On 21 September the Nelson A Rockefeller Institute of Government published a report examining the four major types of legalized gambling from which states earn significant revenues: lotteries, casinos, racinos, and pari-mutuel wagering. The authors of the report, Lucy Dadayan and Robert B Ward, found that the revenues from these categories of gambling have declined by 2.8% in fiscal 2009, the first such decline in at least three decades.

Tribal gaming operations were not considered in the report as comprehensive data from this source are unavailable. There is some form of tribal gaming in 32 US states. The majority of the states allow lotteries and pari-mutuel wagering, 12 states have casinos and 12 have racinos. The study found that the growth in casino revenues over the ‘90s now has shifted to racinos and that pari-mutuel betting, once the major source of revenue, now accounts for just 2% of the states’ gambling revenue.

Commenting that when the economy softens states frequently consider expanding gambling operations to help balance budgets, the report points out that in the past year 25 states have proposed or considered such expansion. Colorado increased maximum bet limits from $5 to $100 and relaxed other restrictions; Illinois has legalised VLTs; even Hawaii is seriously considering ending its no gambling policy.

The revenue states received from gambling rose continuously from 1998 to 2008 but fell in 2009. After adjusting for inflation, revenue from the major sources of gambling over those ten fiscal years rose 26%. Over the fiscal years 1998 to 2009, the states with commercial casinos saw their gambling revenue increase 84% (43% after adjusting for inflation). However, that growth rate has been mostly downward since 2004, with the largest declines evident in New Jersey and Illinois.

The report interestingly concludes: “The historical tendency for revenues from existing gambling operations to grow at a significantly slower pace than other state revenues may hold important lessons for states as policymakers consider further expansion of casinos, racinos, and other gambling activities. Expenditures on education and other programs will generally grow more rapidly than gambling revenue over time. Thus, new gambling operations that are intended to pay for normal increases in general state spending may add to, rather than ease, long-term budget imbalances.”

http://www.rockinst.org/pdf/government_finance/2009-09-21-No_More_Jackpot.pdf (E-09.24.09)


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