After the public hearing held today on legislation that would authorize a state-run lottery and casinos at the four dog tracks, an expected vote by the Senate committee holding the bill was postponed.
Bill sponsor Sen. Del Marsh, R–Anniston, said he plans to make changes to the bill. Rumors are flowing that support is rising to add a fifth casino location in Houston County in the facility where Ronnie Gilley took a stab at setting up a casino in 2009–2010.
But no matter the details of the bill the numbers supporters are using aren’t adding up when all things are equal. Instead of an estimated nearly $332 million net revenue from a statewide lottery, the state would likely garner $272 million at most.
Even though this year’s state general fund budget shortfall of nearly $300 million is the driving force behind interest in expanding gambling in the state, any potential lottery revenue would not help because the earliest a statewide election would be held on the matter would be September. And none of the estimates come close to covering the estimated $702 million needed going forward.
Marsh is pushing for a three-pronged gambling solution through his Senate Bill 453, which would call for a constitutional amendment to form a state-sponsored lottery and allow casinos at the state’s four dog tracks. It also would call for a compact (an agreement) with the Poarch Band of Creek Indians (PCI) in exchange for tax revenue on their gambling dollars.
Revenue from casinos at the dog tracks is estimated at around $60 to $70 million, but potential revenue from PCI facilities was not provided.
The numbers Marsh is using to make his case come from the April 2015 “Assessment of Lottery and Gaming Programs Across the United States,” a study conducted by the Institute for Accountability and Government Efficiency (IAGE) at Auburn University at Montgomery. Marsh hired the organization to specifically look at revenue generated by lotteries in other states and estimate what Alabama would generate with expanded gambling in the state.
IAGE concluded that Alabama could potentially receive $331,667,963 in net revenue after administrative costs and prize money were deducted.
Researchers came to this number by taking the per capita lottery net revenues from the 43 states with state-run lotteries and calculating it with Alabama’s population. The average annual per capita lottery revenue in the 43 states was $69.11.
So $69.11 multiplied by Alabama’s population of more than 4.8 million comes to the nearly $332 million amount.
Determining calculations based on national averages works if Alabama fell in line with the national average in areas such as per capita income and median house income but it doesn’t. Alabama falls 18 percent below the national average in these areas. Calculating the per capita number with the percentage below the national averages drops the net revenue amount by about $60 million.
The IAGE study also used the national average of 33 percent of lottery revenue being used in state programs in its calculation of what Alabama would generate, which means researchers are expecting the state to bring in nearly $1 billion in gross revenue from a lottery.
However, of the five states bordering Alabama with lotteries — Louisiana, Arkansas, Tennessee, Georgia and Florida — Alabama most closely aligns with Louisiana in size and financial statistics. The IAGE research found that Louisiana, with a population of 4.65 million, generates $447 million in gross lottery revenue.
Alabama has a population of 4.85 million and comes in $762 less in per capita income and $1,621 less in the median household income than Louisiana. Yet Alabama is expected to generate more than double what Louisiana generates, according to the IAGE study.
The Alabama Baptist asked for a detailed break down of how the Alabama numbers were determined. The IAGE senior consultant and economist said, “The methodology approach used did not require us to estimate them separately.”
Another concern with promoting the proposed revenue potential from expanding gambling in Alabama is that the study did not take into account the costs that come with this industry.
Research in other states with lotteries and/or casinos has proven that social problems and crime increase, leading to more money needed to pay for expanding law enforcement and social services. Projections have many times been much lower than what was promoted in the beginning.
For instance, Ohio residents were told in 2009 that four proposed casinos would generate $651 million in annual tax revenue for the state, but a 2014 report showed a total of only $518.6 million paid in more than two years combined, according to The Columbus Dispatch.
John Hill, senior research analysis for the Alabama Policy Institute, and Les Bernal, national director of Stop Predatory Gambling, both confirmed the IAGE study should not be taken seriously in the decision about expanding gambling. The study does not take in to consideration any of the negative impact and thus additional costs, they said.
Hill said, “We find that the social costs of expanding gambling in the state are extraordinarily high and they come at a very hefty price to existing business and the economy.
“Alabama is not the only state in the nation right now that is having a shortfall with its budget. There are 20 other states in the United States in addition to us that are having budget shortfalls,” he said. “Many of these states have budget shortfalls that are far worse than ours. Our research shows that 19 of those states have lotteries and 16 have casinos. So why do we think that bringing in more gambling to our state through casinos or lotteries or both will solve our problem when it hasn’t worked in 20 other states?”
Bernal noted, “This is a public policy that produces rising unfairness and inequality in our country. So if you’re someone who is concerned with the widening gap between everyday middle class folks and the super-rich, this is your issue.
“If you’re a working class person this is going to extract money from the working people of this state and give it to some very wealthy people,” he said. “It produces inequality. Don’t let anyone tell you otherwise.”
Bernal said the evidence shows state budget imbalances grow worse over time for states that embrace gambling as a revenue source.
“It’s unsustainable,” he said. “Two years from now when this classic budget gimmick … doesn’t deliver they’re going to turn to you for higher taxes, even more than what’s proposed right now.
“This is a vote to destroy your own state. State after state this has been failed policy,” Bernal added. “It erodes family, it hurts businesses and it makes your government worse because it makes it less accountable.”
A spokesperson for the IAGE study said, “In this case, the objective of our study was to estimate potential new government revenues resulting directly from allowing gambling in the state. Examining any other issues, or determining their relevance, was outside the scope of our work on this project.”
Marsh requested the study and the notation on the study seems to indicate it was paid for out of his Alabama State Senate budget in the office of the president pro tempore, but calls and emails to Marsh attempting to verify that information were not returned before press time.
Questions to Marsh about why he chose not to research the negative costs of gambling in the study also were not answered by press time.
The Alabama Baptist will continue updating the story as information becomes available.
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