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Gambling expansion “a crusade for bigger government,” think tank CEO says

27 March 2011

The top official of a conservative Minnesota think tank has called the campaign to expand gambling “a crusade for bigger government.” The March 26 edition of the Star-Tribune featured a guest column by Freedom Foundation CEO Annette Meeks. Meeks challenged the basic assumption that gambling expansion would produce significant benefits for the state. Here’s the complete text.

More gambling good for Minnesota? Certainly not!
by Annette Meeks, CEO, Freedom Foundation, and Board Member, CAGE (Citizens Against Gambling Expansion)

Minnesotans live in interesting times. In fact, as our elected officials in St. Paul get down to the business of passing a balanced budget, I’m guessing they wish their task were a bit less interesting — maybe $5billion less interesting.

Our unprecedented fiscal challenges are likely to force state and local governments to the brink of what could be a radical makeover of what government does, doesn’t do and how we pay for it. I believe that’s a good thing, a conversation long overdue.

Voters sent a message last November, calling for less but more transparent government. With nearly every budget hemorrhaging red ink, policymakers have a once-in-a-lifetime opportunity to shrink the size and scope of government. Yet after two months of the legislative session, an alarming number of lawmakers in both parties continue their crusade for bigger government, including an expansion of gambling.

Many legislators are wedded to the idea that gaming provides free money for state coffers. Yet many states have crossed the gambling Rubicon and have found that the game has changed. What looked like a good idea just a few years ago isn’t working now. The list of disappointments is long and growing.

In Kansas, of four casino licenses sold in 2007 when the legislature in that state expanded gambling, only one casino has been built. After three years, the state has brought in just $13.5 million. Adding to this fiscal disappointment, the Kansas treasury had to return $75 million in “privilege fees” paid by casino developer Harrah’s, which backed out of its commitments.

Even the state’s racetrack owners have all turned down the opportunity to add slot machines, saying it’s just not worth it. In Illinois, gambling revenues are down as much as 30 percent since 2008, but policymakers there still hope to hit it big. First, they bet on slot machines in bars, and when that failed the test of local voter approval, they started peddling more casino licenses.

Yet, in terms of sheer hubris, it’s hard to compete with Pennsylvania. The Keystone State has lined its New York and New Jersey borders with casinos and dreams of tripling the 24,000 machines it currently operates. Pennsylvania gambling officials recently had to return $50 million in “privilege fees” to the Foxwoods Casino Management Group for a casino promised three years ago but never built.

One Pennsylvania casino has actually asked for permission to reduce the number of slot machines it operates. When Lesley Stahl of CBS’ “60 Minutes” asked Pennsylvania’s then-Gov. Ed Rendell about the predatory nature of slot machines, he became agitated, calling her and her producers “simpletons” and “idiots” because they didn’t understand gambling. He went on to say that Pennsylvanians “would lose their money anyway.”

Many Minnesota policymakers seem to believe that more gambling in Minnesota will somehow avoid the problems other states have seen. It won’t be easy.

Take, for example, the once-booming charitable gambling industry in Minnesota that is now in a death spiral of demographics, competition, and economic and social change. The proposed solution? Ten slot machines in any liquor-licensed establishment that currently offers charitable gambling. That means 25,000 clanging machines spread across every neighborhood of Minnesota. In some rural communities, slot machines would easily outnumber residents.

Sadly, these small-town mini-casinos would continue to draw their profits from the pockets of local citizens and would likely add to Minnesota’s unemployment when the local charitable gambling business was completely replaced by automated slots.

The racino crowd is back at it, too, betting the farm that Minnesotans want slot machines at our racetracks, promising to save the horse industry if only they had slot machines. Here’s a sure bet: Slot machines at Canterbury Park and Running Aces are guaranteed to make one group rich quick — the tracks’ current owners. Interestingly, Running Aces’ windfall will go to its out-of state owners.

Racinos in other states have proven that slot machines do little to help the slowly dying horse-racing industry. And most important: A racino monopoly will do little or nothing to help balance the state’s budget deficit.

The list of gambling dreams goes on. Recently, the new owner of Block E in downtown Minneapolis decided to go “all in” by proposing to tear down the nine-year-old building and replace it with a Monte Carlo-like, upscale, 24-hour casino.

Not to be outdone, the Iron Range Resources and Rehabilitation Board proposed another horse-racing track with slots in its neck of the woods. Perhaps this could be built adjacent to the poorly conceived Ironworld center, thus saving taxpayers the extra expense of eventually having to separately shutter two failing facilities.

Yet gambling, especially “convenience gambling,” comes with a hefty cost, both to local governments who must handle the criminal prosecutions that result when problem gamblers resort to crime as a method of financing their addiction, as well as to families, many of whom suffer in silence.

Robert Goodman, author of “The Luck Business,” writes that “each problem gambler costs society from $13,000 to $52,000 per year.” According to a compulsive gambling counseling center, “after casinos opened in Atlantic City, the total number of crimes [committed] within a 30-mile radius increased 100 percent.” Earlier this year, the list of Pennsylvanians who have voluntarily “self-excluded” or banned themselves from their new “convenience casinos” topped 2,000.

The real face of gambling addiction is often found in tragic stories that unfold in our court systems. Last December, the U.S. Senate, for only the eighth time in American history, impeached a federal judge in Louisiana who acknowledged that he had a serious gambling addiction that led him to accept bribes from lawyers and to lie to Congress.

After Pennsylvania supersized its state-sponsored gambling, Mike O’Neill, a tax collector in Jenkintown, embezzled nearly a quarter of a million in taxpayers’ money to gamble at casinos “around the corner.” Gambling “changed me, who I was,” O’Neill said at his sentencing. He lost his wife, his son, his home, all of his money and his dignity.

His lawyer said his addiction became out of control “when he could go to a casino on a daily basis.” Indeed, the lawyer continued, “I talked to all Mike’s friends, and no one knew he gambled.” Sadly, Gov. Rendell and other gambling proponents weren’t in court when O’Neill was sentenced.

Nor were any Minnesota gambling proponents around a few weeks back when a former auditor in the Minnesota Department of Revenue pleaded guilty to defrauding taxpayers out of nearly $2 million to satisfy her self-confessed “gambling addiction.” And just last week, a Catholic church in Hudson, Wis., announced it had ousted a priest who had stolen some $10,000 in charity funds to support his gambling habit.

Rather than gambling on ways to increase revenue coming into state coffers, legislators should accept this worthy challenge and reduce the size and scope of state government.