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Maryland keno

BALTIMORE – Boarded-up homes, crumbling store fronts and police cameras with blue lights line the streets of Park Heights. It’s in one of Baltimore’s poorest ZIP codes, where the median household income is about $35,000.

Yet people spent $34 million on lottery tickets here in calendar year 2012 — more than any other ZIP code in the state, a Capital News Service analysis found.

Evert Chapman, a truck driver from Park Heights, said he’s not surprised.

“We play to make some extra money,” said Chapman, 34, as he jotted down numbers on the back of a Keno ticket inside Hoffman’s Liquors on Park Heights Avenue. “I want some extra money. We all do.”

The Maryland Lottery has become the fourth largest source of revenue for the state, contributing $545 million last fiscal year, according to the lottery agency’s comprehensive financial report.

But a Capital News Service analysis found that lower-income ZIP codes contributed a disproportionate share. The analysis also found more than a third of the revenue came from Prince George’s County and Baltimore City. Baltimore City led the state in average dollars spent on lottery tickets per adult, followed by Charles County and Prince George’s County.

Lottery officials said they do not know the reasons for the disproportionate spending from those communities.

“It’s not something we analyze or look at,” Jackie Vincent, the director of gaming research and chief of staff at the gaming agency, said.

Agency officials say that their job is to raise revenue for the state, but they don’t set policy. “That’s sort of where we struggle, too. We’re a state agency and a business,” Vincent said.

When told about the CNS findings, Gov. Martin O’Malley and Maryland Senate President Thomas V. “Mike” Miller declined to comment through their spokespersons. House Speaker Michael E. Busch did not respond to interview requests.

However, the findings are not a secret to Maryland officials: A 2011 state-funded study found that low-income residents, African-Americans and people with lower levels of education are more likely to gamble weekly on lottery games and in casinos than other Marylanders.

The study was commissioned by the Department of Health and Mental Hygiene and was required under the law that allowed casinos to open in Maryland.

The state legalized casino gambling in 2008. Four casinos have opened, generating $608.7 million in state revenue in fiscal 2013, with two more scheduled to open in Baltimore and Prince George’s County. Combined with lottery sales, gambling now contributes more than $1 billion annually to the state.

Vincent said that an agency program — though not directed specifically at low-income residents — allows problem gamblers to sign up for a two-year or lifetime ban on playing the lottery. They are blocked from cashing winning tickets when they enter their Social Security numbers to collect.

As of March, she said, 41 people had signed up.

State Sen. Lisa Gladden, D-Baltimore, who represents Park Heights, said that she is a lottery player and, while she might like people to spend their money differently, it’s not up to the legislature to decide for them.

She added the state wouldn’t need the lottery if lawmakers would raise taxes enough to pay for state services.

“It’s a poor trade and we shouldn’t do it that way, but we do,” she said.

The state sends about $20 million a year from lottery revenue back to Baltimore to pay off bonds on the Orioles’ $205 million ballpark and the Ravens’ $229 million football stadium, both built in the 1990s. Beginning this year, $20 million a year in lottery money also will help pay for a Baltimore public school construction program.

The legislature ought to consider creating a local impact fund that gives neighborhoods like Park Heights a share of the money, similar to the local impact grants that come from casino revenues, said Will Hanna II, CEO of the New Park Heights Community Development Corporation, who unsuccessfully challenged Gladden for her Senate seat in June’s primary.

Gladden also said that lottery money should benefit the communities that contribute the most revenue.

“If we have to pay for it, we ought to get something back,” she said.

“Pleasant way” to pay taxes

The state entered the lottery business in 1973, after voters approved a constitutional amendment. In the debate over gambling that preceded the vote, Del. Joseph W. Sachs, an Anne Arundel County Democrat, called it a “pleasant way for people to pay taxes.”

But Sen. Margaret C. Schweinhaut, a Montgomery County Democrat, warned that “it’s the poor person who will be supporting the lottery.”

Four decades after her prediction, CNS examined lottery sales data to see if she was right.

The news service filed a public records request to obtain sales data for calendar year 2012, the most recent full year available at the time.

Players spent $1.69 billion on lottery tickets in 2012, the data show. The state paid about $943 million of that in claims.

CNS broke down the gross sales revenue by county and by ZIP code. Using census data, the ZIP codes were ranked by median household income and then evenly divided by population into five income groups, or quintiles. Each quintile represented 20 percent of the population.

A clear trend emerged: The lower the income group, the higher the lottery sales.

The largest share came from ZIP codes in the lowest fifth, such as 21215 which includes Park Heights. They represented 20 percent of the population but contributed 27 percent of the total lottery ticket sales revenue.

The second fifth — ZIP codes still below the state’s median household income of $70,000 — accounted for 25 percent of sales.

ZIP codes in the third and fourth quintiles generated 19 and 17 percent, respectively. The smallest share of sales, 12 percent, came from the top fifth of ZIP codes, with median household incomes of over $100,000.

The analysis reflects where tickets are sold, because information on where players live is not available.

The 2011 state-funded study surveyed nearly 6,000 residents on their gambling habits. The study found that the very poor gamble more frequently than others. Those with incomes less than $15,000 are nearly 50 percent more likely to gamble on a weekly basis than those with incomes greater than $35,000, on average.

A study of fiscal year 2005 Maryland lottery sales data by researchers at the University of Maryland Baltimore County also found a disproportionate share came from socio-economically disadvantaged groups.

“Our results show that the voluntary tax collected by the Maryland lottery comes disproportionately from census tracts populated by African Americans and low-income residents,” the study said.

Researchers cited previous studies that showed evidence that lotteries are regressive and suggested that “for the current public policy debate to be fully informed it is important to have information about who pays the ‘voluntary tax’.” The researchers urged state officials to consider whether the lottery was “consistent with their broader social policies.”

Per-capita spending was highest in Baltimore in calendar 2012, an average of $579 a year for every adult 18 and older, while the state average is $382 — although that may be due in part to commuters and tourists who play while in the city.

Prince George’s County was third highest with an average of $529 per adult, just behind its neighbor to the south, Charles County, which averaged $547 per adult per year.

The smallest per capita spending came from counties in Western Maryland, where there is competition from county-regulated games of chance — such as tip jars, commonly found in bars and fraternal halls, in which players pay a dollar for a chance to draw a winning number from a container.

Prince George’s County contributed the most overall, $348 million, followed by the City of Baltimore with $281 million.

10 games to choose from

Chapman, the truck driver from Park Heights, said he has been playing the lottery for more than 13 years and plays every day — in the morning before work and in the afternoon after his shift ends.

“That’s the only way you can win: Got to play hard,” he said.

His biggest win came a few years ago when he hit $15,000 playing Pick 4, he said.

“I invested it,” he said. “Put it in my savings like a retirement fund. It helped to pay the bills, too.”

Players can choose from 10 different games in Maryland, ranging from traditional lotteries like Pick 3 and Pick 4 to multistate drawings like Powerball, from instant scratch-offs to video terminal games like Keno and Racetrax, an animated horse race.

The most popular games are scratch-offs, Keno, Pick 4 and Pick 3, in that order. Scratch-offs provide instant prizes. With Pick 3 and Pick 4, players choose numbers for twice-daily drawings. With Keno, players pick up to 10 numbers for drawings that are broadcast every four minutes to computer monitors in stores around the state.

The odds of coming out ahead in the long-term are low. Players can expect to win back about 60 cents for every dollar spent on Keno, and about 50 cents for Pick 3 and Pick 4.

The CNS analysis could not calculate the expected return for scratch-offs, the top most played lottery game in the state, due to the complexity of the game. Maryland’s lottery currently offers 84 different scratch off games, ranging in price from $1 to $20 with the most expensive games carrying top prizes of $1 million.

“I can tell anybody that the odds are against you,” said Carl Nickens, a retired government worker in Temple Hills. “That’s why they call it gambling and luck.”

He was playing at Marlow Winghouse, a local restaurant that was recently renovated to feature televisions displaying electronic lottery games, a large seating area and fluorescent light covers with the Maryland Lottery logo.

With more than $5.66 million in lottery sales last calendar year, Marlow Winghouse was the top lottery retailer in Prince George’s County and number two in the state. (Sodapop Shop, a convenience store just outside of Baltimore City, was number one with just over $5.72 million in sales.)

“I originally started for fun, but then I hit it big years ago, and then I got hooked on it,” said Nickens, who described himself as a retired government worker and regular player.

“I think everybody’s hooked. I hit $20,000 years ago from Pick 4, but they’ve got that back by now,” he said as he sat near the serving area playing Bonus Match 5.

The zip code that includes Temple Hills has a median household income of about $64,000, placing it in the second lowest income group in the CNS analysis.

Market demand and saturation are the main considerations when the agency approves applications from retailers, Vincent said. The agency also doesn’t target particular areas in its advertising.

“Our marketing dollars get spread evenly across the state,” Vincent said. She added the agency’s marketing is focused on trying to get new players in the 18-to-35 age range.

Lottery retailers follow the money, said Donald F. Norris, director of the Maryland Institute for Policy Analysis and Research, who co-authored the 2010 and 2011 studies.

“Lottery retailers know where to go,” he said. “They don’t locate in places where people are less likely to play the lottery. So there’s a much higher incidence of lottery where there are high proportions of poor people and African-Americans.”

Hyon-Young Kim and Amirah Al Idrus contributed to this article.

Maryland keno BALTIMORE – Boarded-up homes, crumbling store fronts and police cameras with blue lights line the streets of Park Heights. It’s in one of Baltimore’s poorest ZIP codes, where

Maryland Lottery Bets on Nutanix—and Wins Big!

COMPANY

The Maryland Lottery is an independent agency of the Maryland government. Its games include Mega Millions, Powerball, Multi-Match, Keno, Bonus Match 5, and numerous scratch tickets. The Lottery has generated more than $15 billion in revenue for the State of Maryland since its inception in 1973.

INDUSTRY

BUSINESS NEEDS

Aging IBM BladeServers and legacy storage systems were difficult to manage and running low on capacity.

SOLUTION

  • Nutanix Enterprise Cloud Platform
  • Nutanix Xpress
  • Nutanix AHV
  • Prism and Prism Pro management solution

BENEFITS

  • Reduced deployment time from 2 weeks to less than 4 hours
  • Cut ongoing management overhead in half
  • Reduced VM restore time from days to minutes
  • Consolidated 3 server racks of legacy infrastructure, to just 6U of Nutanix

CHALLENGE

The Maryland Lottery’s IT environment consisted of a broad mix of legacy server and storage systems, including several IBM BladeCenter servers with direct attached storage. The legacy infrastructure was being used to support all enterprise and business office applications, including the Lottery’s Microsoft Dynamics accounting and general ledger systems, help desk application, websites, operational tools, Splunk applications, domain controllers, MS SQL databases, and backup infrastructure.

Due to the complexity of the traditional 3-tier environment, the Lottery’s IT team was spending far too much time managing these disparate servers and storage infrastructures. When the time came to refresh the aging systems, they started looking for alternatives to the legacy environment that would be more cost-effective and easier to manage.

SOLUTION

The Maryland Lottery started its search by going down the ‘traditional solution path,’ upgrading its existing IBM BladeCenter servers and adding more NetApp storage systems. But since the Lottery always likes to stay ahead of the curve on new technologies, they decided to expand the search to include some of the more innovative hyperconverged systems. “After researching the options, we identified Nutanix as a leader in Enterprise Clouds and hyperconverged systems and added them to our list of solutions to evaluate,” noted Jeff Patchen, CIO of the Maryland Lottery.

The Lottery solicited bids and evaluated options in terms of initial purchase costs, system performance, and ease of management. “The Nutanix Enterprise Cloud Platform offered a tight integration of servers, storage and networking components into one easy-to-manage solution, which is the principle behind hyperconverged architectures. That was a big factor in our decision to choose Nutanix.”

The Maryland Lottery was able to purchase two Nutanix clusters—one for its primary data center and one for its backup site. “We were able to procure compute and storage for both datacenters—with real-time replication between sites,” noted Patchen. “The decision to go with Nutanix was easy at that point.”

RESULTS

Faster Implementation and Smaller Footprint

It used to take more than two weeks to deploy the legacy IBM BladeServers and NetApp storage systems. In contrast, the Lottery’s IT team was able to bring up the Nutanix production system in less than four hours. Additionally, they were able to consolidate three server racks of legacy infrastructure down to just 6U with Nutanix, saving even more on datacenter footprint and power.

Cutting Management in Half

“You never realize how difficult an IT solution is until you replace it with something better,” Patchen explained. “We were able to cut our server and storage management time in half—if not more.”

The Maryland Lottery’s IT team is now using Nutanix Prism Pro to manage the hyperconverged environment. “Prism Pro makes it possible to check both of our clusters from one centralized console,” explained Brad Burgess, systems administrator at the Maryland Lottery. “We now have the capability to easily drill down into any issues we might be having, and capacity forecasting is also much easier.”

“I like the fact that as a CIO, I can easily keep an eye on the entire environment,” added Patchen. “With one click, I can look at all of our storage resources and memory utilization, and see a high-level dashboard of both clusters. It’s nice to be able to go to one place and see all of the metrics I need without having to ask my staff to create and send me status reports.”

Better Performance

Once they migrated to Nutanix, the Lottery’s end users noticed major performance improvements across the entire environment. Access to file servers, response times for the Web servers, and even the backups are running much faster. “Everything is running twice as fast now,” noted Burgess.

Improving Backup and Disaster Recovery

The Maryland Lottery also licensed Metro Availability, the Nutanix solution that enables customers to seamlessly keep applications online, even during full site disasters. They are using Metro Availability to replicate all production workloads over to the Lottery’s DR site every hour. Metro Availability provides the ability to restore a VM in minutes without having to do a full restore from either backup tapes or some other type of backup. “With our previous system, the process took multiple hours or even days,” said Burgess. “We now have a true, quick response backup site which helps us get back on our feet after any disaster.”

Great Support

“I have been extremely impressed with Nutanix Support,” Patchen reported. “All of the service reps have been very responsive to our issues or questions. Even the director of support checks in with us in person on a regular basis to make sure we’re receiving the level of care that we need.” With other IT vendors, the Maryland Lottery typically selected ‘four-hour response’ contracts for hardware replacement. They are so confident in the architecture and setup of the Nutanix environment, they chose ‘next business day’ support, due to the high availability and redundancy of the clusters.

Using Nutanix Xpress for the ICS

The Multi-State Lottery Association (MUSL) is a non-profit, government-benefit association owned and operated by its member lotteries. For lotteries to participate in Powerball drawings, they need to be compliant with MUSL’s rules. One of the MUSL requirements is to have a separate internal control system (ICS) to reconcile transactions against the gaming systems, to ensure the integrity of the transactions and to prevent any sort of fraud or malicious activity related to the lottery games.

The Maryland Lottery recently purchased two Nutanix Xpress nodes to run its internal control system. Nutanix offers solutions for smaller deployments with the advantages of one-click infrastructure management, performance acceleration, capacity optimization, and converged local backups. “Our ICS needs to be segregated from our existing environment in a separate domain, with separate servers,” explained Patchen. “We felt that the best way to accomplish that and also get high availability was to deploy it on Nutanix Xpress.”

Migrating from VMware to AHV

The Maryland Lottery also made the decision to run AHV, Nutanix’s native hypervisor, in the Xpress environment. AHV is pre-installed with Nutanix Xpress, but the solution also supports Microsoft Hyper-V and VMware ESXi if desired. “After evaluating how well AHV works for our ICS and Xpress deployment, we are strongly considering migrating our entire production environment to AHV to eliminate VMware licensing costs,” Patchen said.

Find out how Farmers Insurance Group Federal Credit Union relies on Nutanix Enterprise Cloud to power their mission-critical applications and services.