48 States Raking in Gambling Proceeds
By Kavan Peterson, Staff Writer
States are more addicted to gambling revenue than ever as the lure of easy new money for schools, tax relief and public services has led to an explosion of state-sanctioned casinos, slot machines at racetracks and lottery games.
Twenty-five years ago, gambling was legal in only three states. Now every state except Utah and Hawaii rely on gambling to generate revenues to help avoid raising taxes.
Pennsylvania will be the 11th state to offer slot machines at racetracks and other venues when it finishes awarding contracts to operate 61,000 slot machines - more than any state but Nevada — to raise money for property tax relief. North Carolina in March became the 42 nd state to launch a lottery and expects to raise $425 million in its first year, mostly for education.
Bets can be placed in nearly 900 casinos - 455 privately run in 11 states, 406 on Indian reservations in 29 states and 29 racetrack casinos - known as racinos — in 11 states. And at least nine states (Delaware, Georgia, Kentucky, Maryland, Massachusetts, Minnesota, Mississippi, Ohio and Texas) are considering opening their doors to casino or racetrack gambling.
The economic downturn early this decade was horrific for state budgets but helped push gambling into a mainstream form of entertainment. Gambling now attracts more than twice as many dollars as Americans spend on movie tickets, CDs, sporting events and concerts, according to the CNHI News Service (Community Newspaper Holdings, Inc.). Gaming generates more than $20 billion a year in taxes and lottery revenues for state budgets, according to industry estimates that don't include fees from Native American-run casinos.
While Americans are spending more money than ever on legal gambling, a new poll shows some softening in public approval of states' reliance on gambling money. A survey to be released today by the Pew Research Center found that while 71 percent of the public approves of state lotteries, that is down from 78 percent approval in a 1989 survey by the Gallup organization. The new survey found just over half (51 percent) approve of legalizing casino gambling as a way for states to raise money, down from 54 percent in 1989.
Support for state legalization of bingo for cash prices and off-track betting on horse racing also lost a few percentage points between the 1989 and 2006 surveys, though at least half of the public still approves. But only 42 percent — in both 1989 and today — said they approve of legalizing betting on professional sports.
Two-thirds (67 percent) of adults said they placed a bet of some kind in the past year, down from 71 percent in 1989, but fewer than 23 percent said they enjoy making bets, down from 34 percent in 1989. According to the Center, seven-in-ten Americans (70 percent) said legalized gambling leads people to wager more than they can afford, compared to 62 percent with that concern in 1989. The margin of sampling error for the survey was plus or minus 2.5 percentage points.
"The negative turn in attitudes toward gambling appears to be driven by concerns that people are gambling too much rather than by any revival of the once common view that gambling is immoral," the report said. ( Stateline.org is one of six projects that make up the Pew Research Center, a nonpartisan, non-advocacy "fact tank" that provides information on issues, attitudes and trends shaping America and the world. )
Besides new gambling sites coming to Pennsylvania , which hopes its casinos will raise $1 billion to cut property taxes, Broward County , Fla. , this summer will open the state's first non-Native American casino. Florida voters approved legalized gaming in 2005 despite opposition from Gov. Jeb Bush (R).
In California, Gov. Arnold Schwarzenegger (R) shortly after taking office negotiated a one-time $1 billion payment from Native American-operated casinos in exchange for exclusive rights to operate slot machines in the state.
The hottest craze in recent years has been to bring casino gambling to dog and horse tracks. Georgia , Massachusetts , Minnesota , Mississippi , Ohio and Texas were considering proposals to create racinos this year. Currently there are 29 racinos in 11 states: Delaware , Florida , Iowa , Louisiana , Maine , New Mexico , New York , Oklahoma , Pennsylvania , Rhode Island and West Virginia .
Delaware has been debating a proposal that would open the door to investors who want to build Las Vegas-style casinos to rival those in Atlantic City, N.J.
Arkansas, Alabama and Wyoming are considering joining the 42 states that operate lotteries, including North Carolina, which just started playing March 30, Oklahoma in October 2005 and Tennessee in 2004.
Many proposals to expand gaming are languishing this legislative season because the nation's rosier economy has put less pressure on states to seek new revenue sources, said Steve Rittvo, president of Innovation Group, a consulting firm that helps private companies and state and local governments look at gaming expansion.
"There has to be a real fiscal need, not necessarily a budget deficit, but new (gaming) proposals have to be tied directly to a need to raise money for services like education or elderly health care," Rittvo said.
But a lull in expansion of gambling is only temporary, predicted Florida state Sen. Steven A. Geller (D), the president of the National Council of Legislators from Gaming States , a nonprofit group that is not affiliated with the commercial gambling industry.
Following the 2001 economic downturn, states slashed spending and services and still are recovering from those cutbacks. Although most states are running surpluses this year, the uptick isn't enough to compensate for high expenditures in health care, education, transportation and infrastructure that states soon will face, Geller said.
"I expect states will start expanding gambling again as soon as they find their pocketbooks are empty again," he said.
Of the at least $20 billion in tax revenues states collected from gaming in 2005, non-Native American commercial casinos contributed $4.9 billion in state and local taxes, up 5 percent from 2004, according to the American Gaming Association . States collected more than $16 billion in profits from the $53 billion in lottery tickets sold in 2005, a 15 percent increase from 2004, according to the North American Association of State and Provincial Lotteries. (Neither group had an estimate for state revenues derived from Native American casinos, which won permission from Congress in 1988 to run casinos free of state regulation and which generated more than $19 billion in revenues in 2005.)
A handful of states this year are considering cutting back on some forms of gambling.
One concern is the rapid expansion of unregulated Internet gambling Web sites, which are operated offshore and occupy a legal gray area. Internet gambling is the fastest-growing segment of the gaming market with an estimated $13 billion wagered online last year on Texas Hold'em poker, blackjack and other games.
Washington Gov. Christine Gregoire (D) signed a bill in March clarifying that Internet gambling is subject to state regulation and currently is illegal. Missouri lawmakers are considering a bill to allow financial institutions to block transactions related to Internet gambling, and Kansas, Louisiana and New Jersey considered bills to crack down on Internet gambling.
On another front, the Iowa Legislature overwhelmingly voted in March to remove more than 6,400 TouchPlay video lottery machines from gas stations, bars and restaurants.
Although the machines had been approved by the Iowa Lottery Commission, many Iowans angrily testified at legislative hearings against what they saw as a proliferation of slot machines outside of casinos. The video lottery machines look almost identical to slot machines but are connected to a central location that determines the winning number, whereas slot machines independently generate winning numbers.
Another issue is unregulated machines offering video poker, keno and other games. Gaming officials in several states, including Indiana, New York, North Carolina and Mississippi, have raised concerns over the proliferation of these devices — some small enough to be played from a bar countertop — because they're easy to program to cheat customers and are hard to regulate.
Georgia and South Carolina already have banned unregulated video poker machines, and the North Carolina Senate on May 10 passed similar legislation. Thousands of the machines are operated in the state with almost no oversight, said North Carolina state Sen. Charles W. Albertson (D), who sponsored the ban and also opposed the state's new education lottery.
"I've always been taught and believe hard work is the best way to get ahead in life, and I don't think the state ought to promote or advertise gambling because it doesn't send a good signal to our people," Albertson said.
To address the social cost of problem gambling, South Dakota and Washington enacted laws this year establishing long-term funding to treat gambling addiction. Only 26 of the 48 states with legalized gaming currently appropriate gambling revenues to treat disorders, according to the CNHI News Service study. Less than $36 million a year is spent by the government and gambling industry for education and treatment of gambling problems, the study found.
About 1 percent to 2 percent of the U.S. population suffers from gambling disorders, and researchers are studying whether gambling addiction - like alcoholism - might be caused by a genetic predisposition, said Christine Reilly, executive director of the Institute for Research on Pathological Gambling and Related Disorders at Cambridge Health Alliance, a division of Harvard Medical School.
Reilly said there is no evidence that problem gambling behavior has spiked in tandem with the rapid expansion of legalized gambling. But she said gambling addictions haven't been well studied by the federal government, so little is known about the severity of the problem, the social costs or the best way to treat gambling addictions.
"If states are going to promote gambling, they need to treat problem gambling as another mental health disorder, like schizophrenia, and public health officials should be actively involved in addressing the issue," she said.