Despite gambling's riches, states play cautiously

In the decades-long battle over whether to expand the practice of gambling in America, this was supposed to be a big year for pro-gambling forces.

With state budget crises hitting hard, 34 states are considering whether to expand gambling and tap into the geyser of cash it provides.

Yet as the year progresses, many states - from Maryland to Illinois to Massachusetts - are approaching gambling proposals cautiously. And so far, no state has approved any major gambling expansion, though many are still debating it.

Reasons vary, but one common theme is that gambling's proliferation across the US makes for a clearer track record of both its benefits and its costs. And the costs - from bankruptcies to divorce - are increasingly part of the debate.

"States are in a real dilemma. They don't want their citizens to gamble ... yet they desperately want gambling's revenue," says Richard McGowan, an economics professor at Boston College. As a result, many are trying to strike a "grand compromise."

Last week, Massachusetts's House of Representatives rejected plans to allow slot machines at racetracks. This follows an unusual proposal by Gov. Mitt Romney to try to get $75 million a year in "blocking payments" from nearby Connecticut casinos. For that price, Romney promises no casinos would be built in Massachusetts. Some see the offer as extortion. Others see it as Romney's attempt to tap into gambling's benefits without paying its social costs.

Following an increasingly common strategy, Illinois Gov. Rod Blagojevich is aiming to tax 70 percent of the profits of the state's nine casinos - and has so far rejected calls to add more casino licenses. And in a surprising development, Maryland Gov. Robert Ehrlich was defeated in his attempt to legalize racetrack slot machines.

Some of the states' resistance may be due to the fact that the costs of gambling are clearer. Researchers at the University of Nevada at Las Vegas recently surveyed 99 Gamblers Anonymous members and found:

• Respondents lost an average of $112,400 on gambling during their lifetime, pushing 45 percent to declare bankruptcy.

• 57 percent wrote bad checks to cover their losses or to get more gambling money.

• Of the 29 members who were divorced or separated, 19 of them - 65 percent - said gambling was the source of their breakup.

• Overall social costs tied to gambling in southern Nevada - including court fees, welfare services, and treatment bills - totaled between $314 million and $545 million per year.

The UNLV study is among the more comprehensive done in recent years. But as some states do their own investigating, results are often conflicted.

A study done for Ohio's state legislature found that most Ohioans' gambling is done out of state or is illegal - suggesting a market for state-sponsored gambling. Yet it also found that the social costs of adding slots at race tracks, a popular proposal, could outweigh revenue benefits.

Clearly gambling's benefits are compelling. The gaming industry says nearly 1 million jobs in America are tied to the activity. Commercial casinos alone employ 370,000 people. And government revenues from gambling are on the order of $20 billion per year.

One major force driving expansion plans is competition between states over this cash bonanza. State legislators cringe as residents travel to other states to gamble, depriving their home state of revenue. Roughly one-third of patrons at Connecticut's two big casinos, for instance, are from Massachusetts.

This year, as with the first gambling boom in the early 1990s, there's the potential for a kind of "hopscotch liberalizing of gambling laws," in which one state eases restrictions in order to poach revenues from another, says Bill Eadington, an economist at the University of Nevada at Reno.

Yet because gambling is much more prevalent these days, the competition issue isn't as clear cut. Here in Massachusetts, for instance, one reason lawmakers balked at racetrack slots was concern that they would sap revenue from the profitable state lottery. Even some private-gambling interests see new gambling venues as potential competition.

Some expansion may occur. Pennsylvania and Minnesota are likely to pass laws adding slots at race tracks, and California may allow expansion of native American casinos.

But considering the many states who've tackled the issue, antigambling forces see the few expected expansions as evidence of strong ambivalence. "With all the budget problems, you'd think that if this was such a great product, it would be flying off the shelves," says the Rev. Tom Gray, a chief gambling opponent.

Instead, with Massachusetts and Illinois passing on gambling expansion - and resisting new taxes - one old-fashioned idea is emerging: going into debt by issuing bonds.