Illegal-exaction lawsuit targets lack of Arkansas funding for programs on problem gambling

The Arkansas Racing Commission and the state Department of Finance and Administration have not fulfilled their constitutional duty to establish compulsive-gambling-disorder treatment and educational programs, a lawsuit filed Wednesday claims.

Amendment 100 to the Arkansas Constitution requires the Racing Commission to provide at least $200,000 annually for the programs, but it has not done so, the lawsuit from plaintiff FaNeisha Yavette Mosley states. Mosley is a counselor in Little Rock.

Voters approved the constitutional amendment in November 2018.

State Department of Finance and Administration spokesman Scott Hardin said Thursday that Gov. Asa Hutchinson had authorized the use of $200,000 from the state’s rainy day fund for the problem-gambling programs. The move requires approval from the Legislative Council, which meets later this month.

Hardin said the department was unaware of the lawsuit and that it was in no way related to the decision to release the funds.

Amendment 100 authorized the Racing Commission to license four full-fledged casinos, which the commission has done. Three casinos operate in Hot Springs, Pine Bluff and West Memphis, while the licensed casino in Russellville hasn’t been constructed yet.

The lawsuit, filed by the Denton & Zachary firm of Little Rock, states, “Defendants … have failed to promulgate any rules or provide any funding for compulsive gambling disorder treatment or compulsive gambling disorder educational programs misapplying, at a minimum, hundreds of thousands of dollars [of] taxpayer money.”

The suit argued that the state’s failure to establish the programs constitutes an illegal exaction under Article 16, Section 13, of the Arkansas Constitution, making the case a class action by the plaintiff on behalf of taxpayers.

The lawsuit asks the court to direct the commission and finance department to account for, reimburse, compensate, reward and repay all the money they authorized to be spent on gambling-disorder programs for 2019-22 and deposit those funds in an account to be used only for those programs in the future.

The lawsuit was filed shortly after 5 p.m. Wednesday.

Hardin said Thursday that the finance department doesn’t speak on the specifics of active litigation in which it is involved.

“We have always been committed to implementation of the Amendment 100 requirement related to problem gambling,” Hardin said.

“There have been numerous meetings, discussion and correspondence over the last year regarding the source of funding and how to adequately meet the requirement to provide treatment with the $200,000,” he said in a written statement, adding that the department has for a long time considered whether to request the money from the rainy day fund.

PREVIOUS QUESTIONS

In recent weeks, the Arkansas Democrat-Gazette, in preparation for an article, raised questions about the lack of funding for the programs.

When asked whether those questions played a role in the funding decision, Hardin said, “The need to meet the Amendment 100 requirement has been a priority for us this year.”

“While the lawsuit was not a factor in the progress announced today, questions from the Democrat Gazette over the last two weeks only increased our commitment to ensuring the requirement is met in a timely manner,” he said.

Hardin told this newspaper in a written statement dated Nov. 23 that the initial concern of state officials was the source of funding.

“The funding was simply not available within the Racing Commission’s budget,” Hardin said in that written statement.

“While the money could easily be directed to support a hotline, our concern was whether that would meet the ‘treatment’ intention,” he said. “While addiction treatment is certainly accessible within the state, we learned there are very few resources dedicated specifically to problem gambling treatment.”

As a result of these factors, the $200,000 has not been dedicated “as we work to get this right,” Hardin said Nov. 23.

BEFORE AMENDMENT 100

Before voter approval of Amendment 100, Nate Steel, a counsel for the Arkansas Driving Forward committee that promoted the ballot proposal, said that constitutional provision requiring at least $200,000 for problem-gambling programs was intended as a minimum to replace funding the Legislature cut for these programs in 2015.

In 2015, Hutchinson signed legislation to eliminate the Arkansas Scholarship Lottery’s $200,000-a-year contribution to compulsive-gambling treatment and education programs, thus increasing the amount of money available for scholarships.

That bill, sponsored by Sen. Alan Clark, R-Lonsdale, also reduced the lottery’s payments to the then-state Department of Higher Education for administering the lottery-financed Arkansas Academic Challenge Scholarship program to “only direct expenditures of the department to administer scholarship funding.”

At that time, Clark said he expected the law would raise as least $600,000 more a year for the lottery scholarship program.

Former Arkansas Lottery Commissioner John C. “Smokey” Campbell of Hot Springs frequently complained about the lottery’s payments to the Higher Education Department for administering the scholarship program and to the Division of Legislative Audit for auditing the lottery.

Campbell, who has served as Racing Commission director since August 2015, does not recall making any requests several years ago to eliminate the lottery’s $200,000 annual contribution to compulsive-gambling programs, Hardin said.

Lobbyist Bruce Hawkins sent an email dated June 8, 2020, to Racing Commission attorney Byron Freeland that said, “Afternoon Long Knocker.

“… As you and I discussed last month, our client, AFMC-Arkansas Foundation for Medical Care, is wanting to put together a proposal for the Racing Commission concerning the Problem Gambling Hotline required by Amendment 100.

“Be glad to put a call together or whatever I can do to help get something on paper,” Hawkins wrote.

“I realize the major concern is how or who is going to pay for this,” Hawkins wrote in the email. “I am willing to bet you a ‘cold one’ Smokey [Campbell] would rather it not be the Commission.

“I guess that comes later.”

OTHER PROGRAMS

Hardin noted that the lottery provides funding each year to the Louisiana Association on Compulsive Gambling. The funding started in fiscal 2019, according to lottery records.

The lottery’s contract with the association each year is $14,985, while additional expenses raise the annual total to $20,000, he said.

The lottery contracts with the association to answer calls from Arkansas to the National Problem Gambling helpline, said Keith Whyte, executive director of the National Council on Problem Gambling.

Southland Casino Racing and Oaklawn Racing & Gaming have each donated $12,500 annually to the National Council on Problem Gambling over several years to help fund the council’s help-line network, which serves the entire U.S., including Arkansas callers, he said.

COMMISSION’S BUDGET

Hardin said Thursday that the Racing Commission’s general-revenue budget in fiscal 2021, which ended June 30, was $1.75 million.

“Additionally, millions of dollars are directed to the Racing Commission each year and then distributed as Amendment 100 requires to racing purses,” he said. “For example, approximately $15 million was directed to the Racing Commission in Fiscal Year 2021 and then distributed to purses at Oaklawn and Southland. The purse money could not be utilized for the $200,000 as Amendment 100 clearly states how it must be distributed.”

Asked why the state doesn’t allocate a portion of casino tax revenue to provide the money, Hardin said Thursday, “During the course of numerous discussions regarding the problem gambling requirement, this possibility has been considered.

“Casino tax revenue could ultimately be the source of the $200,000,” he said. A few hours later, he said, “The plan is to utilize $200,000 fro
m Rainy Day to launch the program and build the money into the Racing Commission’s budget in the following years.”