Expanded Gambling: Short Term Revenue, Long Term Problems

“There are two simple questions: Where does the money come from, and where does the money go? If the customers live in the local area, there’s no way you can have economic development.”

– Professor William Thomson, University of Nevada, Las Vegas[1]

Proponents of bringing predatory slots to our state would like you to think that casinos will solve all our budgetary woes – but we can’t gamble our way to fiscal sanity.

A budget can’t be balanced on one-time revenue. Licensing fees are single payments – not stable, recurring revenue – so we can’t responsibly use this money to lower taxes or restore government services. And, licensing fees will likely be much less than anticipated.  In Pennsylvania, licenses originally valued over $500 million were sold for $50 million, leading to a cumulative loss of over $2 billion in anticipated state revenue.[2]

Much of the new revenue will simply be transferred from other sectors, not created. The estimated revenue numbers from slots sound enticing, until you realize how much revenue we’ll lose from other businesses that see a downturn in profits once the casinos come to town. Expanded gambling will drain millions of consumer dollars from our economy. Gambling transfers consumer dollars into gambling facilities, resulting in a net decrease in jobs in the overall economy.[3]

Lottery revenue will also take a steep hit. It’s estimated that casinos will reduce state lottery revenues transferred as state aid to towns and cities by about $90 million.[4] It’s a shell game —  taking money from one account and putting it into another.

Casino revenue is not stable. It’s been in decline across the country, and many are going bankrupt.  A recent report by the Rockefeller Institute concludes that casinos have contributed to, not helped, states’ fiscal meltdowns.[5]

All that “lost revenue to other states?” It’s a myth. It’s simply untrue that Massachusetts is losing billions of dollars to Connecticut. It’s estimated that Massachusetts residents contributed approximately $93 million to the Connecticut treasury in CY 2009 as a result of gambling.[6] This is close to amount as we would lose with a 10% hit to the lottery.[7]

[1] Whitehouse, Mark. “Bad Odds”. The Wall Street Journal. June 11, 2007

[2] Rogol, Natalie. “Pennsylvania’s Gambling Addiction”. Commonwealth Foundation. July 9, 2009.

[3] Kindt, John W. Diminishing or Negating the Multiplier Effect: The Transfer of Consumer Dollars to Legalized Gambling: Should a Negative Socioeconomic “Crime Multiplier” be Included in Gambling Cost/Benefit Analyses?. 2003. Pgs. 281-313.

[4] Based on a 10% hit to the lottery.  “Casino Gaming in Massachusetts: An Economic, Fiscal, & Social Analysis.” Commissioned by the Greater Boston Chamber of Commerce.  March 2008.

[5] Dadayan, Lucy and Robert B. Ward. “For the First Time, a Smaller Jackpot. Trends in State Revenues from Gambling”. The Nelson A. Rockefeller Institute of Government. September 21, 2009

[6] Barrow, Clyde. “New England Casino Gaming Update 2009.” p. viii.

[7] In FY10, the MA lottery distributed $936 million back to the state. If we lost 10% of lottery revenue transfers, that would amount to about $93 million loss in aid to the Commonwealth.

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