- A growing number of states are turning to gambling to
ease staggering budget deficits and to spur other economic activity and
jobs.
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- New York took the lead. After the Sept. 11 terrorist
attacks, the state quickly joined a multistate lottery and allowed casino
gambling at five racetracks to generate more tax revenue. It approved new
Indian casinos at Niagara Falls and in the Catskill Mountains to try to
revive those resort areas.
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- Already this year, Washington state and Pennsylvania
have joined multistate lotteries, and Illinois and Indiana have raised
taxes on receipts from riverboat casinos. Four other states -- Arizona,
Idaho, Nebraska and Tennessee -- will ask voters Nov. 5 whether to expand
gambling or to start new types of games. In Iowa, voters in 10 counties
will be asked whether to keep riverboat gambling and casino games at racetracks.
In North Dakota, voters might be asked whether they want to join a multistate
lottery.
And with projections that budget deficits will continue to soar, 2003 is
shaping up as a possible watershed year in which experts predict all but
a handful of states will consider expanding legal gambling or boosting
taxes on it.
''When there's a recession and the alternatives are raising taxes or cutting
services, gaming looks pretty attractive,'' says former Republican national
chairman Frank Fahrenkopf, president of the American Gaming Association,
which represents casinos and the gambling industry.
With 46 states having faced revenue shortfalls of $40 billion during the
past year, no state expects increased lottery receipts or taxes on legal
betting to cure its financial ills. In most states, income from gambling
provides less than 5% of tax revenue, says Keon Chi, editor of The Book
of the States that is published by the Council of State Governments in
Lexington, Ky.
But for states that already have cut spending, depleted emergency ''rainy
day'' funds and raised ''sin taxes'' on liquor and tobacco, lottery money
and taxes on winnings and gambling operations provide some relief.
$41 billion industry
It's no wonder that states eye gambling for cash. Betting is big business,
as state lawmakers already know.
All but three states -- Tennessee, Hawaii and Utah -- have some form of
legal gambling. Forty-six states allow charitable gambling, 41 allow betting
at racetracks, and 38 states and the District of Columbia operate lotteries.
Native American casinos are permitted in 23 states; non-Indian commercial
casinos are allowed in 11. Six states allow electronic gambling devices
such as slot machines at racetracks.
Merrill Lynch financial analyst David Anders, who follows the gambling
industry, estimates revenue from all forms of gambling will total $41 billion
this year, up from $39 billion in 2001.
Taxes aren't the only reason gambling has an appeal for states. Casinos
and riverboat gambling, for instance, create jobs and often spur hotel
construction and retail development. The American Gaming Association estimates
that every $1 million in casino revenue creates 13 jobs at an average annual
wage of $26,000.
Perhaps no state points up as well as Tennessee why gambling looks like
easy money. Last month, lawmakers ended a budget impasse that had shut
down most of government for three days by approving the largest tax increase
in state history. They increased the sales tax a penny and imposed higher
taxes on businesses, alcohol and tobacco to raise $933 million.
A statewide poll this summer showed wide support for a proposal on the
ballot in November that would drop a constitutional ban and allow a state
lottery. The proceeds would go mostly to scholarships for Tennessee residents
at in-state colleges and universities.
If gambling looked attractive this year in many statehouses, experts predict
it will appear more so next year.
''I think legislators and governors gave it a first look in 2002. In year
two of their fiscal crisis, I think you'll see some real movement in legalizing
gambling,'' Anders says.
Chuck Brooke, a lobbyist for International Game Technology, a leading maker
of slot machines, agrees. ''Expansion of legalized gambling is definitely
going to be an issue next year in every state except Utah,'' he says.
But because lotteries, horse racing and casinos already are fixtures in
so many states, lawmakers will have to look to adding new games or allowing
them in more places if they hope to increase revenue. That means more slot
machines and casinos in more places in the country; increasing the limits
on how much people can bet; permitting more casino-style gambling at racetracks;
and raising the tax rate on gambling proceeds.
Putting casinos at racetracks is the fastest-growing and most popular form
of gambling expansion. ''It produces a lot of revenue, it takes place where
gambling is already accepted, and it permits the gambling to be up and
running quickly,'' Anders says.
But the prospect of more state-sanctioned gambling isn't a pretty one for
some people.
''What they sell is an addictive product,'' says Tom Grey, a Methodist
minister who travels 200 days a year as executive director of the National
Coalition Against Legalized Gambling. ''The job of government is to protect
and serve people -- not to addict and rob them.
''Most people in this country feel we already have enough gambling,'' Grey
says.
Warnings of excess
The push to expand gambling comes despite recommendations from the National
Gambling Impact Study Commission that states go slowly.
''Without a pause and reflection, the future does indeed look worrisome,''
the commission, which was created by Congress, said in 1999. Otherwise,
''a likely scenario would be for gambling to continue to become more and
more common, ultimately omnipresent in our lives and those of our children,
with consequences no one can profess to know,'' it warned.
But nearly everyone, including Grey, agrees that the push will continue
as long as states are hard-pressed to overcome deficits.
He says gambling expansion was stalled in many states because it is an
election year. State lawmakers and gubernatorial candidates don't want
to endorse more gambling when they are up for election, as most are in
most states this year.
Next year is a different story. Then, it will be politically easier to
vote for expanded gambling or more taxes on gambling than it will be to
increase sales or income taxes.
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- ''Next year,'' Grey says, ''we are really going to have
a fight.''
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- Copyright © 2002
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