Great Lakes Journal: Ohio is broke, but gambling is not the answer

This year Ohio, like many states, has a huge hole in its budget; $3.2 billion, give or take. To help fill the crater, the Governor and legislature just rammed through a bill to allow slot machines at seven horse tracks, despite the long history of Ohioans voting down gambling proposals. (Governor Strickland made sure this proposal never saw a ballot.) To balance Ohio's new two-year, $50.5 billion budget, the state projects revenue from these slots of $933 million per year.

The opposition to this measure, LetOhioVote.org, has been vocal about its position but resolutely mute about the source of its funding. Tellingly, the opposition to an upcoming casino bill is backed by MTR Gaming Group (MNTG), which owns racinos -- race tracks which have casinos -- in Pennsylvania and West Virginia and wants Ohioans to continue crossing the Ohio River to gamble.
All of the posturing and debate about slots that spiced our June this year could come to naught, however, if the state is not able to reign in a plague of "skill" games, slot-machine-like games that require the player to take some initiative, such as choosing when to stop the spinning wheels. This is a skill similar in difficulty to choosing which banana out of the bunch to have for breakfast. The state attempted to legislate these games out of existence by limiting payouts to $10, and not in cash. Vendors simply switched to vouchers for merchants such as Amazon.com and allowed the customers to aggregate them. There are thousands of such machines active in the state already.

Several things trouble me about the state's decision to allow slots. The first is the projected income used to balance the budget. Of the 12 states that allow gambling, revenue was down in eight of them last year, while the competition for the gambler's dollar in the Great Lakes region is ever increasing. Nationally, 14 states are considering expanded gambling to help meet their expenses. Last year Ohio added Keno to the state lottery, expecting $292 million in additional revenue. It made $100 million. Are the same prognosticators estimating the slot revenue? I believe the number of gamblers and the amount they can afford to gamble is finite, while government taste for revenue is infinite. At some point, the two will clash with ugly results, and I'm afraid it will be in Ohio.

I'm very troubled at how the state chose to award these plums to horse tracks for $50 million each, never putting the rights up for bid. Is horse racing so important to our state that we must subsidize it? I don't believe so. If people are not coming to the track, perhaps that's an indication that the sport is moribund. Other businesses and programs in Ohio need a boost just as badly: How about bowling alleys, or sport-fishing charters, or high school football programs? Why not slots on city buses? Better still, put them in the lobbies of our social service agencies, which are being cut right through the bone. Of course, these agencies don't donate to campaigns like the track owners.

I'm bothered by the bald-faced response of some track owners such as Lebanon Raceway to their gift. This horse track is on the grounds of the Lebanon County Fairgrounds, which doesn't want slots on its property. Therefore, the track is looking for a freeway-convenient location where it can relocate, hoping to build a $200 million complex (it's not a casino, you see, because there's a horse track in there somewhere). Until then, it will probably set up a huge revival-like tent near the freeway for its slots and worry about moving the track later.

Legalizing slots has also emboldened the casino operators, who have rolled into the state with renewed vigor. Penn National Gaming (PENN) and Dan Gilbert of Quicken Loans, Inc. (and owner of the Cleveland Cavaliers) have a proposal on the fall ballot to build four casinos in the most densely populated parts of the state. They propose paying $50 million per location for a license and a 33 percent state tax on gambling revenue, which seems very low for the revenue potential they gain.

Finally, the idea of using people's inability to understand probability to balance our state budget seems dishonorable. Sure, many people gamble responsibly and believe the entertainment value is worth the money. But some don't.

If other Ohioans share my sense that the gaming industry's money will eventually overwhelm our reluctance, perhaps this time the casino measure will pass. We'll keep some of Ohio's gamblers at home, so casinos in other states will suffer. Still more states will enter the game, and casino operators will expand their businesses until the entire nation is saturated with gaming. At that point, we'll have thousands of places to gamble, and none of them will make any money. Meanwhile, the state will have gobbled up the additional revenue and hunger for more. What sin will we legalize and tax next? Place your bet.

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