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Timothy P. Cahill

Massachusetts' fortune is with gaming

By Timothy P. Cahill
September 18, 2007

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IN 1971, the Massachusetts Legislature voted to create the Commonwealth's first state-sanctioned lottery since colonial days. Many in government argued that gambling was the wrong way for states to raise revenue and that its introduction would create financial havoc and destroy the soul of the state. As chief financial officer of the Commonwealth and chairman of the Lottery Commission, I am proud to report that the naysayers were wrong, and the net societal and economic impact of the state lottery has been overwhelmingly positive.

Just ask the mayors and administrators of our 351 cities and towns. Since the introduction of "The Game" in 1972, the lottery has returned over $15.3 billion to cities and towns, with more than $3.5 billion coming in just the past four years. The much needed revenue has been committed to education, infrastructure, and public safety, money that would otherwise have been raised through ever-increasing property taxes.

Today, we are bracing for another contentious, political debate over whether the state should open the door to Class 3 gaming in the form of three licensed destination casinos. Based on my review, the empirical evidence clearly states that while many of the costs, both social and otherwise, tend to be overstated, the long-term benefits of a limited number of destination casinos tend to be underappreciated. We must acknowledge that gaming has a significant foothold in Massachusetts and New England. Citizens are voting with their feet and cars every day by spending an estimated $1.1 billion annually at casinos in Connecticut and Rhode Island.

Would casinos in Massachusetts impact the lottery? Yes. An independent study done last year by Christiansen Capital Advisors found that even though lottery revenues would decline initially by from 3 to 8 percent, these revenues would rebound within five years. Even without new casinos, the lottery has struggled to meet the growing revenue needs of cities and towns. If we combine the revenues from slot machines with lottery net revenues and deliver the combined amounts to the state's 351 cities and towns, there will be a dramatically reduced need to rely on property taxes as the major generator of local revenue.

Of course, there are costs associated with the introduction of destination casinos in Massachusetts. Traffic congestion will worsen, there will be increased costs associated with problem gamblers and local small businesses will undoubtedly be impacted. But such costs are outweighed when compared to the benefits destination casinos provide to fiscal relief.

In 2006, Foxwoods and Mohegan Sun generated $3.15 billion in gross revenue, and tax revenue to the state of Connecticut approached $500 million. The two destination casinos in Connecticut directly employ over 24,000 individuals since they were created in the 1990s.

There is little doubt that destination casinos in Massachusetts could draw customers from every gaming market in the nation except Las Vegas. A Federal Reserve Bank study in 2006 stated, "a new resort casino has attracted a significant number of patrons from neighboring states with existing casinos, as many as twenty percent in some cases."

Economist Adam Rose, in a study titled, "Regional Economic Impacts of Casino Gambling," demonstrated when casinos are built, states inevitably earmark funds for long-term improvement projects. These investments, often in the areas of education and infrastructure, have the long-term benefit of a more educated population and a better-trained, more marketable workforce.

Casinos provide their employees with significant health insurance and retirement benefits: 83 percent of unionized casino workers have healthcare coverage - 10 times the national average - as do 63 percent of all casino workers, most of whom are low skilled hourly workers. Additionally, Price Waterhouse Coopers reports that women and minorities represent a higher percentage of workers, particularly in executive and leadership positions, at casinos than in the general workforce. Rose states, "The preponderance of evidence indicates that the aggregate direct and indirect impacts of construction, operation, and taxation of casinos are significantly positive.

Broader economic costs relating to factors such as the use of government services and changes in property value are not trivial, but they do not come close to canceling out the more conventional output, income and employment gains."

Over the past 30 years, the lottery has provided a sustaining revenue stream to cities and towns with few of the predicted negative societal impacts. If done right, the expansion into destination casinos will provide needed revenue for another 30 years and beyond.

Timothy P. Cahill is treasurer of Massachusetts.