Gambling on gaming: revenues from gambling are just too tempting for troubled state budgets.

• Author: Rafool, Mandy

Editor's note: This is the first in a three-part series on gambling. Watch for "Does Gaming Pay Off?" in February and "Indian Gaming Grows" in the March magazine.

What was once considered a vice has gone mainstream. As states continue to grapple with budget shortfalls, lawmakers have depended on gaming to generate new revenues and stimulate economic development. In fact, sometimes, it's hard to remember that gambling was once considered shady. Nearly every state has a lottery, newspapers print point spreads, senior groups schedule trips to casinos, and poker is booming--thanks to the seemingly endless supply of televised tournaments. Only two states--Hawaii and Utah--don't permit any type of gaming.

That's not to say gaming isn't controversial; it is. Public reaction varies widely. Many people question whether government should profit from practices that many residents feel are morally wrong. Others question whether the benefits outweigh the social costs. Not withstanding this debate, however, there does seem to be an increasing tolerance of gaming as an acceptable form of entertainment and source of state revenues. Public acceptance grows even more when the question is presented as a choice between gambling expansion or tax hikes. "Given the choice, people will take gambling over tax increases any day," said Representative. John Rogers of Alabama who introduced a constitutional amendment last session that would have allowed voters to repeal the state's ban on lotteries and casinos. The measure failed to pass the legislature.

Alabama was hardly alone. Gambling was big on the national legislative agenda in 2004, with 28 states considering more than 50 different measures.

THE RACE FOR RACINOS

The bid for racinos--racetracks that host electronic gaming machines--has become something of a horse race itself. It was the most popular gaming legislation considered last year, with at least 14 states looking at measures.

There are several reasons behind its popularity. Many policymakers like them because they don't require additional infrastructure. And, they can argue, these slot parlors aren't really more gambling, just a different variety added to a place where people already gather to wager on horses or dogs.

Additionally, racinos lend themselves nicely to video lotteries, which are attractive to states because most already have lotteries. Expansion into electronic lottery formats may not require changes to the state constitution like other gambling activities would. And for the consumer, there's no difference--the video lottery experience is similar to playing slots in a casino.

Finally, and possibly most important, in the quest for racinos is interstate competition. States compete for gambling revenues, just like they do with most other forms of commerce. In turn, gaming discussions have been particularly prevalent in states with gambling neighbors. The argument is simple: "Like it or not, our citizens are gambling. Right now they go across the state line to do it. Not only are we missing out on a significant revenue opportunity by not offering gambling in our state, the state treasury next door is being filled with our people's money." Perhaps this reasoning is best illustrated by recent activities along the Eastern Seaboard.

In two states--Maryland and Pennsylvania, which both border other gaming states--the racino issue dominated the legislative agenda for the second straight year. The outcomes varied. In Maryland, where the measure to bring more than 15,000 video gaming machines to the state failed, the old mare didn't give up easily. The gambling debate raged on well past the end of the legislative session and almost became a last minute November ballot item. However, the deal fell apart in what some insiders say is an all too familiar pattern of accusations and finger pointing. This issue has become a political football with the Democratic speaker of the House on one team and the Democratic Senate president lining up with Republican Governor Robert Ehrlich Jr..

For the past two years, the slot legislation has failed in the House, which has been a big blow to the governor, who has made gambling the centerpiece of his agenda. He said a slot machine proposal would return, but not until House leadership agrees to pass it.

Had the Maryland measure passed, it would have...