By Jackson Brainerd
Gambling can lure players with the hope of hitting the jackpot and getting rich quick, in the same way that states can be enticed into expanding legalized gaming with the expectation of a revenue windfall.
Gambling revenue plays a small role in state budgets, about 2 to 2.5 percent of general revenue raised directly by the state. Gambling expansion, however, offers state budget officials an appealing alternative to the politically unpopular and invariably conflict-laden effort to hike taxes.
In the last eight years alone, six states have legalized casino operations, two have legalized racinos—race tracks that offer casino-style gambling in addition to pari-mutuel betting—and two have legalized lotteries.
Several more legislatures considered, but did not pass, legislation to legalize or expand gaming in 2016. As more states have expanded their gambling operations, market saturation has become a problem, with new gaming states poaching players from states with established operations.
Voters in three more states will be considering general election ballot measures to legalize or expand gaming. The threat of revenue cannibalization clearly plays a role in most of these measures.
Massachusetts only recently legalized commercial casino gaming in 2011, and the first casino opened in June 24, 2015. Two others are under construction. In that time, the state has brought in $81.4 million in taxes and horse race assessments such as license fees and commissions. Question 1 on the November ballot will allow the Gaming Commission to issue an additional category 2 license, which would permit operation of a gaming establishment with no table games and not more than 1,250 slot machines.
New Jersey’s gaming industry has been hemorrhaging money, and Atlantic City’s recent financial difficulties have been well documented. In FY 2008, the state brought in $523.5 million in casino tax and fee revenue, adjusting for inflation. By FY 2015, that number had declined to $241.2 million.
Public Question 1 allows two casinos to operate outside of Atlantic City (at least 72 miles away), the first time state gambling would be allowed beyond the city’s limits. Licenses can only be granted if the applicant makes an investment of $1 billion in the state. Opponents worry that this will only drive more players out of Atlantic City.
Question 1 would authorize the first state-operated commercial casino located in Tiverton. This is not as historic as it sounds.
Rhode Island currently has two commercial racinos (racetrack casinos), Twin River and Newport Grand—both owned by Twin River Management Group—that contribute about $1 billion in economic activity. Currently, they operate more like traditional casinos and don’t offer any kind of live racing.
If the referendum is approved, the Newport Grand racino will be shut down and the operating licenses will shift to Tiverton. The new casino will be built very close to the Massachusetts border in an effort to combat the loss of revenue to the tribal casino opening in Taunton, Mass.
Jackson Brainerd covers gambling issues and is a policy associate in NCSL's Fiscal Affairs program.