I did a submission to the Minister on the proposed Online Casino Gambling Bill. Reproduced below, mainly for posterity as there seems little appetite for any of these discussions.
For decades New Zealand has had a system of linking gambling to community funding: think Lotto and Class 4 pokies as an example. These funding streams blossomed in the late part of last century, along with other funding streams such as community and energy trusts. This grant money has now created an ecosystem where people and organisations now rely on significant grant funding for operational and capital purposes, and New Zealand has twice as many charities per capita than say Australia. This supports communities – and families working for those organisations getting that grant money.
For decades New Zealand has had a system of linking gambling to community funding: think Lotto and Class 4 pokies as an example. These funding streams blossomed in the late part of last century, along with other funding streams such as community and energy trusts. This grant money has now created an ecosystem where people and organisations now rely on significant grant funding for operational and capital purposes, and New Zealand has twice as many charities per capita than say Australia. This supports communities – and families working for those organisations getting that grant money.
I had looked into this: above is a chart looking at Canterbury’s grant making ecosystem. While old data, there have been no significant changes in grant makers in the past decade. We can see that pokie make up around 50% of the grants going into Canterbury. If we include Lotto then around 2/3 of grant funding comes from gambling. There is no reason to think that Canterbury is not similar to the rest of the nation in terms of their grant profile.
This data of course ignores Government contracts and private / corporate giving, focusing on organisations who make grants into entities.
Pokies have some big advantages.
There are of course some issues with this grantmaking model:
However, the majority of the funds end up doing some good in the communities they support. NZCT has a very good schematic on the split of pokie funding. This split shows the share that goes to community funding groups (3.2 cents in the dollar), the Government (2.9 cents in the dollar) and 1.5 cents in the dollar to the operator and to the venue, along with 90.9 cents paid back to the gambler. Casinos do not have the same community funding burden on their business model.
My concern over the proposed changes is on the impact to the funding ecosystem. Pokies make up a significant portion of grant funding. That money is used to support all manner or organisations: sports clubs, health charities, schools, community groups and arts organisations, and used to pay for community assets, events and support thousands of salaries in New Zealand.
If funding were to be part of the online casino industry, proceeds from that funding could easily be leveraged into an existing grantmaking body without a need for replication: perhaps local bodies, the existing Lotto decision makers, or perhaps an existing pokie who has vetted good practice. The advantage of the latter is that they are already a low cost operator, likely lower cost than the other options which means more money ends up with communities.
I do believe that the grant making sector needs thought at a high level. To make this structural change to our essential pokie funding without considering the long term effects of this on the recipients is short sighted and will only result in even more demands on the public purse for support. We do have too much reliance on gambling. We do have too many charities replicating services and chewing up cash. We do have paid staff where before communities and volunteers stepped up. We do have messy funding boundaries between state and philanthropy. We do have too much power for our community resources with highly paid staff in grant making organisations who are often driven by populist agendas. We do have high cost systems. Some of my earlier work suggests that the cost of this process to NZ Inc is around $260m per annum, and that a grant costs around $4k to get into the community.
There are few people thinking about this: grant makers tend to put themselves at the centre of the solution, and grant seeking organisations tend to be organized based on sector rather than as resource seeking entities. Change tends to be incremental to the system rather than system redefining. I wrote this a while back but still see no reason why New Zealand couldn’t rethink the model. But this rethink requires policy which cuts across multiple portfolios, vision and strategy at the system level rather than a death by a thousand cuts approach which is what is happening at present.
I also think that NZ based entities are likely to be more responsive: we can see with many offshore companies there is a complete lack of response in relation to complaints and customer issues. International entities have a poor track record of being good citizens to our small nation, an issue I am sure Problem Gambling will highlight as a real concern.
Online gambling is in New Zealand already and its great that the Government is looking to bring some order to the sector. However, I think its remiss for community funding to be excluded from the model given the likely impact of online gambling on pokies. A better solution would be leveraging local providers and adding a community funding element which is commensurate with the amount Class 4 are required to provide while taking some time to critically review the grant making ecosystem and adjusting once a strategy is in place. An even playing field seems fair and the right thing to do for both New Zealand businesses and New Zealand communities.
This data of course ignores Government contracts and private / corporate giving, focusing on organisations who make grants into entities.
Pokies have some big advantages.
- Quick decision making
- Broad range of organisations funded
- Simple application procedures
- High trust model
There are of course some issues with this grantmaking model:
- Organisation overreliance on pokie funding
- Misuse of funds
- Some poor allocation of grant money – there are numerous articles on this
- Poor oversight of the ecosystem
However, the majority of the funds end up doing some good in the communities they support. NZCT has a very good schematic on the split of pokie funding. This split shows the share that goes to community funding groups (3.2 cents in the dollar), the Government (2.9 cents in the dollar) and 1.5 cents in the dollar to the operator and to the venue, along with 90.9 cents paid back to the gambler. Casinos do not have the same community funding burden on their business model.
My concern over the proposed changes is on the impact to the funding ecosystem. Pokies make up a significant portion of grant funding. That money is used to support all manner or organisations: sports clubs, health charities, schools, community groups and arts organisations, and used to pay for community assets, events and support thousands of salaries in New Zealand.
If funding were to be part of the online casino industry, proceeds from that funding could easily be leveraged into an existing grantmaking body without a need for replication: perhaps local bodies, the existing Lotto decision makers, or perhaps an existing pokie who has vetted good practice. The advantage of the latter is that they are already a low cost operator, likely lower cost than the other options which means more money ends up with communities.
I do believe that the grant making sector needs thought at a high level. To make this structural change to our essential pokie funding without considering the long term effects of this on the recipients is short sighted and will only result in even more demands on the public purse for support. We do have too much reliance on gambling. We do have too many charities replicating services and chewing up cash. We do have paid staff where before communities and volunteers stepped up. We do have messy funding boundaries between state and philanthropy. We do have too much power for our community resources with highly paid staff in grant making organisations who are often driven by populist agendas. We do have high cost systems. Some of my earlier work suggests that the cost of this process to NZ Inc is around $260m per annum, and that a grant costs around $4k to get into the community.
There are few people thinking about this: grant makers tend to put themselves at the centre of the solution, and grant seeking organisations tend to be organized based on sector rather than as resource seeking entities. Change tends to be incremental to the system rather than system redefining. I wrote this a while back but still see no reason why New Zealand couldn’t rethink the model. But this rethink requires policy which cuts across multiple portfolios, vision and strategy at the system level rather than a death by a thousand cuts approach which is what is happening at present.
I also think that NZ based entities are likely to be more responsive: we can see with many offshore companies there is a complete lack of response in relation to complaints and customer issues. International entities have a poor track record of being good citizens to our small nation, an issue I am sure Problem Gambling will highlight as a real concern.
Online gambling is in New Zealand already and its great that the Government is looking to bring some order to the sector. However, I think its remiss for community funding to be excluded from the model given the likely impact of online gambling on pokies. A better solution would be leveraging local providers and adding a community funding element which is commensurate with the amount Class 4 are required to provide while taking some time to critically review the grant making ecosystem and adjusting once a strategy is in place. An even playing field seems fair and the right thing to do for both New Zealand businesses and New Zealand communities.
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