the formula hasn’t worked, the revenue has fallen far short and Keno has been slow to get started,” said state Sen. David Watters, D-Dover, during a recent public hearing on legislation to break the connection between Keno and kindergarten.

But New Hampshire Lottery Executive Director Charles McIntyre said annual profits would approach this level if the towns with Keno on the ballot endorse it this week.

“This could bring us pretty close to our original estimate of Keno generating $8 (million) to $8.5 million a year,” McIntyre said during an interview late last week.

McIntyre said his agency always maintained Keno would only make that kind of profit once enough communities approved it.

“What folks don’t realize is that we started Keno with only five weeks’ lead time in the first fiscal year. We didn’t estimate it would bring in any money prior to June 30 and we got $1.6 million,” McIntyre said.

“In state after state that adopted Keno, it’s taken a while for it to reach a full state of maturity.”

Debate moves to cities this fall

He pointed out in these towns taking up the issue there are roughly 200 restaurants and bars with liquor licenses that could host the game.

Based on past practice in the 66 communities with Keno, about one in three merchants have hosted the game so this would translate to 75 new outlets if all these towns endorse it.

“We would expect if that’s the case then we would bring in about $14 million in revenue and $3 million more in net profit,” McIntyre said.

By year’s end, McIntyre said the agency hopes to convince officials in five of six cities without Keno to consider putting the issue on their municipal ballots this fall.

Lebanon city officials have already voted against having residents decide the matter this year, McIntyre said.

The other cities without Keno are Portsmouth, Keene, Concord, Rochester and Dover.

During Keno, players pick from one to 12 numbers, and every five minutes a computer randomly generates and displays 20 winning numbers from 1 to 80 on a television monitor. A player may place a wager from $1 to $25 per game.

Gambling opponents maintain the game can be too addicting because compulsive bettors can quickly rack up significant losses if they’re playing it for several hours.

Gov. Chris Sununu signed a law legalizing Keno as a way to help pay for all school districts to get $1,100 for each student in full-day public kindergarten starting in the 2018-19 school year.

Based on current enrollments, that amount of per-pupil aid costs $11 million annually.

The law grants all school districts with full-day kindergarten this per-pupil amount whether the town approved Keno or not.

House and Senate Democratic leaders have gotten behind separate bills that have the state paying for the entire $1,800-per-student cost for districts that went from half- to full-day programs.

State education officials estimate this would increase state aid grants to school districts by $9.2 million a year.

Diverting Keno to construction

The Senate this Thursday is expected to initially approve the measure (SB 266) of Democratic leaders to direct all profit from Keno to go toward restoring state building aid for local school construction projects.

During the last recession in 2008 the state placed a moratorium on support of future projects and since then the backlog of school construction work has exceeded $250 million.

“Property taxpayers and kindergarten school children should be treated the same as all other public school children,” said Senate Majority Leader Dan Feltes, D-Concord.

“Banking on Keno to support this program is fiscally irresponsible and unfair to our kids and our communities.”

A spokesman for Sununu said Keno once fully adopted would raise enough to reach the $1,100-per-student benchmark in state law.

“It is important to note that Keno implementation remains in its infancy. As Keno is expanded to more communities throughout the state, revenues will rise and school districts will receive more state funding,” said Ben Vihstadt, Sununu’s spokesman.

“We are confident that as Keno is adopted on a wider scale, communities will receive increased funding for full-day kindergarten programs. Every school district will receive at a minimum $1,100 per-pupil in state funding regardless of Keno revenues.”

Watters said creating a dedicated account with Keno profits for school building projects could convince many districts to repair ailing buildings.

“It has been a real struggle for communities that have to build new school facilities that they are not getting money from the state,” Watters said. “We would be providing lasting property tax relief if we finally did something with school building aid.”

With current Keno revenue, Watters said this would allow the state to support the top three school construction projects that the Department of Education already ranks in terms of need.

The House endorsed and sent to its Finance Committee for review its bill (HB 184) that would pay for full-day kindergarten and divert Keno into more education aid grant money.

Sununu did not propose a major change in Keno or increase in education aid grants in the two-year state budget he proposed last month.

Keno offers merchants 8 percent of gross sales, which is among the largest in the country.

McIntyre said this contributes to why a University of New Hampshire Survey Center poll the Lottery paid for found four of five merchants with Keno said they were likely to renew their licenses and the game had no negative impact on their establishment.

More than half of those surveyed said Keno increased revenue to their bottom line, and they recommend other businesses offer it, the survey said.

McIntyre said this favorable word of mouth is helping the state’s profit as well.

“We have seen in the last four weeks our sales reach a record level and that’s a credit to our licensees who are seeing consumers come to their establishment enjoy these games and doing what they can to promote it,” McIntyre said.

State lottery officials maintain Keno helped its other offerings.

“We estimate that it’s brought in as much as $1 million more a year in the sale of Powerball, scratch tickets and other games we offer to these consumers,” McIntyre said.

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