Scratch & Win

Ian Coss: As I was sifting through the database of the GBH archives, looking for material for this series, there was one item that caught my eye right away. Because it was about the city where I live. A small city of about sixty-five thousand people just outside of Boston, called Medford.

ARCHIVAL: At the Sunnyhurst Farms Market in West Medford today, customers were lining up for a dance with Lady Luck.

Ian: It turns out that decades ago, a young reporter with very large glasses, named John Hashimoto, had toured the local convenience stores, talking to lottery players and clerks -- trying to understand a puzzle about the city's finances.

MUSIC: Fade in

Ian: Then, as now, the city was strapped for cash. Cuts to city services were looming. But no one in town wanted to talk about raising taxes. The mayor was refusing to even put a tax hike referendum before the voters. And yet...

ARCHIVAL: I come in here every single day and get my scratches. Somebody's gotta keep the government going.

Ian: For all the agonizing over taxes, people here had plenty of money when it came to playing numbers and scratch tickets.

ARCHIVAL: What better proof than the latest lottery sales figures, which show this small blue collar town selling more than 17. 5 million worth of tickets last year.

Ian: Seventeen and half million dollars spent on lottery tickets, while the city struggled to close a four million dollar budget gap.

ARCHIVAL: Like most of Massachusetts, Medford would rather play the lottery than pay more taxes.

MUSIC: Post

Ian: Lotteries in America have always been bound up with government finances. Thomas Jefferson was a big proponent of lotteries as an alternative to taxes -- as a way to bring in revenue, but voluntarily. Lotteries helped fund the Continental Army during the Revolutionary War. Afterwards they helped pay for the construction of the Washington Monument and the Erie Canal. They were a reliable and popular source of money.

ARCHIVAL: A joint legislative hearing on a proposal to allow off track betting in Massachusetts

Ian: But in the modern era that logic has been pushed to a new extreme. In a way, states and cities like mine were testing the limits of Jefferson's original argument: can gambling revenue truly replace taxes?

ARCHIVAL: It's a measure that would allow the state to raise much needed revenue without raising the dreaded T word, taxes. For the 10 o'clock news, I'm John Hashimoto.

MUSIC: Theme

Ian: From GBH News this is Scratch and Win: the making of America’s most successful lottery. I'm Ian Coss.

In the 1980s, the rise of modern lotteries collided with another historic trend: an anti-tax movement that swept across the country and transformed American politics, conservative politics in particular. In Massachusetts those two forces interacted in a unique way, creating a lottery that is more politically potent than perhaps any other in the country.

This is Part Five: The Cherry Sheets.

MUSIC: Out

BREAK

Ian: I feel like I should warn you up top that there are no mob hits in this one, no break ins, no wiretaps. It’s time to drill down on the policy side of lotteries, and it will get wonky. But I promise you, it’s also a juicy story, and it’s absolutely essential for understanding what state lotteries have become.

So if you look at all the money spent on lottery tickets, about sixty to seventy percent of that money is paid out in prizes, to the lucky winners. Once you take out the overhead costs of actually running a lottery, the rest, maybe twenty or thirty percent, is returned to the state as government revenue.

One of the unique qualities of the Massachusetts Lottery is where that revenue actually goes, how it's spent. In a lot of states, lottery money is set aside for a specific cause like education or the environment; in others the money just goes into the state's general fund. But in Massachusetts the money goes to cities and towns. It does not fill state coffers, it fills municipal coffers, local coffers. That is very important because when the modern anti-tax movement first got rolling, the tax in question -- the most explosive, radioactive tax of the day -- was essentially a local tax.

And that is, the property tax.

Isaac Martin: Property taxes, in one form or another, predate the Republic. This is the oldest form of taxation that's still in use in the United States.

Ian: Isaac Martin is a professor of urban studies and planning at the University of California San Diego, and he wrote a book called "The Permanent Tax Revolt: How The Property Tax Transformed American Politics." As Martin explains it, there is a simple reason why property is the old stand-by of American taxation.

Isaac Martin: If you are trying to set up a government for the first time what you want is a way to tax something that people can't run away from. And the way you do that is you tax the land.

Ian: The trouble with taxing land, is that unlike income or sales, a piece of land does not have an obvious inherent value.

Isaac Martin: Yeah, I'll say it's the sort of easiest to start, but the hardest to perfect.

MUSIC: Enter

Ian Coss: And that difficulty, that mystery of what property is actually worth, that's what ultimately makes them so political

Isaac Martin: absolutely, there's always a fight over the value of property at tax time.

Ian Coss: Yeah.

ARCHIVAL: I'm talking with Somerville Mayor Lawrence Bretta.

Ian: In the 1960s and 70s, that fight became unusually heated. States were reforming how they assessed property values, causing sudden increases in peoples’ tax bills – which nobody likes. At the same time, their residents wanted better schools, better parks. And it wasn’t clear how to pay for it all...

ARCHIVAL: And your personal opinion on this? My personal opinion is that the property owners of, uh, my city at least, just cannot accept any more on their property taxes

Ian: Around the country, there were hints of a backlash. Various groups mobilized to advocate for tax relief, on the right and the left. But in California, a groundswell of fed up property owners seized the moment…

ARCHIVAL: A million and a half people signed petitions to put Proposition 13, the Jarvis Amendment, on the June ballot

Ian: They passed something called Proposition 13: a ballot measure to permanently cap property taxes.

Isaac Martin: If you think about The idea of a local tax in California, it doesn't sound like a national news story, but Proposition 13 seemed like more than that.

Ian: Prop 13 became a national story.

ARCHIVAL: California has long been considered a trend setter, a birthplace of new ideas that go on to sweep the country.

Isaac Martin: It seemed like a signal of maybe a sea change in american public opinion.

MUSIC: Out

Ian: An amorphous backlash had been focused into a kind of movement -- a pretty radical movement at that -- one that didn't just seek to reform property taxes, but to severely limit them, regardless of the consequences.

Roy Switzler: And, um, I get the idea, well, let's try, let's try it here in Massachusetts.

Ian: In 1978 Roy Switzler was a state rep, who also had a real estate business. He had followed the campaign in California, and could see that Massachusetts was perfectly suited to be the next battle ground in this fight.

Roy Switzler: Massachusetts was known at the time as Taxachusetts.

ARCHIVAL: For too long, the label of Taxachusetts has driven established industry and business from our state,

don't you resent it when out of state friends kid you about living in Taxachusetts?

Roy Switzler: We were the highest taxed state in the country, across the board.

Ian: In fact, in 1978, the same year Prop 13 passed, the leader of that campaign visited Massachusetts and said quote: "I never thought I’d find a state where property taxes are worse than California, but I have and you are here."

Roy Switzler teamed up with a young organization called Citizens for Limited Taxation and they began planning their own ballot initiative

Roy Switzler: Proposition 2 12,

Ian: They called it Proposition two and a half.

ARCHIVAL: Under Prop 2. 5, cities and towns cannot tax property at more than 2. 5 percent

Ian: The measure would limit the total property tax revenue for any city, at 2.5 percent of all its property value. So say in a small town all the property values add up to a million dollars, the maximum the town can collect in property taxes is 2.5 percent of that, or 25 thousand dollars.

ARCHIVAL: until they reach the two and a half percent level.

Ian: Additionally, the law would limit how fast that total amount could grow. So even if the property values of a city are rising quickly, the amount collected in property taxes would only grow each year by, again, 2.5 percent.

It's a lot to make sense of, I know. It was at the time too, but Switzler and his allies made it simple.

Ian Coss: How would you make the case to voters at the supermarket?

Roy Switzler: Uh, are you concerned about your property taxes? Yes, sign here.

Ian: They had no problem getting enough signatures.

Roy Switzler: And, uh, the thing went on the ballot.

Ian: The tax revolt, here and in California, ran on populist energy. They may have gotten some big checks from business groups, but the image was of an outsider campaign challenging the entrenched interests of the state. So Roy Switzler, a sitting state rep, was not the man to be the face of that campaign.

ARCHIVAL: WGBH sting

Ian: Fortunately for us, WGBH produced a half-hour feature on the person who became that face: Barbara Anderson.

ARCHIVAL: She is likable, important, serious, very articulate, funny,

Ian: The piece opens with this long montage of voices.

ARCHIVAL: She was a powerful force in Massachusetts. Sophisticated communicator. As important as the governor of the commonwealth.

Ian: Ending with Anderson herself.

ARCHIVAL: I have never liked the idea of anybody being able to tell me what to do.

Ian: Barbara Anderson passed away in 2016, she was at times compared to both Joan of Arc and Lucille Ball; her movement was compared to the Boston Tea Party, and the Minutemen of the Battle of Lexington and Concord. Pretty heady stuff.

But her rise to that position was entirely unexpected.

MUSIC: Enter

Ian: Barbara Anderson's origin story goes like this. In the 1970s she was a housewife living in a small coastal town called Marblehead, where she taught swimming lessons at the local pool. Until one day, frustrated with her own tax bill, she quit the pool job to volunteer her time with Citizens for Limited Taxation.

Roy Switzler: And Barbara was brought in as a secretary basically.

Ian: She started as a secretary for the head of CLT in 1977, answering the phones. But there was a lot of turnover in those years. The founding director left suddenly, then his successor left soon after.

Ian: Anderson though, was still there.

ARCHIVAL: Yeah, this is Barbara. Thanks. And we'll, we'll keep you informed.

Roy Switzler: Because the others were gone, She answered the phone. They'd call up and say, Hello, well, they're not here, but I'm here, can I answer, and that's how Barbara became who she became.

Ian: In 1980 Anderson became the director and figurehead of CLT. Three years from secretary to director. And that same year, 1980, Proposition 2 1/2 appeared on the ballot.

ARCHIVAL: I had no idea what I was getting into, it came as a total surprise to me.

MUSIC: Out

Susan Shaer: So this was a time when female icons were only emerging.

Ian: Susan Shaer got to know Anderson very well, because they would often do battle over tax issues. Shaer represented the League of Women Voters, a group she had worked with since the early 70s.

Susan Shaer: It was a time when Ms. Magazine had just started. The National Organization for Women had just started. Women had just started actually running for office, And getting a bathroom in the statehouse so that they could run and use the facilities when they're on the floor of the legislature. So all of those things were just happening. She was an anomaly, and she was speaking about an issue That had resonance with a lot of people. And she knew how to use it.

Ian: What Anderson did, is she made 2 1/2 personal. Property taxes are about homes, about the domestic world, right. And so what better spokesperson, than in the language of the day, a "homemaker"? Here she is on WGBH, making her case.

ARCHIVAL: I clearly remembered sitting on my front porch in Danvirt getting the latest notice of the property tax increase. And, and just sitting there in tears knowing that there went the monthly movie. You know, there went, cause we just didn't, we had put all our money in the house. We were trying to fix it up. Andy was working all these hours. And we were just, you know, newly married. And, uh, it really hurt. It really hurt to pay the property taxes. And nobody cared.

Ian: According to Susan Shaer, when the ballot campaign got underway, there was no natural advocate to take the other side, against 2 1/2. There was no organized pro-tax lobby, even if there were many people and organizations who relied on those taxes. That's why it was her group, the League of Women Voters, who rose to the occasion.

Susan Shaer: And one of the things that disturbed me at the time was that the league said we are not going to have debates, because we won't win a debate, because as soon as you say, That you want to limit taxes. That was just they won before they even started.

Ian: Instead, the League held townhalls across the state to at least try and educate citizens on what their property taxes were for, and also warn them, of what services would have to be cut if this measure passed.

ARCHIVAL: In the city of Springfield, where we have trash collection once per week, Proposition 2. 5 may have trash collecting once per month.

Ian: In many cities, those warnings were pretty dire.

ARCHIVAL: serious cuts in our public health, public safety,

We likely would have to close this library, unfortunately.

Ian: But still, they were just that: warnings.

Susan Shaer: Our stories are always about, well, if they do this, this horrible thing is going to happen. You know, houses are going to burn down because we don't have firefighters, and hospitals are going to close, and that kind of thing.

MUSIC: Enter

ARCHIVAL: Tell you what I’m gonna do, I’m gonna cut your property tax, your excise tax…

Ian: The image I get is of two parallel campaigns: Shaer and the League talking about the value of city services

ARCHIVAL: …will lose police and fire, schools and teachers…

Ian: while Anderson and CLT talked about the burdens on individual taxpayers,

ARCHIVAL: It means they can keep their homes and know their property taxes can go down.

Ian: as if services and taxes were somehow unrelated.

ARCHIVAL: Senator, you don't mind if I use your visuals here, do you? No, I don't mind.

Ian: But ultimately the ballot measure is a blunt political instrument, a yes or no vote, and CLT had framed the question for us.

ARCHIVAL: all we are saying is, let's put a limit on how much they can take. It is all our money.

MUSIC: Out

Ian: This narrative disconnect is both a legacy and really an innovation of this time. Historically, discussion of taxes was always tied to discussion of spending. They go hand in hand. What Prop 13 and then 2 1/2 did was put just the tax part directly before voters.

Isaac Martin: You could decouple the question of taxes from the question of spending.

Ian: And that tactical move, according to Isaac Martin, has had truly profound political implications.

Isaac Martin: Hmm. Ask people, Hey, do you want lower taxes? And not tell them what it would cost them in terms of lost public services. And that that could become a winning election issue.

Ian Coss: That's so interesting. Partly because it's a ballot initiative, it doesn't have to reckon with its own consequences, and so it allows taxes as a standalone issue to become what they are, you know, what we know them as is like an issue that people campaign on and identify with.

Isaac Martin: Absolutely.

ARCHIVAL: Well, the first thrill tonight, Was to find myself for the first time in a long time in a movie on primetime.

Isaac Martin: And the Republican Party starts to make room for a new generation of politicians who begin campaigning on tax cuts, tax cuts, and more tax cuts, and don't worry about the deficits, don't worry about where the spending is gonna, come from, let's just cut taxes.

ARCHIVAL: Every taxpayer in America knows only too well that government continues to grow, to get bigger every year. And that means a bigger bite out of everyone's paycheck.

Ian: In 1980, on the same day that voters in Massachusetts made their choice about Prop 2 1/2, they also made their choice for President. We can see now that those two votes were part of the same larger political trend.

ARCHIVAL: The time is now for Reagan.

Ian: That night, Reagan's victory was called before the polls had even closed in California. It was clear which way the winds were blowing. And they blew the same way in Massachusetts.

Susan Shaer: I think I got a call. from our state rep because he knew I had been involved in it.

Ian: Susan Shaer spent the night of that election waiting by the phone -- making and taking calls.

Susan Shaer: so, I was standing in my kitchen with a very long cord,

Ian Coss: what did he tell you on the phone?

Susan Shaer: We lost. That's all you have to say.

I didn't cry, I didn't scream. I didn't have a glass of wine.. You know, when you're so involved in something, you either, I think you either have the emotions like I did everything I could, or you think I failed and I know I was thinking I did everything I could.

MUSIC: Enter

Ian: In a way, that November night in 1980 was the high water mark for the property tax revolt. There wasn't another wave of copycats after Prop 2 1/2. It was really just California and Massachusetts.

Isaac Martin: So the property tax crisis and the property tax revolt came and went within a few years. And the energy tapered off pretty fast after Proposition 2. 5.

Ian: But in those few years, a much longer lasting and farther reaching movement had been set in motion, a movement that is very much alive and well today. Think of HW Bush telling viewers to "read my lips", Grover Norquist's anti-tax pledge, or later the Tea Party -- these can all be read as offshoots of what sparked in California and caught fire in Massachusetts.

Isaac Martin: Can think of the property tax revolt as a kind of ladder that anti tax activists climbed, uh, and then they didn't need it anymore and they sort of kicked away the property tax issue and started to pay a lot less attention to property taxes and focus on other tax issues once they had acquired the model for how to do populist campaigns on tax cuts.

ARCHIVAL: You really think we won? Question three. Yeah!

Ian: Barbara Anderson definitely acquired that model, and used it to great effect for the rest of that decade. But I want to stay on the story of Prop 2 1/2 itself. Because just as Anderson scored her first big victory, she also kicked off a new battle over how to save those cities and towns from the hurt that was coming their way.

James Segel: She threw the grenade, but there was no solution to it. She just said, it's enough with property taxes, after that you're on your own.

Ian: And one thing those cities and towns could still count on, was their lottery.

MUSIC: Out

BREAK

Ian: The idea that lotteries could replace taxes once held a kind of mystical appeal. It was like the philosopher's stone, the fountain of youth, or nuclear fusion maybe: a way to eliminate the tough choices of life and simply have it all. A painless, popular tax. But it was always a mirage. You don't have to be an economist to see that the numbers don't add up. They never added up.

ARCHIVAL: I'm just saying, would it be a good idea if all of our taxes were collected by people buying lottery tickets?

Yeah. But I don't agree with it. Because it wouldn't work out that way.

Ian: I love this clip of a WGBH reporter out polling this idea among lottery players in the 80s.

ARCHIVAL: I mean, why don't we just have a national lottery,

Ian: The question is phrased in a pretty leading way, but even still, no one seems to bite.

ARCHIVAL: I don't think so. You can't depend on this. People might just stop buying tickets, and you still need that tax dollars to keep society going.

Ian: The tax revolt didn't change these basic facts, but it did prompt a fresh wave of interest in so-called 'non-tax revenue'. In the 1980s and 90s, twenty five new states added lotteries, half the country, pushing the lottery map west and south, into states that had resisted legalized gambling, but liked the idea of cutting taxes.

ARCHIVAL: I support your right to express at the polls your views on the lottery as a voluntary way to raise money.

Ian: Lottery ballot measures passed in California, Missouri, Oregon. And in states that already had lotteries, like Massachusetts, the tax revolt created a new kind of pressure to step up and produce. But because of the unique structure of our lottery, the way it paid out revenue directly to cities and towns, that pressure did not come from the top of the state government. It really came from the bottom up, and it began as soon as Prop 2 1/2 passed.

Ian Coss: when we talked before, you described yourself as a politician in recovery. Could you say what you mean by that?

David Gilmartin: It's, I think I also said that I'm glad that I did it, but I could never talk anybody into doing it,

Ian: David Gilmartin is the former mayor of Fitchburg, Massachusetts.

David Gilmartin: All the fallout from prop two and a half, it was serious. It was rough and I'm glad I was there to handle it. I don't know how other people would have done it, but I made the decision to walk away.

Ian Coss: Yeah..

Ian: Gilmartin was 25 years old when he decided to run for mayor of his home town. He was working as a firefighter at the time. And Fitchburg, for context, is an old industrial city that in the 1970s had fallen on hard times.

Which for the fire department, actually made for a busy and dangerous job.

David Gilmartin: Vacant buildings, things like that, they were just going up all the time. And, um, one night, there was a guy, who was killed, and three other firemen never worked again when the front wall of a four story building came down on them.

And, I thought, you know, maybe I can make a difference. I think I know how to at least put the brakes on this.

Ian: So he challenged the longtime incumbent, running on a platform of change, and he won. Gilmartin was sworn in as mayor on his 26th birthday.

David Gilmartin: January 4th. And, I made my resignation for the fire department so this is very theatrical. I went on the stage, wearing my uniform,

Ian: He went up in the full dress uniform of a firefighter -- you know, the officer's hat, the double breasted jacket, the braided cord hanging from one shoulder.

David Gilmartin: Somebody came out, I took off my hat, took off the blouse, handed it to them, and I put on a jacket. A Harris Tweed.

Ian Coss: So there's literally like a ceremonial transition from firefighter to mayor..

Ian: This was January of 1978, so just a few months before Proposition 13 passed in California, and Gilmartin followed the news with some interest.

David Gilmartin: I kind of thought that there would be a ripple effect, and there was.

Ian: By January of 1981 that ripple had arrived in Fitchburg. It was Proposition 2 1/2, and it was no longer just a ripple.

David Gilmartin: And what it did is it changed the equation for taxes. In the old days, you'd total up all your expenditures once the budget was finalized, and then you figured out your tax rate. This flipped that.

Ian: From now on, the tax revenue was capped at two and half percent of total property values.

David Gilmartin: This is how much money you're going to have to work with.

Ian: And of course it was the mayor's job to make the hard cuts -- to be the bad guy.

MUSIC: Enter

Ian: The state's cities and towns were facing a collective budget gap of about six hundred million dollars.

ARCHIVAL: He needs to cut 1. 2 million from the school system

Ian: Six hundred million dollars worth of local services that had to be cut or paid for some other way.

ARCHIVAL: Schools, parks, the city hospital

Ian: In other words, those dire warnings that the 2 1/2 opponents had talked about, were coming to life.

ARCHIVAL: playoffs are scheduled at the end of the summer. The effects of Prop two and a half have not yet reached this program.

Ian: After Prop 2 1/2 passed there was an unprecedented surge in applications to private schools -- mostly from upper and middle class parents concerned about their town's public schools.

ARCHIVAL: Eventually, you're gonna hit a, a point of no return where a town hits a wall. It can't fund even basic services anymore

Ian: David Gilmartin recalls a pair of police dispatchers who started declining to respond to non-urgent calls, citing the impending budget cuts from Prop 2 1/2. The officers were disciplined, but still, that was the level of uncertainty, and alarm really.

David Gilmartin: Once you started losing that revenue stream, there wasn't much else. And look what we've replaced it with, meals taxes, hotel taxes. You know, I think Fitchburg has got one hotel left that doesn't, it doesn't make up for what happens.

ARCHIVAL: The moment of truth is just about on us. Is that clear? Is that correct?

David Gilmartin: So, there was quite a bit of angst. Am I going to keep my job? You're not going to cut this guy, are you? You're not closing the parks, are you? So, and I didn't have an answer until I'd worked out the budget.

MUSIC: Shift

Ian: A lot of the cuts Gilmartin made were not things people would see right away. Open positions were left unfilled, maintenance was deferred. A plan to put lights up at the Little League field was put on hold. But there is one cut he will never forget.

David Gilmartin: I had to close the fire station

Ian: The firefighter who decided to run for office because he watched one of his comrades perish in a burning building, who walked onto the inauguration stage in his firefighter's dress uniform -- he had to close a fire station.

David Gilmartin: And that was painful. Oh, I had a relative who worked out of that station in the horse drawn days. And the people in that neighborhood were upset, but there was nothing I could do. Um, that was, that hit home with me. But I had no choice. I had no choice.

Ian Coss: choice. I

David Gilmartin: did. Yeah.

Ian Coss: Do you have any memories of it? Like, what it looked like inside?

David Gilmartin: Yes, it's still there. Um, It had a hose tower where you'd dry the hose. It was wainscoted inside, brass sliding poles. And it had an individual, uh, bunk rooms upstairs and a kitchen. It was cozy.

Ian Coss: When you close a fire station, is there a, some kind of process or ceremony of decommissioning that building?

David Gilmartin: Many, many years ago, they're used to, they'd make the last run, the last alarm, and they'd sound a box and, that would be it. Uh, we did not do that. I didn't. We just closed it. Guys cleaned out their lockers and they went to work in a different house.

Ian Coss: didn't

David Gilmartin: I didn't think it was appropriate.

Everybody knew we weren't trying to do this quietly or pull a wool over anybody's eyes, but, I hated having to do with this, and I just wanted to get it over.

MUSIC: Out

Ian: As David Gilmartin worked his way through the budget, there was one wild-card still in play, a last ray of hope really, and it is also how all of this ultimately does connect back to the state lottery. So every year, when the legislature gathers on Beacon Hill to create the state budget, they carve out some money for local government, called Local Aid. This is money that's collected through state taxes, but goes to local coffers. Once the budget is done, notices then go out to every city and town letting them know how much money they got. At one point in time these notices were printed on pinkish paper, earning them the name "Cherry Sheets."

Local Aid was not typically a hot topic in the budget process. In fact, it was largely an afterthought. But the 1981 budget was bound to be unlike any in state history. Mayors were waiting anxiously to get their Cherry Sheets. And by total coincidence, that same year, those mayors gained a new champion on Beacon Hill: James Segel. We heard him briefly just before the break.

James Segel: I was appointed to. Be the first executive director of Mass Municipal. They just had created the organization. And I came in exactly at the same time as two and a half words affecting all the cities and towns in the most, detrimental way in history.

Ian: The Mass Municipal Association represented all 351 cities and towns in the state. Segel's job was to be their voice in Boston, in the state house. He was known as a low-key numbers guy, someone who mostly worked behind the scenes and didn't make waves.

Now, at age 35, Segel was about to go against all that. To save the cities and towns, he would have to go on the offensive and change the way the whole state budget process worked.

James Segel: to turn it on its head and make local aid the first priority as opposed to the last priority was the challenge and that's what we undertook.

ARCHIVAL: In the efficient and economic management of the state.

Ian: The state budget process unfolds in three acts. First the governor offers up a budget proposal, then the House of Representatives, and finally the Senate. There is competition between the different versions and hopefully they all get resolved between January and June, when the fiscal year turns over.

ARCHIVAL: In Elder Affairs, we are recommending 68. 5 million

Ian: So in January of 1981, Governor Ed King -- a conservative Democrat -- kicked off the process with his budget address to the legislature, staking out his vision. But with the impacts of Prop 2 1/2 just coming into focus, there was really one number everyone in the room was waiting to hear.

ARCHIVAL: In the 1982 fiscal year, 37. 6 million more should be available for payments directly to cities and towns than was certified for the current year.

Ian: That was his lifeline. Facing up to $600 million in lost revenue, Governor King would offer cities and towns $37.6 million.

ARCHIVAL: know I can rely on your consideration and assistance.

MUSIC: Enter

Ian: The budget was a shock.

ARCHIVAL: of the seven budgets that I've seen since I became a member of the legislature, that it's the single most irresponsible one that's presented

I think this is war. It simply isn't even worth arguing about. It's, it's war. Because the whole issue this year is two and a half.

James Segel: Here we were cutting 600 million. So it wasn't even a recognition that two and a half had taken place. I think it was totally unacceptable.

Ian: In an unprecedented move, the governor tried to hastily put together a second budget proposal, and then a third. But by that time it was already clear: the governor was irrelevant. The reckoning with 2 1/2 would have to happen inside the true power center of state politics: the legislature itself.

MUSIC: Post

ARCHIVAL: even though they've gotten local aid, they really can't, uh, meet many of the challenges that, uh, we were looking at

Ian: James Segel began his lobbying campaign in the House -- which again typically hosts the second act of the state budget drama. And in that campaign, Segel also formalized a goal. He wouldn't try and get the state to fill that entire $600 million hole. But he wanted half.

James Segel: okay, we're going to tighten up. But you've got to help us to the extent of half of it, 300 million. We couldn't swallow that in a year.

Ian: And that's the pitch he took to legislators.

ARCHIVAL: And try to make sure that some of these revenues go back to the citizens.

Ian: It's important to understand that Local Aid was not usually a big cause for Democrats. Because more local aid meant less state spending. If anything, it was Republicans who usually supported Local Aid -- who wanted that money to go back to the local level. So Segel, a liberal Democrat and now the voice of those local governments, quickly found himself at odds with some of his party's most powerful figures.

James Segel: Tom Magee was a Marine who was in a tank in Saipan, which was one of the worst battles in World War II in the Pacific.

Ian: He's talking about House Speaker, Tom McGee.

James Segel: He was small, he was a fighter, he was very tough, he almost did not say a sentence without the F word. at least twice.

Ian: Tom McGee was one of many Democrats who did not want to increase Local Aid, at least, not at the expense of state spending. So when McGee heard that Segel was snooping around the state house having private meetings with his members, the old marine sent court officers to gently escort Segel out of the building. He was not welcome there.

James Segel: And um, it showed that they were not going to increase local aid at all.

Ian: Which meant it was time for Segel to turn to his final option -- act three of the budget drama: the senate.

James Segel: and the Senate was watching what we were doing in the House.

Ian: And Segel saw an opening to play this round differently, to avoid that kind of showdown.

James Segel: I couldn't take on the House and the Senate and the Governor, I didn't think, and Bill Bulger was the President of the Senate and I did not want to take on Bulger. Cause he's the toughest man I ever met.

Ian: In case you're wondering, Bill Bulger, the Senate President is the kid brother of Whitey Bulger -- the notorious mob leader we heard about in the last episode. There is an old line in Boston, that what one Bulger did with a gun, the other did with a gavel. Bill Bulger wielded the gavel.

James Segel: And I just didn't think I could beat him, King and McGee.

Ian Coss: Is it, so you were pursuing a kind of like good cop, bad cop. Strategy of, like, you're, you're playing confrontationally with the House, throwing F bombs, or at least receiving F bombs. But then on the Senate side, you're trying to negotiate, meet in the middle.

James Segel: Exactly. Exactly. I was not going to have a confrontation with the Senate.

Ian: And Segel had something to offer the Senate too: a chance to show up their rivals in the House. As I said before, the Senate proposes their budget last. But since the question of Local Aid had so far gone nowhere with both the Governor and House, the Senate had a rare opportunity to take control -- to swoop in to the rescue of cities and towns.

James Segel: We made the Senate the good guys.

Ian: Segel's partner in this maneuver would be the chair of the Senate Ways and Means Committee -- an ambitious and clean cut young man who looked like he could be a member of the Beach Boys, but happened to share a name with a legend of country music: Chet Atkins.

Chester Atkins: I was frankly as I look back, very arrogant and very young,

Ian: This is an older, wiser Chet Atkins.

Chester Atkins: so a person who had been entrusted with an enormous amount of power and was intent on breaking eggs to make an omelet.

Ian Coss: Where would you meet with Chet Atkins? Can you set the scene a little bit?

James Segel: Yeah, I'd come into his office and I'd sit across the desk

Ian: Again, James Segel.

James Segel: they were not comfortable meetings even though we were on the same side. I'd say there was a little bullying involved.

Chester Atkins: I was a brash and I think at, at that point I realized A eureka moment that this was our chance to really make a profound once in a generation impact.

MUSIC: Fade in

Ian: Atkins saw himself as a reformer, who was ready to break some eggs if it made government work better. And the disruption of Prop 2 1/2 was the perfect opening to make much bigger, broader reforms in state finances. In other words, Atkins was happy to root around in the budget, and find that 300 million dollars that Segel was looking for.

Ian Coss: Tell me about some of your egg breaking, what did, what did, what did that look like?

Chester Atkins: like, the registry of motor vehicles had always been sacrosanct. Filled with people, people who were politically connected. but it was a huge problem.

Ian: So Atkins and Segel looked into reforming the RMV, right down to how parking tickets were collected.

James Segel: it cost me, by the way, personally. probably 800 in parking tickets that I had to pay.

MUSIC: Post

Chester Atkins: Crazy things. The state ran a bunch of pheasant farms raising pheasants and then releasing them into the wild for people to hunt.

Ian: So they cut the pheasant farms.

Chester Atkins: Probably up well over a hundred of little things like that that had never been changed over time.

Ian: And big things too. Privatizing a city zoo, eliminating whole programs, cuts to higher ed and mental health.

MUSIC: Fade out

Ian: As the process wore on, Segel recalls that the pair got pretty close to that 300 million mark, but then they hit a wall, they couldn't find more places to squeeze money.

James Segel: We were in the twos. I think Chad had gotten it up into the twos, but we couldn't figure out how to get there.

Ian: Until they realized there was another source of funds staring them in the face. A source that was growing year by year, that was popular, and that was almost by divine ordinance, already dedicated exclusively to the support of cities and towns.

James Segel: the lottery of course was coming to the cities and towns anyways But we just included it in in the number that we were doing.

Ian: Including lottery funds in their budget was largely a semantic move. The lottery had always supported cities and towns, it would still support cities and towns. But it wasn't just a nice bonus at this point, the lottery was now part of a promise from the state, to make the towns whole after a devastating financial shock.

Chester Atkins: The state lottery, was at an inflection point

Ian: And even more than that, as Atkins saw it, the lottery needed some help fulfilling its potential.

Chester Atkins: Needed more advertising and ability to get into new kinds of games.

Ian: Things that the legislature -- which had always set certain limits on the lottery's operations -- could provide.

Ian Coss: And you could see at that moment in 1981 that, This thing could get a lot bigger with a few tweaks this thing could bring in a lot more money

Chester Atkins: It was pretty clear.

Ian Coss: So you were, in essence, gambling on the lottery, that it would come through for you.

James Segel: We were gambling. Uh, yeah. Yeah, that's, that's, that's right.

MUSIC: Transition

Ian: The complete budget was printed out at a nearby shop where the staff was sworn to secrecy. There was incredible anticipation at this point, and Atkins did not want the media or his rivals in the House getting a peek at what they were doing.

Chester Atkins: they were looking for us to pull a rabbit out of a hat

Ian: Finally the copies were stacked in boxes and delivered to members of the legislature. It was unlike any budget they'd seen before. The document ran 953 pages, bound in two volumes with green covers. It was so big it earned its own nickname: The Green Monster.

Ian Coss: And when did people start calling it that?

Chester Atkins: As soon as it was released, and of course my nickname was Chester the Molester.

Ian: Chester the Molester.

Chester Atkins: It's a good rhyme. And people felt that I had molested their sacred cows.

MUSIC: Enter

Ian: The strategy all along was that the budget would make the hard cuts no one wanted to make, but then combine it with something incredibly popular: increased Local Aid. Atkins figured, if that $300 million for cities and towns was in there, he could get away with a lot in the senate -- especially with Bill Bulger at his back.

But the real test was whether the Green Monster budget -- with all its nips and tucks -- could get support in the House.

Chester Atkins: I would say any bicameral legislative body, there's always tension between the House and the Senate.

Ian: As a character on the West Wing once said: "The Republicans aren’t the enemy. They’re the opposition. The Senate is the enemy."

Ian Coss: And so the idea of getting people in the House to support a Senate budget, that's like crossing party lines, practically. It

Chester Atkins: did. People were stunned, and it generated a tremendous amount of anger.

Ian: In July of 1981, with the fiscal year technically over and the state still in limbo, the House and Senate budgets disappeared into the shrouded process known as the conference committee, where key members of each chamber hammer out the final deal.

MUSIC: Post

Ian: The committee dragged on for weeks, with Atkins and the House leadership trading jabs in the press, while continuing to work behind the scenes. State employees stopped receiving pay checks; pension payments and welfare checks stopped too. Workers at Boston's Waste Water Treatment plant even threatened to walk off the job and flood the harbor with sewage, if there wasn't a budget soon.

The meetings ran late into the night, one or two in the morning, fed by cheap cheese pizza since no one dared get caught ordering expensive toppings during a fiscal crisis. Then, three weeks into July a finished budget emerged.

MUSIC: Out

Ian: It was essentially the Senate budget.

ARCHIVAL: what do you attribute to the fact that you were not able to get your proposal through? What, I mean, what failed? What happened? Well, I think that,

Ian: Both the governor and the House leadership had to admit that in at least in terms of political jockeying, they had lost this round.

ARCHIVAL: And authorship on, on some instances, and, uh, there are various reasons that bills don't go through.

MUSIC: Transition

Ian: At last the Cherry Sheets went out to the cities and towns, letting them know how much they would receive in Local Aid, and of course the Lottery money went out with it. But the two were now linked in a way they had not been before.

The mayors and town leaders were counting on it, not just to continue, but to grow, and keep growing. David Gilmartin in Fitchburg was counting on it.

Ian Coss: was it a relief when the state budget finally passed?

David Gilmartin: it was because what I had were contingency plans,

Ian Coss: plans. Yeah.

David Gilmartin: Know, and, and, uh, if we go beyond this point, these are the things that are going to happen. And those are things I really didn't want to do.

Ian Coss: So you had the next round of cuts teed up on the chopping block.

David Gilmartin: we really would have had to, to let people go.

Ian Coss: Yeah. What, for you, is the long legacy of Prop 2 12? How has it changed local government? And how has it changed the city of Fitchburg?

David Gilmartin: Fishburg? Um, some things that happened as a result of Prop 2. 5 are still there and those are things that never got done. Even after state aid and two and a half communities started putting off, you know, paving streets or painting windowsills in public buildings and I think that legacy is still with us. The, idea behind prop two and a half was to get rid of things, to make government more efficient. The lesson of it is, is that nothing is as easy as it seems.

ARCHIVAL: the final paper is 24 415. Proposition two and a half override order and ballot question

Ian: We still live in the world Prop 2 1/2 created. Just this past year, the city where I live, Medford, for the first time ever voted on a referendum to override 2 1/2. This is the only way a city can raise its property taxes above that limit set in 1980: by a direct vote of the residents.

ARCHIVAL: we will have three minutes for the first two hours of public comment

Ian: When the City Council formally proposed that override last summer, they opened the floor for debate and public comment.

ARCHIVAL: I am in third grade and I am in Ms. Stowe's class

Ian: It went on for three and half hours.

ARCHIVAL: how many homeowners are in the city right now that we're trying to get this money from.

I look forward to the chance to vote on this override because I want my taxes to go up

my parents retirement is this home. They're not worth 800, 900, 000.

Ian: People rose in opposition, they rose in support.

ARCHIVAL: I do support all of these prop 2. 50 rides

I'm opposed to all of these overrides,

I support an override

Ian: But what's stunning to me is how little the fundamentals of the debate have changed. The two sides are still largely talking past each other.

ARCHIVAL: I have been a public school teacher for 17 years

Ian: One side talks about benefits, about money for teachers and books; the other about burdens, about seniors who can't afford the taxes on homes they've lived in for decades.

ARCHIVAL: I don't know what this city is doing. My taxes have tripled.

Ian: And we remain deeply divided about how to pay for our local government.

ARCHIVAL: we don't have deep pockets. We're a working class town. God help us forever and ever to pay our bills. Good night and good health.

Thank you. I'm going to go to the podium. Name and address for the record, please.

MUSIC: Fade

Ian: When I talked with Jonathan Cohen, the lottery historian, about this strange confluence of events around the Massachusetts lottery and Prop 2 1/2, he said it's hard to interpret because it's unique. There is no other lottery that dispenses money directly to municipalities, and no other lottery that became so deeply enmeshed in a crisis of municipal funding. It's an N of 1 in math speak. But he could see how all of this created a unique kind of political constituency. Every year our lottery sends over one billion dollars into local budgets. That's just a slice of the total Local Aid fund, but it's a significant slice. Significant enough that there are 351 mayors and town leaders out there with a pretty strong incentive to keep that lottery going, and make it as profitable as possible. Politically, it is unassailable, and largely unrestrained. And that, according to Chet Atkins, the man breaking the eggs to make that massive budget -- really began in 1981.

MUSIC: Enter

Ian Coss: Were there actually concrete changes made at the lottery as a result of Prop 2 12 and that 1981 budget, like increased advertising, for example?

Chester Atkins: Sure, there were a lot of changes like that in the lottery. We basically gave them free reign. We essentially said we're getting out of your business and telling you what to do, you tell us what you need to maximize your revenue. and we're going to be very predisposed to give you what you need.

ARCHIVAL: Good evening, and welcome to Megabucks Live. I'm Tom Bergeron. I trust you have your, uh, tuxes and evening gowns on at home.

Ian: In the next few years, the lottery got exactly what it needed: a new ad firm, a new TV host, and a new game that helped spark a national craze.

ARCHIVAL: This September in Florida, a record 105 million jackpot sparked the latest outbreak of lottery fever.

Ian: That's next time.

The series is produced by Isabel Hibbard and myself, Ian Coss. It’s edited by Lacy Roberts. The editorial supervisor is Jenifer McKim with support from Ryan Alderman. Mei Lei is the project manager, and the Executive Producer is Devin Maverick Robins.

There’s one book I did not mention in the episode, but was really important for my thinking on it, which is “Don't Blame Us: Suburban Liberals and the Transformation of the Democratic Party”, by Lily Geismer. I highly recommend it. For more info on the series and full transcripts go to GBHNews.org/scratchandwin . You can also find videos of the episodes on the GBH YouTube channel with incredible archival footage.

The artwork is by Bill Miller and Mamie-Hawa Bawoh (Mah-mee How-wah Bah-woh - like whoa, slow down). Our closing song is “You Made Me Love You,” performed by Massachusetts State Treasurer Bob Crane.

Scratch and Win is a production of GBH News and distributed by PRX.