Viewpoint: Gambling for solvency?

Viewpoint: Gambling for solvency?

By Joe Baker, Senior Editor

While newly installed Governor Rod Blagojevich begins to wrestle with the state’s financial headaches, the prospect of some relief has appeared from an unorthodox source.

The Illinois Casino Gaming Association told the Illinois Gaming Board that a few changes in state law would provide a greater share of gambling revenue to Illinois.

The gambling group said steep taxes imposed on casinos and limits on the number of games at each venue are sending a sizeable share of wagering dollars into the coffers of neighboring states.

Gaming association spokesmen said the state is starting to see a slide in gaming revenues because of competition from casinos in Indiana, Iowa and Missouri—all states with lower gaming taxes and no limit on the number of games per casino.

The spokesmen said that despite a 7 percent growth rate in the past four months in the Chicago area, including northwest Indiana, Illinois’ gaming take is down 4.5 percent. That means, they said, that Indiana is getting more of the gravy.

Gaming association officials said that could be corrected by changing state law, and they dangled the carrot of alleviating the budget crisis as an incentive.

Tom Swoik, executive director of the Illinois Casino Gaming Association (ICGA), said: “The casino industry gets hit with a double whammy in Illinois—the highest gaming taxes in the country and the nation’s only law restricting the number of games and tables at each facility. These policies discourage investment that would create even more tax revenues and jobs, and that hampers our industry’s ability to help the state solve its budget crisis.”

Accordingly, the casino group is offering a plan to legislators, called a “Better Deal for Illinois,” which it says would generate an additional $317 million in revenues annually, plus stimulate hundreds of millions of dollars in additional economic activity and also create thousands of fulltime jobs.

“The Illinois riverboat casino industry plays a vital role in the state’s economy,” Swoik said, “but could be an even more powerful engine of revenue generation and economic growth if given the opportunity.”

In 2002, the state’s nine casinos generated more than $550 million for public schools across the state.

Swoik said the five casino boats in Indiana offer their patrons nearly 10,000 game stations versus only 4,800 in Illinois’ four northern casinos.

In the St. Louis market, the two riverboat casinos on the Illinois side of the Mississippi have about 2,400 positions compared with more than 10,000 positions on the Missouri side of the river. In the past year, our share of that market has dropped almost 2.5 percent.

Over in Iowa, the manager of a Davenport casino told The Des Moines Register that the two riverboats on the Iowa side have gained two points in market share in the past two months. He attributes that increase to the higher taxes levied against the casino in Rock Island.

Swoik said as long as the present tax structure and limits are in place, the casinos in neighboring states will continue to siphon off funds that should go to Illinois.

Last spring, the Illinois General Assembly boosted the top tax rate from 35 percent to 50 percent, the highest in the country. Indiana employs a graduated tax with the upper limit at 35 percent, while Missouri and Iowa each tax at 20 percent.

Gaming positions in the state are limited to 1,200 per casino. Casino operators want that removed, and they want the tax system to be pushed back to the levels before July of last year, but only after the 10th casino license is operational. There has been some interest in that license for Rockford.

Before the state cranked the taxes, there had been a bid of $615 million for that 10th license. Now it’s widely held that the license has lost half its value.

The Missouri Gaming Commission recently termed Illinois’ setup as “ill-advised economic policy that should not be adopted in this state.” The group added that Illinois tax rates “punish operators for reinvesting.”

That’s precisely the argument that Swoik’s organization advances, saying that without lower taxes, casino operators would be reluctant to invest in more gaming positions.

The proposal from the casino industry certainly will be very attractive to financially hard-pressed lawmakers. It ignores, however, any recognition of the potential social costs of more gambling—such as addiction and the resulting financial insolvency for many families. Legislators will have to weigh whether more dollars will offset those additional human expenses.

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