Don't rush to cash in on slots

Kai Hagen

March 7, 2003

Time is running out in Annapolis, where the General Assembly must pass a balanced budget by March 31.

Since before his election, Governor Ehrlich has assumed that more than 10,000 slot machines will help fill a big hole in next year's budget. After all, our new governor was a strong and outspoken advocate for slot machines during his campaign. And, of course, he won the election.

But the election was not a referendum on slots.

Voting for Ehrlich was not the same as voting for slots, and many people voted for the new governor who do not support slot machines.

Ehrlich and his staff made a mistake crafting a budget strategy that depends on a new form of state sponsored gambling being in place this year. Making state government dependent on slots, and addicted to it, is not something that ought to be done in haste.

Institutionalizing slots is as complicated as it is controversial. The current wrangling about various elements reflects the fact that it isn't simply a matter of yea or nay. Many unresolved questions deserve ample time, thorough consideration, and more participation by the citizens of the state. That isn't going to happen if the governor and assembly, operating in a crisis atmosphere, push unexamined legislation through the process in the next two or three weeks.

Rushed or not, the governor has taken time to negotiate the details with racetrack owners, who got a lot of input this week. A meeting or two, and already the one-time gambling licensing fees have been cut by two-thirds and gambling proceeds earmarked for schools have been reduced.

The current budget dilemma is not a good enough reason to abandon good process and be saddled with mediocre results. But, so far, Ehrlich appears determined to race ahead, with blinders on, in spite of stumbling out of the legislative gate.

If the finish line is to be pushed back a year or longer to allow for a more thoughtful approach, it will likely have to be over the objections of Governor Ehrlich and Senate President Mike Miller.

Ehrlich's gubernatorial campaign received more than $120,000 in contributions from racing and gambling interests. Miller has also been a major beneficiary of the racing industry. In recent months, a subsidiary of the Maryland Jockey Club has given more than $200,000 to a national political action committee headed by Miller.

The general assembly doesn't have to say no, right now. But it ought to say not yet.

Among other things, a little time will give us a chance to reconsider the connection between slots and schools. As rhetoric or reality, binding a percentage of gambling revenues to education funding is a cheap form of political blackmail, and leaders who accept that ought to be ashamed of themselves.

There is nothing about either gambling revenues or school funding that makes the connection any more natural or reasonable than linking the income from slots to highway maintenance or sewage treatment.

The state generates revenues in a number of ways, and it distributes the money according to various commitments and priorities. Whether you favor slots or not, let's stop pretending that supporting our schools and educating our children has anything to do with gambling. If we enable the gambling industry to establish a bigger foothold in Maryland, it will not be something we do for our kids.

It is constructive to look at South Carolina, which is a rare exception to the rule, having shut down a $3 billion-a-year gambling industry in 2000, after realizing they had made a mistake.

In South Carolina, it wasn't about slots machines. Instead, they added tens of thousands of video poker or blackjack machines. But the bottom line is that it's all electronic gambling.

Gambling operators routinely underreported income to evade state taxes, according to two state revenue commissioners. The gambling industry "has been lying like a rug about the profitability of the business," one said.

The industry evaded rules intended to control gambling, such as limits on payouts and on the number of machines allowed at a single location.

The state's top law-enforcement officer said that organized crime was moving into the state, attracted by the huge amounts of untraceable cash generated by the gambling machines.

One major gambling operator was convicted of bribing a sheriff's deputy for protection from criminal investigations. Other major gambling operators had convictions for tax evasion and conspiracy.

Video gambling interests quickly built one of the largest lobbying operations in the state, spending hundreds of thousands of dollars to push their cause in the state legislature. When Governor David Beasley came out against gambling in 1998, the industry poured hundreds of thousands of dollars into the campaign coffers of his opponent. Beasley was defeated for re-election that fall.

Addiction counselors in South Carolina reported a fourfold increase in people seeking help for gambling addiction. Studies estimate that anywhere from 1.5 percent to 7 percent of the adult population in states with legal betting will become compulsive gamblers.

If we install thousands of slot machines, we can expect to experience many of the same problems in Maryland. And, as long as we have gambling or seriously entertain the possibility, we can expect gambling interests to become a permanent part of our political and electoral landscape, as they were in the recent election.

What can we expect in the future?

The Washington Post reported that "some lawmakers have said representatives of Las Vegas casino magnate Steve Wynn told them he is planning a trip to Annapolis to make a personal pitch to build full-blown gambling palaces in Maryland. Harrah's Entertainment Inc., a major casino and riverboat firm, has hired a local lobbyist. Horseshoe Gaming Holding Corp., which owns casinos in Mississippi, Louisiana and Indiana, has been interviewing local lobbyists as well."

There are a lot of concerns and uncertainties if Maryland legalizes this particular form of gambling. But while there is a lot at risk, it won't be a financial the state, because, just like the casinos in Las Vegas and Atlantic City, the "house" rules guarantee a big profit. Racetrack owners and horse breeders will make a lot of money. The state of Maryland will make a nice profit, too.

The people who put money in the slot machines, and their families, will lose $1.3 billion...the first year.

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