Murky state rules mean those who do collect larger prizes may not even lose their public benefits

Maine residents on public assistance have spent hundreds of millions of dollars on lottery tickets, according to an estimate based on the $22.4 million in large prizes they collected between 2010 and 2014, including eight jackpots worth at least $500,000 each.

Yet state rules are so murky that the winnings do not necessarily disqualify anyone from continuing to receive food stamps and other benefits.

The data on winnings comes from a state Department of Health and Human Services memo obtained under Maine's open records act. The agency cross-referenced a list of people who had won a Maine lottery prize of $1,000 or more against a list of people on state benefit programs: food stamps, aid to families and MaineCare. The estimate of total spending on lottery tickets comes from David Just, a behavioral economist and state lottery expert at Cornell University.

"It's pretty clear that there's a lot of money from people on welfare cycling back to the state through the lottery," said Just, whose research in Maine has shown that lottery sales increase with poverty and unemployment. "But the real story here is how much people had to spend in order to win these amounts."

Given the long odds on winning, Just, who has studied lotteries in 39 states, estimates that benefit recipients statewide spent "hundreds of millions of dollars" on tickets in order to win $22 million in large prizes. Since 2010, nearly one of every four people who hit jackpots of least $1,000 in the state lottery was receiving government benefits for the poor, according to DHHS data.

According to the memo, the winners were enrolled in at least one of the state's three principal public aid programs: Supplemental Nutrition Assistance Program, or SNAP, commonly known as food stamps; Temporary Assistance for Needy Families, or TANF; and MaineCare, the state's Medicaid program. The identities of individual benefit recipients were not disclosed.

Sam Adolphsen, chief operating officer for DHHS, said in most cases there is no law preventing someone who receives public benefits from purchasing a lottery ticket. Nor could he say for certain that lottery winners had been automatically disqualified from benefit rolls.

"Under current rules, it is hypothetically possible to win a million dollars and stay on food stamps," Adolphsen said.

Blame the players or state government?

Officials said a review of the lottery winners — part of a larger effort to ensure compliance with the eligibility rules for all public assistance programs — was underway.

The DHHS memo describes a plan to tighten rules and immediately remove anyone who has won more than $5,000 from the food stamp program. The proposal, which has yet to be announced publicly, is part of a larger effort by the LePage administration to reduce what it sees as waste and abuse in the state's taxpayer-funded welfare system.

In fiscal year 2015, the state and federal government spent an estimated $2.87 billion on the benefit programs for Maine's poor, according to DHHS data. The previous calendar year, nearly 1,000 Mainers on public assistance won $4 million in prizes of $1,000 or more in the state's lottery; winnings for lesser prizes have not been determined, and winnings for 2015 will not be available until next year.

"Taxpayer dollars should be going to the neediest people in the state and absolutely not to subsidize gambling, in any fashion," Adolphsen said. "Even one dollar is too much."

But a key lawmaker said the blame rests with the government.

"I agree we shouldn't allow people on these programs to buy lottery tickets, but this is a problem we created. Our state-funded lottery uses advertising to market itself very effectively," said state Rep. Drew Gattine, D-Westbrook, chair of the legislature's Health and Human Services Committee. "The state is selling something to people that they shouldn't be buying, and then they want to tell people they're bad for buying it?"

"These are very poor people," said Chris Hastedt, policy director at Maine Equal Justice Partners, a group that provides legal aid to the poor. "Most of them have turned to the lottery because they see no other option. They're desperate."

Ambiguous rules on winnings, benefits

The issue is complicated not just by politics, but also by a tangle of complex and sometimes ambiguous laws.

Food stamp recipients aren't allowed to purchase lottery tickets with their benefits, but they can with their own cash. For those on welfare, it is legal to spend cash benefits to gamble in the state-run lottery, but not at a privately run casino. And MaineCare recipients, who receive subsidized health care, can spend their own money freely on the lottery.

"We can't tell people what they can and can't do with money they've earned, but we should be doing everything possible to ensure public money isn't being diverted into things that aren't helping people get out of poverty," said Sen. Eric Brakey, R-Androscoggin, the Health and Human Services Committee co-chair.

Those who win must report the prizes to the state. But that doesn't necessarily disqualify the winner from receiving benefits, said Beth Hamm, a 27-year veteran of the eligibility division at DHHS.

"This is where things get complicated," she said. "There is no simple answer."

Although lottery winnings count as income and can put a recipient of public assistance over an income threshold, there are many variations in each program, Hamm said. Those variations — such as when the winnings were received, when they were reported and the status of the recipient — are taken into consideration and could mean lottery winners would not lose their benefits.

"What benefits do you receive?" Hamm said. "What are the lump-sum rules associated with each program? How much did you win? Where's the money now? Is it in a checking account or savings account? Did you spend any of it? How much? What did you buy? Can you verify that? What is your family situation? Are you elderly, blind or disabled?"

Asked whether anyone had ever been removed from the rolls after winning lottery jackpots, Adolphsen did not directly answer the question.

"No one would have been closed solely because they won, but could have potentially been closed if the program rules counted assets and the winning took them over the allowable asset limit," he said.

Changing laws to disqualify winners

In some cases, the state can propose to amend the existing federal laws that govern each program. The LePage administration this year put forth a rule, which will take effect Jan. 1, that disqualifies certain food stamp recipients with assets of more than $5,000, including lottery winnings.

But sometimes the federal guidelines are unclear, state officials said. The 2014 Agricultural Act, for example, requires that households with "substantial" lottery or gambling winnings lose eligibility for food stamps. But the U.S. Department of Agriculture has yet to define "substantial," complicating enforcement, Adolphsen said.

"They give lip service to making sure these tax dollars are used only for appropriate purposes, but they don't follow up," he said.

A spokesman for the Agriculture Department said the federal government encourages states to enact their own regulations, although a change in the rules would need to be vetted by federal officials.

Some states have been successful in passing such rules. In New York, a person who wins more than $600 in the lottery must use a portion of the money to repay public assistance received in the past 10 years.

In Michigan, a 2012 law required state officials to begin cross-checking lottery winners against a list of public assistance recipients each week. The following year, the state removed 810 lottery winners from benefit rolls, said Bob Wheaton, a state spokesman.

"That saved taxpayers nearly $2 million," he said.

Minimal oversight of revenue stream

The Maine Center for Public Interest Reporting obtained the DHHS memo shortly after publishing the results of an investigation that found players buying tickets in Maine's poorest towns spend as much as 200 times more per person on lottery tickets than those living in wealthier areas.

In Washington County, where one in five people receives food stamps, individual lottery players in some towns spent as much as $1,313 annually on the lottery, according to state sales data. By contrast, players in Kennebunkport, a wealthy coastal town where fewer than 1 in 20 people receive food stamps, spent just $6 per person on lottery tickets.

The average annual food stamp benefit in Maine is about $1,249 per person.

The state has never studied the impacts of the lottery or its marketing on Maine's poor and unemployed, despite tripling its in-state advertising budget in the past decade, the investigation showed.

Hastedt, of Maine Equal Justice Partners, said the government encourages poor people to play the lottery, so it shouldn't be surprised when they win.

"The great irony is that the administration is operating a lottery system that expressly targets people living in poverty ... tempting them to dream a little about a better life for themselves and their children," she said. "And now, it targets them ... with shame and penalties for doing just what that state-financed advertising lured them into doing."

After the reporting center's first stories on the lottery, some lawmakers in both major political parties called for closer scrutiny of the $230 million-a-year lottery, including an inquiry into whether the state may be targeting the poor in its advertising.

But for the lottery, which nets more than the state's corporate income tax, less aggressive advertising could mean less money for state coffers — dollars that would otherwise need to be offset by higher taxes or reduced services.

"The lottery is a major revenue stream for the state," said Just, the Cornell researcher. "No one is likely to want to question this too closely."