by Pamela M. Prah, Stateling.org Staff Writer
Fed up seeing their residents dole out millions of dollars at out-of-state casinos and tracks, more than a dozen states this year worked on dramatically expanding gambling within their own borders.
States are playing their version of “keeping up with the Jones” as they scramble for a bigger piece of the gambling pie.
Kansas this year made the most dramatic move to compete with commercial gambling operations in neighboring Iowa, Missouri and Colorado by becoming the first state that will own and operate large-scale casino resorts.
While some states that allow slots at racetracks, such as Delaware, Rhode Island and West Virginia, own the equipment and pay the operators, Kansas’ venture is the first to extend to Las Vegas-style casinos, said Brian Lehman, a spokesman for the American Gaming Association, which represents commercial casinos. The new Kansas law also puts slots at two existing racetracks, known as “racinos.”
Private contractors, not the state, will manage the daily operations, but “Kansas will own the operation, including the buildings,” said Keith Whyte, executive director of the National Council on Problem Gambling. “This is a radically different model for the United States,” he said, although he added that government ownership of casinos is not that unusual in other countries, including Canada.
Whyte said Kansas’ move could foreshadow a new and troubling trend if states got too cozy with the same casino operations that they are supposed to regulate.
But Kansas Gov. Kathleen Sebelius (D) told Stateline.org that the unique arrangement “ensures not only the highest possible financial return, but also the toughest regulation.” She stressed that casino managers and other workers will not be state employees, but will work for the gambling contractor. “We won’t have ‘Bartending 101′” for casino workers, she said.
The amount of money a commercial casino can gin up for states varies widely depending on tax rates imposed on the operations.
Nevada casinos churned out $12 billion in total revenue in 2006 and 8 percent of that, or $1 billion, flowed to state and localities in taxes. State and local governments’ take in Mississippi came out to about 12 percent, or $300 million, of a total $2.6 billion in gross gambling revenue last year.
Once casinos are up and running in Kansas, the state will rake in 22 percent of each of the four new casinos’ annual revenue. That’s on top of the upfront, one-time “privilege fees” totaling $80.5 million that the state will pocket from private companies that win the right to manage the day-to-day operations.
The Kansas attorney general in August sought approval from the state’s highest court to make sure the law doesn’t run afoul of the state constitution.
Kansas’ action is unprecedented, but other states also are aggressively tapping into one of the easiest ways to bring cash to their coffers: Let gamblers lose on slots, poker and roulette — and carve out a big take for state treasuries. Commercial casinos, excluding American Indian casinos, brought in $5 billion to state and city governments in 2006. That was on top of states’ cut of $17 billion in lottery profits and more than $1 billion from American Indian casinos.
“It’s a painless source of revenue for states,” said Richard McGowan, a professor at Boston College’s Carroll School of Management who has written several books on gambling. “I don’t know where it will stop.”
