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Budget woes drive states to gambling

At least 26 states considering some sort of betting expansion THE HUNT for an antidote to budget shortfalls that doesn’t require raising taxes has softened resistance to gaming in Maryland, where opposition once ran high, and in New York, Pennsylvania and Kentucky.

It is the chance for states to cash in that is proving irresistible, said Robert McIver, who handles investor relations for International Game Technology of Nevada, one of the nation’s largest makers of slot and video poker machines. Without gaming, McIver said, “You’re going to have to raise taxes or cut programs. And you know how politicians feel about that.”

Maryland’s legislative leaders and U.S. Rep. Robert L. Ehrlich Jr., the likely Republican candidate for governor, have launched an aggressive push for slot machines at the state’s horse racing tracks, predicting the move would produce an estimated $400 million in annual revenue.

ECONOMIC SLIDE BUILDS MOMENTUM
Elsewhere, gaming lobbyists have started capitalizing on the economic slide.
Last year, in one of the first measures approved after the Sept. 11 attacks, New York lawmakers voted to expand Indian casinos and bring slots to several racetracks, though the law they passed faces a serious court challenge. This year, the promise of added tax revenue prompted Indiana lawmakers to loosen restrictions on the state’s billion-dollar riverboat casino industry.

Voters in Tennessee, Nebraska, Arizona and Idaho probably will find gambling initiatives on their ballots come November. And lawmakers in at least 26 other states are expected to debate some form of gaming expansion next year, according to Thomas A. Grey, executive director of the National Coalition Against Legalized Gambling.

Given the economic climate, Grey said, there is a strong chance that even reluctant politicians will relent. The dire prediction he plans to offer at his anti-gambling group’s annual meeting in Texas next month: “We’re going to get overrun.”

The last big effort to legalize gambling beyond Nevada and Atlantic City came in the early 1990s. It’s no accident, industry experts say, that the revival of riverboat casinos and the rise of Indian gaming coincided with sour economic times.

The farm crisis helped persuade Iowa officials to institute a statewide lottery in 1985, and riverboat gambling for Gary, Ind., was approved in 1993, just as the steel industry there was faltering. In Maryland, then-Gov. William Donald Schaefer used the state’s fiscal crisis in 1992 to justify the addition of keno — a lucrative, fast-paced numbers game — to the state’s arsenal of lottery offerings.

“It was only when the economy picked back up that states began saying no again,” Grey said. In the past year, evidence that the lull was ending could be found in the uptick in political donations from gambling interests, said Sue O’Connell, communications director at the National Institute on Money in State Politics.

CAMPAIGN DONATIONS ON THE RISE
Nationally, campaign donations from casinos and track owners to state and federal candidates are on pace to reach $11 million this year, double what was spent four years ago, according to the Center for Responsive Politics.

Last week at the Maryland State Fairgrounds in Timonium, north of Baltimore, Maryland’s horse breeders and thoroughbred owners threw what they said was the largest fund-raiser ever for their political action committee. They invited 1,000 guests and raised an estimated $70,000. The group’s leadership said they would dispense the money to candidates who pledged to bring slots to Maryland’s racetracks, a move they contend would revive their flagging industry.

Mike Pons, the owner of Country Life Farm and chairman of the PAC, said “the stars have come into line” for his group this year. There is the impending departure of Maryland Gov. Parris N. Glendening (D), an ardent foe of gambling who cannot seek reelection because of term limits. There was the passage this year of a costly education initiative that may be impossible to fund without a major infusion of cash.

“The state’s facing a billion-dollar deficit with no way to fix it,” Pons said. “The way we see it, slots are coming front and center.”

It’s not just the horse crowd that is enticed by Maryland’s potential as a mid-Atlantic outpost for gaming. Last month, Harrah’s Entertainment Inc., one of the nation’s largest casino operators, released results of a study showing that Maryland residents took 3.4 million trips last year to gamble at casinos in neighboring states.

FLIGHT OF ‘MARYLAND DOLLARS’
The implication was not lost on Maryland House Speaker Casper R. Taylor Jr. (D-Allegany). “Hundreds of millions of Maryland dollars are going to other states to build their roads and schools,” he said. “There’s no reason that should continue.”

Under a gaming expansion, Taylor said, the state would receive a hefty cut of proceeds to fund education initiatives, with a smaller portion going to the racetracks.

The formula is similar to one instituted last year in New York, which may explain why Harrah’s also has begun championing a concept it calls “racinos,” or casinos at racetracks.
Gary Loveman, Harrah’s president and chief operating officer, said his company has tried to remain nimble to foster its goals for expansion.

“If gaming is liberalized in Maryland, or in any state, we want to be a part of it,” Loveman said. “There’s tremendous pent-up demand. It’s a little like the end of Prohibition.”
Public support for slot machines has also grown, according to a poll by Potomac Survey Research, published by the Baltimore Sun last month. It found that 51 percent of Maryland voters would favor slot machines at the tracks, up from 39 percent in 1998.

The interest in gambling has captured the attention of Maryland’s two leading candidates for governor. Ehrlich supports legalization, so long as the money is spent on education, and Lt. Gov. Kathleen Kennedy Townsend (D) opposes it under any circumstances.

CANDIDATES ADDRESS GAMBLING ISSUE
But both turned up last week at the Timonium event to mingle with the state’s horse enthusiasts and address the issue of slots head-on. As stable owners and track executives ate barbecue chicken and corn on the cob, small crowds gathered around each candidate at opposite ends of the convention hall. Townsend was fielding pointed questions.

During her time overseeing criminal justice and economic development policy for Maryland, she said, she became convinced that the machines are not only addictive, they hurt small business and generate crime.

“I’m going to look for another way to help” support the horse industry, she told Allen Murray, a longtime breeder who owns Murmur Farm in Harford County. “I don’t think slot machines are the only answer.”

Like most of those present, Murray nodded politely and smiled. Gambling advocates have tried to avoid the mistakes of 1998 campaign, when they lined up squarely behind Republican candidate Ellen R. Sauerbrey and found themselves without an ally in the governor’s mansion.

“The truth is,” Murray said, “everybody believes we’re going to get slots no matter who the governor is. The way we see it, it’s an economic reality.”

To win approval for slots without support from the governor would require enough votes in the legislature to override a veto or to pass a constitutional amendment. And opponents of the gambling efforts say they will aggressively fight both.

Del. John A. Hurson (D-Montgomery) said he would rather swallow hard and approve a tax increase than see a gaming initiative pass. “Truth is, there’s no way slots can pay for all the programs we’ve passed,” Hurson said. “I think we’ve got to make the tough choices and be honest with the public.”

In Virginia, where budget woes are by many accounts far worse than in Maryland, conservative Republicans believe they have successfully managed to prevent slots from emerging as a possible remedy, said William W. Kincaid, a Richmond lobbyist and gambling opponent.

CONCERN AMONG FOES
Still, many of Kincaid’s counterparts in other states are concerned that gaming’s financial allure will be too appealing for lawmakers to ignore.

Scott Harshbarger, the former attorney general of Massachusetts and current president of Common Cause, said one of his goals this year will be to encourage the public to look closely at the pros and cons of gambling wherever expansion efforts crop up.

“There is a very conscious strategy” on the part of the gambling industry “to take advantage of vulnerable states and to ally with state officials who don’t want to make tough decisions about taxes,” Harshbarger said. “But when there’s a full and fair public policy debate, it’s tough for the gambling forces to win. People realize there’s no quick and easy fix to these tough economic problems.”

Lawmakers and voters may not ultimately accept gambling for its revenue in Maryland and elsewhere. But McIver, the analyst for slots manufacturer International Game Technology, said the debate is sure to come next year.

“If there is still a funding crisis, you can count on it,” he said.