No jackpot with casino gambling

First of two parts

TEN MONTHS ago on the campaign trail, Governor Deval Patrick said he needed to do "homework" before supporting casino gambling. This week, under the pressure of finding revenues to close a possible $1 billion deficit, he reasserted that he is not yet ready to make some town in Massachusetts the next Atlantic City. "I'm not going to go down that path until I've finished the homework that I've talked about," the governor told reporters.

This homework is taking an awful long time. Perhaps it is because Patrick's head is spinning like a slot machine, with no clear jackpot falling into his lap.

The first obvious issue is revenue. A June, 2005, review in the National Tax Journal titled "Economic Winners and Losers of Legalized Gambling" found no evidence of economic growth from riverboat casinos and perhaps a "cannibalization" of nearby restaurants and entertainment venues. There is some evidence that they cannibalize the state lottery.

The promise of casino revenue falls as flat as the rosy predictions for sports stadiums. Publicly-funded sports stadiums are not an overall economic engine because they just take entertainment dollars from somewhere else.

Another review in the same issue of the tax journal titled "Casino Taxation in the United States" found that the link between casino tax revenues and increased funding for public services remained an "open question," still lacking in hard data. The review quoted one study that found that "earmarking of lottery revenues generally does not benefit the statutory recipients." A study on lotteries and education funding found that it had a positive effect on education spending is some states and a negative effect in others. It quoted a 2001 study that showed that the Ohio lottery had no impact on education expenditures. "Despite earmarking," the review said of Ohio, "the lottery revenues were found to be fully fungible."

Thus, the review concluded, "If casino tax revenues are as fungible as lottery tax revenues appear to be, then the combined incidence of the taxes and government spending may not be what it appears."

A worse example of what could happen without proper oversight is in -- hardly shocking -- Atlantic City. The New York Times reported this week that the agency that is supposed to be using casino revenues to fix up blighted areas of Atlantic City and New Jersey has, since 1994, given back to the casinos 20 percent of the revenues -- $400 million -- for them to spiff up their own buildings and services. David Sciarra, the then-deputy public advocate who helped write the legislation, told the Times, "This is a betrayal of the very promise that was made to the citizens: That the casinos would have a social responsibility to invest a small percentage of their revenue. . . . to help make sure residents, especially the poor, had better housing and neighborhoods."

Even if we let casinos in, it is far from clear how much more gambling money can be squeezed out of the collective wallet of the Commonwealth, or from New England. According to the Tax Foundation, Massachusetts ranked fifth in the nation in per-capita lottery spending in 2004, at $682.60. If a Massachusetts casino was looking for someone from Rhode Island to come across the border to pour money into our coffers, think again. Rhode Island was tops in per-capita lottery spending at $1,373.04. Connecticut, which already has Foxwoods and Mohegan Sun casinos, ranks ninth in the nation at $259.68. The national average is $184.25

"And what happens if we build casinos in Massachusetts? Do you think Foxwoods and Mohegan Sun are going to sit still?" asked Robert Goodman, the Hampshire College environmental design professor who wrote the "The Luck Business: The Devastating Consequences and Broken Promises of America's Gambling Explosion." He was also the director of the US Gambling Research Institute.

Patrick indeed should study casinos. They are not my preferred way to raise revenues, especially seeing how the lottery fleeces the poor. But with a populace dead set against across-the-board property taxes and the like, some serious homework could spur a healthy debate.

"It seems clear that a good portion of the revenue generated by taxes on casinos is offset by reduced revenues from other sources, primarily from sales and excise taxes," the "Casino Taxation" review concluded. "Hence, the net revenue effect of additional casino taxes is smaller than it first appears." The question is whether the coins from the slots are worth the cost.

Next: Casinos and Crime.

Derrick Z. Jackson's e-mail address is jackson@globe.com.