Gambling dollars can boost small biz
We should use new revenue to address inequality
WITH THE ENCORE BOSTON casino scheduled to open in June, fiscal year 2020 will be the first year that the Commonwealth will receive significant taxes on gross gaming revenue, creating a new financial resource to address key challenges facing our state.
No challenge is greater than the growing wealth and income inequality that we see across both racial and geographic lines in Massachusetts.
The Federal Reserve Bank of Boston has documented the astounding racial wealth gap in Greater Boston, with whites averaging $247,000 in wealth and black households averaging just $8. Latinos lag far behind as well with average household wealth of less than $3,000. Massachusetts also suffers from geographic inequity. While Greater Boston’s economy is booming, many rural towns and some Gateway Cities struggle to retain local businesses, jobs, and people.
Housing is a big part of the problem and we need a comprehensive approach to address those challenges. But we also must do more to build wealth by creating, sustaining, and growing small businesses in our struggling cities and towns, within immigrant communities, and in communities of color. New revenue from the gambling industry can play a key role in these efforts.
Significantly, 85 percent of the businesses in the program are owned by immigrants, people of color, women, low-income people and/or are in a low-income area. More than three-quarters (76 percent) of the businesses achieved a positive outcome in the past year. An independent study by Mt. Auburn Associates in 2018 found the program to be highly cost-effective – costing just over $1,000 per business.
The program’s success comes from funding highly effective community based non-profit organizations that understand their community and their clients. The organizations tackle the unique challenges these businesses face by offering business education and coaching, access to networks, resources and markets, and financial capital.
The 40 organizations funded by MGCC are as diverse as the businesses they serve.
Mill Cities Community Investment serves the Lawrence/Lowell area and helped dozens of businesses impacted by the Columbia Gas explosions last year. The Carrot Project works with farm and food businesses by helping them build the financial management skills they need to thrive. The Community Development Partnership on Cape Cod helps local businesses manage the challenges of a seasonal economy. New Vue Communities is partnering with the City of Fitchburg, Fitchburg State University and the Fitchburg Art Museum to create a thriving new business environment on Main Street. Dozens of other groups develop customized programs that are culturally and economically targeted to the communities they serve.
Unfortunately, the program has been underfunded for years. The program was originally capitalized in 2006 with $2 million and in FY 2019 the appropriation was still just $2 million. MGCC and its partners could be serving many more businesses with additional funding.
All of which brings me back to Encore Boston and the gaming revenue that will hit the state budget in FY 2020. When the Legislature established the gaming industry in Massachusetts, it had the foresight to earmark 9.5 percent of the taxes on gross gaming revenue for an Economic Development Fund that could support initiatives like the SBTA program. The Gaming Commission itself did an exhaustive study of how to spend the dollars in that fund and specifically recommended allocating dollars to MGCC for this purpose. In FY 2020, the fund is expected to have over $20 million in new revenue.As the House and Senate put together the Commonwealth’s FY 2020 budget, now is the time to seize the opportunity and use the Economic Development Fund to increase the SBTA program to $4 million annually. Additionally, at least $1 million from the Economic Development Fund should help expand the state’s support for Community Development Financial Institutions that make loans to underserved businesses that can’t access bank funding. The CDFI program is a terrific complement to the SBTA program. These investments would go a long way to ensuring that the gaming industry helps reduce the unacceptable racial and geographic wealth inequality that persists in our state.
Joseph Kriesberg is president of the Massachusetts Association of Community Development Corporations and a member of the board of directors of the Massachusetts Growth Capital Corporation.