Gambling Gets Renewed Look As Tax Source

by John Henry  on Monday, Jan. 14, 2002 12:00 am  

Gambling proposals of various sorts have cropped up in nearly every election during the past decade.

The proposals all crapped out at the polls or the courts, but the odds are great that Arkansans will face more gambling measures in the future.

The recent $142 million state budget shortfall and an impending Supreme Court ruling on the inadequacy of the state's educational system have reignited the issue as several legislators, looking for new sources of revenue, have cast an wistful eye toward a state lottery and possibly other forms of gambling.

Although Arkansas is virtually surrounded by states that offer every type of gambling imaginable — and Arkansas itself has a colorful gambling history — voters have held the line at parimutuel betting at a horse-racing track in Hot Springs that has been around since 1905 and a dog-racing track in West Memphis.

Last month, however, even conservative state Sen. John Brown, R-Siloam Springs, said a statewide vote on a lottery could come as soon as this year.

"There's going to be a need for more money, period, in 2003. And the court says we need even more for education. And nobody likes a tax increase. So where are you going to go?" Brown said.

Gambling certainly seems to be where the money is. Americans spent $60 billion-$70 billion gambling last year, according to Eric Jackson, general manager at Oaklawn Park in Hot Springs and a keeper of gambling data.

To bring any new forms of gambling to the state will require Arkansas voters to amend the state Constitution, which forbids games of chance, including raffles and charitable bingo, and says "no lottery shall be authorized by this state, nor shall the sale of lottery tickets be allowed."

During the 2001 legislative session, state Sen. Mike Everett, D-Marked Tree, filed a resolution proposing a constitutional amendment to repeal the state's ban on lotteries. It also would have allowed the General Assembly to authorize, regulate, control and license all types of gambling, lotteries and other games of chance. The proposal died in committee.

State Sen. John Riggs, D-Little Rock, long has been outspoken in his belief that Arkansas needs a state-owned lottery to fund education needs. In the last legislative session, he co-sponsored a resolution that would have set up a statewide lottery earmarked for education. It fell one vote short of getting out of committee.

"We're going to have to have out-of-the-box thinking," said Riggs, who hasn't said whether he'll try his lottery proposal again in 2003. "We've got the least-educated people in the country."

The Arkansas Blue Ribbon Commission on Public Education, of which Riggs is a member, has estimated the cost of fixing the state's educational inadequacies at more than $850 million a year. But Riggs said "there's no way in the world we can raise $1 billion" each year without a lottery.

Nor would a lottery alone raise that kind of money. Based on a comparison with West Virginia, which shares a similar population and economic base, an Arkansas lottery would generate an estimated $140 million-$200 million a year. Opponents say a lottery would be no more of a bonanza for the state budget than an additional 1 percent sales tax.

Riggs said another avenue for revenue could come from permitting and taxing video poker at Oaklawn Park in Hot Springs and Southland Greyhound Park at West Memphis. Riggs said that since those have been declared games of skill, only a vote in the Legislature would be needed.

State Sen. Terry Smith, D-Hot Springs, whose district includes Oaklawn, brought up a bill in the last session that would have permitted the two racetracks to conduct "account wagering" over the telephone or the Internet. He said he would probably try to get the measure passed in the next session.

Smith said 10 states now have that type of wagering, and many Arkansans are betting without the state collecting any taxes on it. And he's also concerned that more money will be flowing south since Louisiana Downs, the Shreveport racetrack, is putting in 1,500 slot machines this season.

But even if legislators were to approve of new gambling measures, they would still have to face the veto power of Gov. Mike Huckabee.

The Opposition

Gambling has had a long, colorful and controversial past in Arkansas. During the 1950s and '60s, casinos and slot machines were wide open in Hot Springs. Gov. Winthrop Rockefeller shut down the illegal operations in 1969.

Any moves to reintroduce gambling will be met with wide opposition, primarily from church groups. And earlier this month, Huckabee jumped into the looming battle.

Formerly a Baptist minister, the governor has said government becomes "a pimp" when it uses lotteries to raise revenue, even to support education.

In a Jan. 5 column carried by many newspapers across the state, the governor wrote: "I recently listened to a radio talk show as two state senators advocated a lottery. I'll always oppose those who want to have a gambling operation run by state government."

The governor continued: "Such operations urge our poorest citizens to take what little money they have and bet it on the foolish, false hope of getting something for nothing. If the lottery were the way out of a recession, states that already have lotteries would be doing splendidly right now. The fact is most of those states are experiencing economic woes worse than ours. The lottery isn't saving them, and it won't save us."

And he wrote, "Regardless of any short-term economic benefits, lotteries are bad public policy. They're the only state programs I'm aware of that must actually set aside funds to treat the addictions of those who participate."

But other than stating his opposition, the governor has done little to provide real leadership against the pro-gambling forces in the state, said Larry L. Page, executive director of the Arkansas Faith and Ethics Council.

Page, working mostly through the churches of the state, has been the driving force in rallying residents to vote against any gambling measures that make it to the ballot and also lobbying and bringing lawsuits to prevent them from being on the ballot.

"Gambling is all around us," Page said. "[A lottery] won't bring any tourists in" to spend money in the state. "The ticket buyers will be Arkansans. It will simply be a redistribution of money."

Even in Georgia, where a lottery funds the wildly popular Hope college scholarship program, the poor are paying for the college educations of the wealthy, Page said.

While Riggs agreed that some gambling revenue would simply be "swapping pockets," he points out that Arkansans are already gambling. And that's a fact. A quick trip across the Mississippi River to Tunica, Miss., reveals parking lots lined with cars bearing Arkansas tags.

Arkansans padded Mississippi's general fund by about $40 million, Oaklawn's Jackson said, an estimate based on the percentage who visit the gambling establishments and the average amount left behind.

About 20 percent of those gambling at Tunica are Arkansans. At the Gulf Coast casinos, Arkansans account for 34 percent of the business. At the casinos directly across the Mississippi River from Helena, the figure is more like 80 percent.

In 1996 Charles E. Venus, a Little Rock economic consultant, conducted a study that suggested that one-third of Arkansas' 2.5 million residents had visited Mississippi and Louisiana casinos. And that was six years ago.

Costs of Gambling

Page argues that a lottery is a regressive tax, and he calls it the most insidious form of gambling because it makes the state an "economic predator to its weakest people."

Page cites studies showing that every dollar of gambling revenue a state takes in costs $3 for infrastructure, regulation, gambling-related criminal justice and social-welfare expenses.

Page also argues that, since gambling money usually is diverted from discretionary income, lotteries and casinos take money from other businesses and cost the state sales-tax dollars.

Nevada and Mississippi, the top gambling states per capita, ranked fourth and fifth among the states in per-capita bankruptcy filings. Atlantic City, N.J., lost more than a third of its retail businesses within four years of the casinos coming to the city. Closer to home, more than 70 percent of businesses in Natchez, Miss., reported declining sales within a few months of the opening of the city's first riverboat.

And statistics suggest that crime rates for counties with casinos are higher than counties without casinos. Nevada has the highest crime rate among the 50 states, meaning more must be spent on police. Jackson and Venus said the simple explanation for the increased crime is the mass of people who converge into the gambling areas.

Riggs doesn't deny that there are costs associated with gambling.

"My argument," he said, "is that we're already incurring the costs but without any of the benefits."

Lotteries Lose Luster

Tennessee, which has no legal gambling of any sort, will vote this year on a state lottery, but the chance of any new lottery being approved is not as great as it was a decade ago.

In 1964, New Hampshire became the first state to legalize a lottery in the modern era. With no income or sales tax, New Hampshire residents viewed the lottery as a voluntary tax.

The movement spread quickly during a period when state governments were being squeezed by tax opponents on one side and increasing needs on the other. During the late 1960s and the 1970s, 12 states legalized lotteries. During the 1980s, 18 states followed. Six more states approved lotteries in the early 1990s.

But more recently, several measures have failed. Opposition has often crossed party lines and political ideologies with moderates questioning the costs, liberals opposing regressive taxation and conservatives decrying the harm to business and morals.

Just as impressive as the ideological arguments is this: In the late 1990s, lottery revenues fell in nearly half the states that had them.

Past Initiatives

Arkansas' latest attempt at gambling was a proposed amendment in 2000 that would have allowed the state to set up a lottery and regulated bingo and would have given privately owned Arkansas Casino Corp. the right to build casinos in six counties.

Its backers said proceeds would eliminate the sales tax on groceries and fund college scholarships for all Arkansas high school graduates. At least 45 percent of lottery revenue would have been set aside to fund a scholarship program modeled after Georgia's and to expand prekindergarten educational programs.

But the 2000 ballot initiative was criticized widely as a flaky attempt by out-of-state interests to create a constitutionally guaranteed, unregulated monopoly more for the benefit of shareholders in Arkansas Casino Corp. than for the people of the state. Sixty-four percent of Arkansans voted against the proposal.

A 1996 election attracted four measures that would have legalized some gambling in the state plus a fifth initiative that would have banned all gambling, including the two existing racetracks.

The only one to survive legal challenges and appear on the ballot was Oaklawn Park's plan for three casinos in Hot Springs, including one at the Oaklawn racetrack. It failed by a 61-39 margin.

Gambling interests spent $9.3 million in the state that year, but it only cost the Arkansas Faith and Ethics Council (then called the Christian Civic Foundation of Arkansas) $400,000 to stop them.

Page contests the suggestion that all the previous proposals have been deeply flawed and that a moderate gambling proposal might succeed. The 1996 plan, he said, actually was a very moderate, limited gambling plan, yet it too failed.

The odds would seem to be stacked against legalized gambling ever getting lucky in Arkansas. Still, Riggs says he senses a change in Arkansans' attitudes.

"They just don't want to see someone getting rich off gambling," he said.

Page, too, says years of advertising by the gambling industry finally may be eating away at the opposition.

"Generations change," Page said.

 

 

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