Guest Post: Gambling has not saved budgets in other states - Granite Grok

Guest Post: Gambling has not saved budgets in other states

slot machine

by Michael Biundo

If we want definitive proof that expanded gambling won’t make our state budget permanently flush, all we have to do is look at the states that rely on gambling revenue today.

First, a quick look at New Hampshire. In 2008, only seven states experienced a higher percentage growth in state spending than New Hampshire. Politicians and think tanks agree that New Hampshire in 2009 is facing a budget shortfall of somewhere between $300 million to $400 million.

In the face of this historic shortfall, the gambling debate is once again heading for a legislative showdown. This year, the pro-gambling lobby thinks our current budget woes will act as its ace in the hole.

Unfortunately for the pro-gambling crowd, the current budget deficit was caused by excessive spending and over-estimated revenue, a problem that will not be cured by adding a new revenue source, either gambling or a broad-based tax.

I am not personally opposed to gambling. And I agree with gambling proponents like Chuck Morse, who has been quoted as saying: "If the state is looking for new revenue to address this budget challenge, it can’t afford to risk our economic advantage by implementing a sales or income tax." The problem is that not unlike the slot machines the gambling lobby would like to bring to New Hampshire, expanded gambling could pay off in the short run, but the long run it will certainly end in more deficit spending, with the taxpayers once again reaching into their pockets.

According to the Center on Budget and Policy Studies, all states that count gaming as a source of tax revenue are currently facing or are projected to face large budget deficits of their own.

Nevada is looking at a budget deficit of $536 million. The Nevada Gaming Control Board recently released its report on gambling, and the final numbers show a statewide decrease in gambling revenue of 14.8 percent. Illinois’ casino revenue is down a whopping 20.3 percent, which translates to $150 million to $160 million, all while Illinois faces a $2 billion state budget deficit this year.

New Jersey is facing a $2.1 billion deficit, and slots revenue was down 7.2 percent in July. New York’s own Seneca Gaming Corporation has reported a drop of $17 million for the fiscal year of 2008 while New York faces a projected $13.7 billion deficit for 2010.

 

Connecticut, our gaming neighbor to the south, has a projected budget deficit of $2.5 billion for fiscal year 2010. The state, which gets 25 percent of casino slot revenue from both Mohegan Sun and Foxwoods Resorts, saw its share drop by more than $19 million in the fiscal year 2007-8.

Mitchell G. Etess, chief executive of the Mohegan Sun casino, sums it up this way: "People were not gambling as much as they once did." Foxwoods and the MGM Grand laid off 700 employees in October. The governor of Nevada said "the lesson from the last 20 years is clear; our revenue system is broken because it has relied on regressive and unstable (gambling) taxes."

Not only are gambling revenues volatile, in decline and obviously not keeping their state revenues in the black, they also may have a negative impact on our current forms of gambling revenue. The Brookings Institution sites a 2003 study that finds a strong cannibalization of state net lottery revenue by commercial casino tax revenue. Specifically, it found that an increase of $1 in commercial casino revenues reduces net lottery revenues by 56 cents.

The experiences of the states mentioned above should serve as a lesson to those who are proposing expanded gambling as a solution to the current fiscal disaster. The economic reality is that a source of revenue as erratic and unpredictable as gambling will not solve a situation in which the state continues to spend those revenues as haphazardly as the New Hampshire Legislature has since 2006.

The best choice for the state budget to become solvent again requires that unnecessary spending be ended and that those who are projecting revenues do so in a realistic manner. Tough choices lie ahead, and only sound fiscal management, good government principles and a prudent use of taxpayer funds will solve the state’s fiscal woes.

The current situation requires tough choices made by serious leaders. This is not a time to roll the dice on our future.

Michael Biundo is chairman of the New Hampshire Advantage Coalition and a former Republican state representative from Manchester.

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