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The pitch from the gambling industry

We know that the gambling industry, which never sleeps, has been busy preparing for the next legislative session. The Trib gives us an overview of their pitch, about which I’m sure you’ll be hearing plenty more in the coming months. Most of this is familiar territory, so let me just zoom in on two points. One has to do with the numbers:

Promoters of gambling have been trying to get everything from slot machines to casinos legalized in Texas for years, but they were brushed aside last year after the stimulus money relieved the budgeteers of many hard choices. Now, the gambling side says, the continuing recession improves their odds, and they’ve managed, for now, to keep all of their own constituencies from squabbling.

“They’re all getting along and singing from the same hymnal,” says Mike Lavigne, who’s working for Texans for Economic Development, a group of track owners, horsemen and others who want the state to okay expanding gambling at tracks. They’ve got a web site — winfortexas.com — and have lobbyists and others strategizing in advance of the 2011 legislative session.

That group wants lawmakers to allow video lottery terminals, or VLTs, at the state’s horse and dog tracks and on reservations of the state’s three Indian tribes: the Tiguas, the Kickapoos, and the Alabama Coushattas. They say those “racinos,” (a combination race track and casino, would bring $1 billion into state coffers each year (twice that for a two-year state budget) once they’re up and running and would be an economic boon to their communities and to the horse business in Texas.

“Eventually, they’ll be facing taxes, or fees, or something else,” Lavigne says. “This is the lowest-hanging fruit. If you need $2 billion fast, call us.”

[…]

Rob Kohler, who’s been lobbying against legalized gambling for years, doesn’t buy the budgetary justifications. “The difference between now and when we did horses and the lottery is that, then, we didn’t have a lot of data,” he says. “Now we have the data. This isn’t a viable revenue mechanism.” Horse and dog tracks never produced any more than a trickle of revenue for the state in spite of flagrantly optimistic economic forecasts at the time lawmakers were asked to legalize it (at the start in 1986, proponents forecast the state would net $110 million annually; the revenues have never been more than a small fraction of that amount, and the costs of regulation have negated any fiscal benefit to the state treasury). The lottery has produced more or less as predicted, but didn’t become the public school funding panacea sold to voters, he says. “The perception is that they were sold a bill of goods,” he says.

Slot machines, Kohler says, would bring the dangers of expanded gambling without much benefit. Racinos, he says, would add little to the state’s annual budget, which is approaching the $200 billion mark. “Take 200 pennies. Throw them in a bag. Throw in one more penny. That’s what you’re getting,” he says.

Kohler’s point about the relative size of gambling revenue to the overall budget is correct, but not particularly responsive. What matters now is the size of the deficit and how it can be shrunk, and even a small new revenue source still contributes to that. Note that one reason we’re having the conversation about gambling as a source of revenue is because all of the more sensible sources are for a variety of reasons politically untenable, and even in Texas most people recognize that cuts only get you so far. If we could have an adult conversation about the state’s tax structure, there would be less attention being paid to casinos and video lottery terminals.

Of course, as we’ve discussed before, even if the gambling industry got everything it wanted in the next session, the revenues they promise would not materialize right away. That’s the second point, the timeline:

The racinos wouldn’t produce money immediately. [State Rep. Ed] Kuempel and others say the state will need the money in subsequent budgets and argue that the earlier the gaming is allowed, the quicker the money will come in. One proposal would let the state sell licenses for the VLTs — that would bring in money up front — but the track operators say they can’t afford the licenses until the gaming parlors start generating cash. And they say the Legislature isn’t ready to approve full-blown resort casinos, either. “We’re not talking about opening up new casinos all over the state,” Lavigne says. “These things don’t happen overnight.”

However we answer the question about gambling this session, the questions about the budget shortfall will have to be answered separately. Expanded gambling will not do anything to affect this biennium.

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