David Williams

Yesterday, I took a quick look at the re-emerged Beshear Casino Movement, the Gov’ners potential legacy project. In all, it was a broad overview of what lessons might be learned from the many other states that have, at this point, already adopted casino gambling.

One line, in particular, irked some:

Back then, his singular campaign promise failed to come true, blocked in Frankfort and loudly opposed by folks across the state. Can it be different in 2012?

“Back then” clearly referred to 2007, just as “Can it be different in 2012″ clearly refers to right now.

One commenter on yesterday’s post wrote:

Where in any poll over the past few years has it shown that an expansion of gambling is “loudly opposed by folks across the state.”? Last poll that was taken WHAS) showed a 3/5 margin in favor.

To be clear, the statement that gambling was “loudly opposed by folks across the state” had no bearing, as it was stated, on polls conducted “over the past few years.” Those are two separate questions and the second part was not addressed in the post.

The first part, that lots of people opposed gambling in 2007, was and, to answer that part, let us look at…

WHAS 10.10.2007 SurveyUSA Poll:

The C-J’s election eve poll, similarly, showed (PDF) a strong majority of Republicans opposed to gambling and a strong minority of Democrats. Another WHAS/SurveyUSA Poll, likewise conducted just ahead of the vote, showed that while a vast majority favored a public vote on a constitutional amendment, a majority were opposed to Gambling. A Herald/WTVQ poll had it at 46% opposed to 42% in favor.

Point being… there were a lot of loudly opposed people on the issue of casino gambling in 2007.

More recent polls — and some older polls – have showed stronger public support for gaming, like this one from the HL/WKYT/WAVE in May 2010 which found Kentuckians “overwhelmingly” picking expanding gambling over three other options [those being: 1) slashing education and health care; 2) closing tax loopholes for businesses; 3) expanded sales tax].

The question now, in 2011 and heading into 2012, is how many voters are in favor of expanded “gaming”? Do wide majorities still want a public vote rather than a legislative move? Will Beshear and the Republicans unseat David Williams and clear the path to make either one of those happen? And most importantly, is it a good idea, what can we learn from other states, and does a Kansas-style state-owned casino system make more sense by keeping more revenue for the House?

Steve Beshear won the Governor’s Mansion in a landslide. Is this a mandate or a rejection of the other guy? Just as he did in 2007, Steve’s testing this boundary with the gambling issue.

Back then, his singular campaign promise failed to come true, blocked in Frankfort and loudly opposed by folks across the state. Can it be different in 2012? Steve’s down to try again:

“I think most folks out there are ready to vote on expanded gambling,” Beshear said. “My preference is for passing something we can get a majority vote on. If that’s legislation, I’m all for it. If that’s a constitutional amendment, I’m all for it. I think it’s a much easier vote to put on the ballot and let the people vote on it.”

He said he has been in talks with Republican and Democratic leaders in both state chambers but has not yet met with Senate President David Williams, R-Burkesville. Beshear soundly defeated Williams in the Nov. 8 general election, and Beshear said yesterday that one key difference was their stand on gambling.

Whether it’s going through the legislature or via a constitutional amendment, Beshear thinks (or, says he thinks) the tone has changed and now’s the time.

Gambling’s never been a terrible idea to raise revenue. Some oppose it for religious reasons, others are concerned about gambling addiction. The structure of Beshear’s first administration ideas all sought to feed the money into the thoroughbred industry, which is certainly struggling.

The most sensible argument against Beshear’s gambling plan is that it’s a regressive tax. It seeks to fleece money for revenue from, by and large, the people who struggle the most. Sure, there may be some high-end gamers (What up, David Williams!) but looking at the make-up of this state, the economic situation of its population, Steve Beshear’s plan raises revenue from the wallets of the poor.

If gambling was coupled with actual tax reform then the state could move in the right direction. If it was further augmented with industrial hemp job creation and revenue (what up, James Comer), that would do even more to put Kentucky on its feet.

As it is… Steve Beshear appears aimed for raising taxes only on Kentucky’s working class through regressive gambling. Fair enough. Hopefully it will work, raise money for the state and help the thoroughbred industry.

There is one big aspect to this go ’round worth considering — for advocates and detractors alike. Four years ago, Kentucky was one of several states considering casino gambling. In that time, several other states have allowed it. This means that we should have some strong examples to follow — like a clinical study, these other states offer evidence of gambling’s benefits, side effects and ill effects. [There's Florida, Pennsylvania, D.C., Iowa, New Hampshire, Massachusetts and Connecticut and Rhode Island, Georgia, Illinois,

If you wish to believe the American Gambling Association (which represents the gambling industry so...), legalized gambling created $7 Billion in revenue in gaming states. Pennsylvania led all others in their study with $1.3 Billion and Indiana had $875 million, edging out Nevada/Vegas.

Writes the Pew Center on the States:

Nevada can still lay claim to being the nation’s leading casino state, with a total take of $10.4 billion last year, but casino revenue and casino tax revenue are two very different things.  State tax policies for casinos vary widely. Tax rates often are higher for casinos located at racetracks, sometimes called “racinos,” where the slot machines tend to be operated by the state lottery as opposed to the more traditional state regulatory gaming commission.

Nevada doesn’t have any racinos. It has 256 commercial casinos, but it imposes a comparatively low rate of up to 6.75 percent in taxes on the money they take in. Pennsylvania, on the other hand, has only 10 casinos, but it applies a 55 percent tax rate on the more than 26,000 slot machines at those casinos. Of the proceeds, 34 percent go to the state gaming fund, 12 percent to the horse racing industry, 5 percent to economic development and 4 percent to local governments. Pennsylvania has a 16 percent tax on table games.

Indiana also taxes at high rates: It has a graduated tax of 15 to 40 percent of gross gambling revenue for riverboat and land-based casinos, and a graduated slot tax of 25 to 35 percent of gross gaming revenue for racinos.

The same Gambling Association report found that of 22 states, eight saw a decrease in tax revenue -- including West Virgina (-7.3%), Illinois (-6.0%) and Indiana (-0.4%). Twelve states saw a decrease in casino jobs -- including West Virginia (-3.4%), Illinois (-2.7%) and Indiana (-10.8%). (There's much more in the full report (PDF) for both sides of the coin... or chip).

While four years ago, we were largely left to believe the prognostications of the Governor and both sides of a very divided argument, now we have twenty-two test scenarios, which we can study and consider. If the projected economic impact stretches over a billion, we have states to check whether that's realistic.

The other question is (and always has been), if the argument currently is that Kentucky tax dollars are being lost to neighboring states with legalized gaming, what is the net effect of creating another state with legalized gaming? As in... Indiana's revenues, for example, are -- by this argument -- beefed up by Kentucky residents' money. If Kentucky legalizes gaming, Indiana not only loses that revenue (which we shouldn't much care about) but are Kentucky's projected gaming figures built on the idea that we'll be receiving neighboring state's gambling dollars? Or are the projected figures weighted heavily and primarily on the backs of Kentucky residents rather than visitors driving across a river or border?

Another study, from the Rockefeller Institute of Government, paints more of the picture.

State-local gambling revenues from lotteries, casinos, racinos, and pari-mutuel wagering increased by 2.0 percent in fiscal 2010, but were still 0.5 percent lower than collections in FY 2008. One state,Pennsylvania, accounted for nearly half the nationwide growth in 2010.

....Interstate competition continues to produce both winners and losers among states, particularly in the Northeast. Results in fiscal 2010 confirmed that state-sanctioned gambling tends to generate relatively slow revenue growth, except when policymakers expand the market by authorizing new casinos or other operations. As with other fiscal choices, states may overlook the short-term nature of rapid growth in such revenue, ignoring longer-range implications as they balance annual budgets.

And there's this:

....Gambling revenue plays a consistently significant, if relatively small, role in state budgets. State revenues from lotteries, commercial casinos, racinos, and pari-mutuel wagering combined amounted to no less than 2.1 percent and no more than 2.5 percent of state own-source general revenues (taxes, charges, etc.) between fiscal years 1998 and 2009. For all 50 states, gambling revenue represented an average 2.4 percent of own-source general revenue in fiscal 2009. (We are not able to calculate that proportion for fiscal 2010 because Census data on overall revenues for that year are not yet available.)

And there's this:

[Again, the whole PDF has lots of info.]

With all these test cases out there, it should allow for a much more informed debate than the one four years ago. Rather than just relying on the Governor and other advocates figures, they can be checked against how other states have actually fared. And rather than simply relying on the other fact sets offered by those opposed, there is the realities of other states. The question isn’t “Should we or shouldn’t we?” It’s more like, “Does it work?”

And in looking at other states and learning from their lessons, one state that should be looked at very carefully is Kansas. Unlike all the other ones, Kansas legalized casinos with a twist — the state is in charge. Rather than hand over massive profits to the existing casino industry, the thought goes at least, the state maintains that control and thus keeps more of the created revenue. (See here and here.)

Again from the AGA:

The lessons of Kansas aren’t yet clear, but it would be highly irresponsible of Gov. Beshear and everyone else to not look closely at their model and consider how much additional revenue would be created by keeping the money rather than handing it over to the gambling industry.