Posted tagged ‘state revenues’

The Odds on Gambling Have Gone Up?

December 4, 2012

(Update:  An astute reader has suggested that if gambling is more likely then, in fact, the “odds have gone down”  – I’ve added a question mark to the title to reflect my uncertainty.)

With a newly elected governor open to this possibility of introducing casino gambling in NH and a state senate that has been similarly inclined in recent years, by all accounts casino gambling will be a hot topic in the legislature this year.    Because this blog attempts to address timely issues, this is the first of what will be a number of posts that take an empirical (as opposed to moral or ideological) look at the fiscal and economic impacts of casino gambling in NH.  First, a disclosure:  I am not now nor have I ever been involved in debates regarding expanded gambling in New Hampshire or anywhere, either professionally or personally.  I only point this out because so much of the debate is framed by advocates or opponents, the information from each is often discounted by some percentage because of their advocacy.  There may be other reasons to discount the information I offer here but my position as an advocate or opponent ought not be one.  Most of what I will be posting here are aspects of casino gambling that interest me, and thus may not be the most important or most relevant from a public policy perspective.   If there are issues you think I ought to examine,  feel free to let me know.

casino tax revenues

Looking at the basics, casino gambling provides substantial revenues to the three states I examined for this post.  The chart above shows the state government revenues provided by casino gambling revenues of CT, NJ, and Nevada.  For Nevada, the  revenues do not include casino gambling related revenues such as taxes on rooms or meals and for each state the figures do not include any licensing revenues.  Revenues in Connecticut are the “cleanest” to interpret, they represent the state’s 25% share of the “win” from slot machines at both Foxwoods and Mohegan Sun.  I don’t know (yet) the revenue formula for Nevada or New Jersey but I do know that slots are important regardless.  In Nevada, slot machines represent about 65% of casino revenue (61% at publicly traded – larger- casinos).  A key question from the chart is whether the decline in state revenues is cyclical, or structural.  Cyclical involves changes resulting from economic conditions, while structural involves issues such as competition (the increase in gambling locations) and perhaps the 800 pound gorilla, internet gambling.  Either way, the decline in gambling revenue has been especially dramatic in New Jersey, which likely reflects a combination of increased competition (especially from new Pennsylvania casinos) as well as economic conditions.  It will be interesting to see how CT and NJ fare with the impending opening of casinos in Massachusetts.

Casino gambling revenues come from the discretionary spending of consumers.  Discretionary income suffered significantly during the recent recession.  In NH, the revenue source probably most dependent on discretionary spending is the state’s meals and rooms tax.  A significant percentage of the meals and rooms tax is related to entertainment and recreation spending, similar to casino gambling (although the meals and rooms tax is also a function of business conditions and expenditures).  A quick comparison of gambling and meals and rooms tax revenues shows that the meals and rooms tax (adjusted for rate changes) declined during the recession but has been a more stable source of revenue for NH than has casino gambling revenues has been for other states.  Another interesting fact is that revenue from NH’s meals and rooms tax was about $237 million in FY 2012, while casino gambling revenues in NJ were about $238 million.Casino vs meals and rooms

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