New Hampshire has wisely resisted past pressure to legalize casinos because it understands the economic and social costs outweigh the benefits. While that equation has not changed, lawmakers are once again considering a plan to allow one casino.
History shows once states get hooked on casinos, other forms of gambling follow. Eventually the casino tax revenues drop, forcing states to push more and more gambling and give special breaks to casinos.
New Hampshire’s timing could not be worse. Casino tax revenues are falling in many states thanks to oversaturation.
In the Northeast, especially, casinos in Connecticut, Maine and Rhode Island are battling for market share. The addition of casinos in Massachusetts and New York will add to the glut. The crowded market leaves little room for New Hampshire to cash in. A Granite State casino will depend mainly to local repeat and problem gamblers.
Pennsylvania’s casino evolution shows how quickly states get hooked on the revenue. Pennsylvania legalized slot machines in 2004. Table games were added in 2010. Last year, as casino revenues dropped for the first time, lawmakers approved a variety of gambling games in bars, restaurants and taverns.
Regulators expect to allow the state’s 13th casino in Philadelphia, where gamblers at an existing casino visit an average of three to five times a week.
Lawmakers are also considering online gambling and more lottery games. Despite raking in billions of dollars in casino revenues, many residents still await then-Gov. Ed Rendell’s 2004 promise that casinos would reduce property taxes by 23 percent.
Ohio’s casino foray has been even less successful than Pennsylvania’s, thanks to increased competition from surrounding states. Casino revenues have been less than half the initial projection. After two years of operation, Ohio’s casino tax revenues are already dropping.
Indeed, casino revenues are down in a number of states, including Colorado, Louisiana, Missouri and Wisconsin. In Indiana, casino revenues hit an eight-year low. In Mississippi, revenues are down 27 percent from the 2007 peak and the casinos have slashed 8,500 jobs.
The falling revenues prompted Governing Magazine last year to ask: “Are Casinos Still a Safe Bet?” Similarly, a report last year in USA Today asked: “Does The Country Have Too Many Casinos?”
Some see Delaware as the model for New Hampshire. Be careful what you wish for: Delaware was early to the game, legalizing slots at three racetracks starting in 1995. With little competition, tax revenues soared and eventually accounted for 8 percent of the state’s budget.
But once larger neighboring states legalized casinos, Delaware’s gambling tax revenues plummeted. To offset losses, Delaware legalized table games and sports betting in 2010. Online gambling was added in 2012.
The added gambling has not stopped the losses. The problem is Delaware no longer attracts out-of-state gamblers because the surrounding states all have casinos. With a population of less than 1 million, Delaware does not have enough gamblers to support its casinos.
Last year, the casinos threatened layoffs unless Delaware lowered their tax rate. Instead, Gov. Jack Markell gave the casinos $8 million in subsidies.
So, the Delaware casinos have gone from generating tax revenues to receiving a government bailout. The state is now scrambling to prop up an industry that produces nothing and entices residents to lose money.
Delaware formed a commission to develop ways to combat the casino competition. Some options under consideration include lowering the tax rate for casinos, reducing annual fees or building more casinos. But lower taxes for casinos means less revenue for the state. And more casinos mean more competition.
The News Journal, Delaware’s main newspaper, offered a better solution: “Delaware should start getting out of the gambling business,” the paper wrote in an editorial last year. “It is too dependent on what was once the easy money of a state-controlled monopoly.”
Here’s the good news for New Hampshire: It can avoid getting the government and residents hooked on unsustainable and regressive casino revenues. Instead, lawmakers would be wise to focus on helping businesses that grow the economic pie rather than fight for the shrinking casino crumbs.
Paul Davies is the Maggie Walker Fellow at the Institute for American Values, a nonpartisan think tank based in New York, where he edits a blog at www.getgovernmentoutofgambling.org.