John W. Kindt, a professor of business and legal policy at Illinois, is a leading national gambling critic who has testified before Congress about the societal, business and economic impacts of decriminalizing gambling. As Illinois lawmakers consider a major gambling expansion bill, Kindt spoke with News Bureau Business and Law editor Phil Ciciora about the perils of bringing more casinos to the state.
With the forecast for the state budget so bleak, what’s wrong with bringing in more revenue, along with creating more jobs, through an expansion of casino and electronic gambling in Illinois?
The costs of expanding gambling, both social and economic, simply overwhelm any kind of benefit to the state. The national studies consistently report that for every $1 in new revenues, the costs to the taxpayers are $3 or more. In fact, gambling is one of the reasons why states like Illinois, Nevada and California are in the kind of budgetary crunch that they’re in today. States where gambling is legal are at the top of the financial irresponsibility and crisis list.
According to research, the social costs of increased access to casinos and convenience gambling include an increase in personal and professional bankruptcies, up anywhere from 18 to 42 percent, as well as an increase in crime by at least 10 percent. In high gambling areas, people buy at least 10 percent less food and 20 percent less durable goods. So, the real question is, why should taxpayers subsidize social problems?
Gambling advocates would argue that casinos are engines of economic development. They would also say that people are going to gamble anyway, so why not just accept it and open more casinos in Illinois in order to keep that money in-state?
Fine, let them go destroy another state. If Illinois declares itself a gambling-free zone, we’re going to attract more Fortune 500 companies, because businesses simply do not locate in high-crime, high-gambling areas.
The bottom line: You can’t gamble your way to prosperity. States like South Carolina, where slot machines have been re-criminalized, have figured that out, and they’re in better fiscal shape for it.
Virginia, another state that’s anti-gambling, has a balanced budget. Utah, which for obvious cultural reasons will never have legalized gambling, is in very good financial shape compared to states where gambling is prevalent.
After South Carolina turned back the clock and made gambling slots illegal, their economy took off. The 1999 U.S. National Gambling Impact Study Commission, sponsored by the late U.S. Sen. Paul Simon, even called for no expansion of any type of gambling in the U.S., as well as the re-criminalization of convenience slot gambling. And if our economy in Illinois keeps going south, we may have to do just that.
Which is more dangerous to the economy – slot machines or table games like blackjack and roulette?
It’s all about slot machines; about 90 percent of casino revenue comes from slot machines. Nobody cares about the table games. As a matter of fact, in Missouri, they actually had a referendum where they allowed card games at the riverboat casinos but eliminated the slot machines. That was a non-starter for the casinos, who all basically said, “We’ll go bankrupt without the slot machines.”
The goal of the industry is to make the Land of Lincoln look like Nevada, and turn it into a leader in convenience gambling. In 2009, the Illinois Legislature allowed a huge expansion of slot machines, meaning another 45,000 to 75,000 new machines would be spread throughout the state. We’re the only state other than Nevada where such a major expansion has occurred.
The legislation was so disreputable that instead of saying to communities, “You may vote to invite the machines in if you want them,” the legislation was written so that the burden on keeping these machines out of communities was placed on municipalities and counties. In other words, the machines are coming unless you vote them out. So far, more than 70 municipalities and communities have voted to keep theses machines out because they realize the economic and social consequences. For example, Cook County voted 10 to 4 against the machines, and the DuPage County vote was unanimously against.
The industry is betting that people aren’t informed about this, and that slots will simply, slowly, creep into everyone’s backyard and people won’t notice until it’s too late. It’ll start out at bars, or anywhere that serves alcohol. They’ve already introduced legislation to expand it into other places, such as local stores and airports.
Should we raise taxes on existing gambling revenue?
While there are proposals to raise everyone’s state income taxes, taxes on gambling have been going down over time; so one solution would be to heavily tax all of these machines across the state. In Canada, for example, the government actually owns the casinos, and they pay a management fee to the casino owners, but they take 90 percent of revenue. In Illinois, we’ve got about $2 billion leaving the state and going back to Nevada. Why is that? Because the gambling industry’s economic philosophy is, “We want it all.” The state of Illinois could have an additional $2 billion overnight if we would simply tax all the existing casinos like Canada does.
The legislation currently being considered by the Illinois House aims to put casinos in Rockford and Danville, communities that are still struggling with high unemployment. The proposed Danville casino would also be located close to about 40,000 university students. Out of those 40,000 students, you can count on at least 3,000 of them developing a gambling problem or outright addiction, being so close to a casino. College communities can expect free casino buses for transporting students to the casinos instead of classes.
For the state of Illinois, the smartest thing to do may be to wipe the slate clean and throw all the machines out, like South Carolina did. When that happens, the economy will come back, and our tax revenues will go up. That’s the only sure bet.
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