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Gambling Revenues Down, Only Racinos Up

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Published: September 28, 2009 2:06 pm ET

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A report issued today by the Rockefeller Institute of Government shows that state and local government revenues from authorized gambling operations in the United States declined by 2.6 percent from fiscal year 2008 to 2009, marking the first time those revenues have declined in over three decades.

Data on the decline come as states continue to examine casinos, video-lottery terminals and other gambling operations as potential sources of new revenue — with more than 25 states considering such proposals in the past year.

Authors of the study — For the First Time, a Smaller Jackpot: Trends in State Revenues From Gambling — said new gambling activities often provide a quick boost to state revenues, but generally do not keep pace with traditional tax revenues and government expenditures over time.

“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,” Institute Deputy Director Robert B. Ward and Institute Senior Policy Analyst Lucy Dadayan wrote in the report. “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.”

Most individual states reported declines in gambling revenues over the last two years. The few states that reported increases — including Pennsylvania and North Carolina — have recently authorized the opening of new gambling operations.

According to the report, states generate tax revenues from four major types of gambling operations: state lotteries, casinos, racinos and pari-mutuel betting. By far the largest source of state gambling revenues is lottery income — which experienced an overall decline of 2.3 percent between fiscal years 2008 and 2009.

The second-largest source is casinos. During the same period, those revenues declined 8.5 percent. The third-largest source for gambling revenues is the newer racinos, or racetrack-based casinos. Revenues from those operations increased by 6.7 percent, largely because of new racinos opening in Indiana and Pennsylvania.

Pari-mutuel wagering — which generally takes place at horse racing, harness and dog tracks — makes up a small percentage of revenues from gambling, even though it’s the longest established form of legalized gambling in many states. Preliminary figures contained in the new report indicate those revenues fell off by 14.8 percent from July-March 2008 to July-March 2009.

The new report also examined the extent to which states rely on gambling revenues. Overall, gambling revenues make up about 2.3 percent of states’ “own-source” revenues, with the percentage for individual states ranging from as high as 13.6 percent for Nevada and 9.2 percent for West Virginia to less than 0.1 percent in Alabama and Wyoming.

The report is available on the Rockefeller Institute's website.

(with files from the Rockefeller Institute)


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