Big Bets Made by Democrats on Gambling
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Democratic governors across the country are increasingly betting on gambling revenues, rather than tax increases, to balance state budgets strained by the slowing economy.
In Maryland, Governor Martin O’Malley is endeavoring to close a $1.7 billion budget gap in part by pressing the state to legalize slot machines. In Kentucky, which faces its own budget crunch, Governor Steven Beshear is calling on lawmakers to permit voters to amend the state constitution to legalize casino gambling. In Massachusetts, Governor Deval Patrick is urging lawmakers to approve a measure to auction three casino licenses to help finance new education and public safety spending and close a $1.3 billion hole in his budget.
And here in New York, Governor Spitzer has proposed establishing a $4 billion statewide endowment for the City University of New York and the State University of New York that would be financed by turning the reins of the state lottery over to a private firm that would pay the state billions of dollars to share in the revenue and manage much of the operation.
Mr. Spitzer hopes to raise $36 million this year by bringing Quick Draw, an electronic bingo-like game, to more bars and restaurants and by removing restrictions on its hours of operation. He’s banking on $250 million from the sale of video lottery terminal development rights at Belmont Park.
While casinos, lotteries, and slot machines have long been an ace in the hole for state leaders struggling to pull out of deficits, pressure on Democratic leaders not to raise taxes has encouraged an even greater reliance on gambling money.
The shift to a “voluntary taxation,” as some call it, indicates the reluctance of a new breed of Democratic politicians to raise revenues the old-fashioned way, by increasing income or sales taxes. But it also runs the risk of exposing new divisions among the Democrats, and of opening them up to criticism from opponents of gambling.
Some in Albany are accusing Mr. Spitzer of preying on low-income people. Mayor Bloomberg suggested this week that the Spitzer administration was fooling itself into thinking that its plan to expand the state lottery was different from a tax.
“There’s no free lunch here. It may be easier to take money out of the public’s pocket in a lottery than it is in taxes, but it’s still coming out of the public’s pocket,” Mr. Bloomberg said in Albany, where he discussed Mr. Spitzer’s budget with lawmakers. The mayor, an independent, is threatening to close the city’s Off-Track Betting parlors, which are running at a loss.
The debate over gambling within the Democratic Party came to the fore in the presidential race earlier this month when Senator Clinton tried to win the support of caucus-goers in Nevada, where gambling is legal, by unearthing negative comments Senator Obama had made about gambling to a Chicago newspaper in 2003. Mr. Obama was quoted as saying that he was worried about the “moral and social cost of gambling” on low-income communities.
The speaker of the Assembly, Sheldon Silver, a Democrat, has said he’s concerned that Mr. Spitzer’s proposal to install 4,500 video lottery terminals at the Belmont racetrack in Elmont would have a dangerous impact on poor residents. New York “should not be tempting them to play with limited resources,” he said.
A Democratic assemblyman of Westchester, Richard Brodsky, said Mr. Spitzer was abandoning his progressive principles by embracing gambling.
“It’s the triumph of the economics of Karl Rove and George Bush in the politics of New York, and it’s not good for the state,” he said.
Spitzer administration officials argue that the administration is trying to raise revenue from what it sees as just another form of entertainment.
“There’s a difference between playing the lottery, or going to the racetrack, or going to a VLT facility as form of entertainment, and inappropriate gambling. Likewise, there’s a difference between going to a bar with your friends and problem drinking,” Mr. Spitzer’s director of operations, Paul Francis, said.
Mr. Francis said the state takes “very seriously the problems of compulsive gambling” and that it would expand programs to help addicted gamblers “if we get any indication that the problem is getting worse.”
In other states, Democratic governors have made similar calculations about the benefit and costs of gambling.
For the governors, gambling is a big piece of the budget solution, but not the only one. Mr. Patrick, like Mr. Spitzer, is also seeking to raise revenue through a tightening of the tax code and close so-called corporate tax loopholes.
In Maryland, Mr. O’Malley says the slot machines would generate more than $500 million and rake in gambling cash that residents were spending in neighboring states. Lawmakers, who have historically resisted the idea, have agreed to allow voters to make the call on whether to allow the machines and put the issue on a ballot in a referendum in November.
Mr. O’Malley has already pushed through Annapolis a $1.3 billion tax package that raised the rates of sales, cigarette, and corporate income taxes, while shifting more of the income tax burden to wealthy residents.
As in New York, the state is turning to gambling revenue to pay for new initiatives. The governor says the machines would pay for increases in health care and transportation spending.
Messrs. Spitzer, Patrick, and O’Malley were all elected in 2006.
In Kentucky, which faces its own budget crunch, Mr. Beshear, who was elected in 2007, also makes the case that the state is losing gambling revenue to other states.
“Do we want Kentucky money continuing to benefit the people of other states, or do we want to bring it home to improve the quality of life of our own people?” he said, the Associated Press reported. He said the casinos could add $500 million to state coffers.
“If you look at the gambling expansion over the last 10 years, the vast majority of the decisions have been driven by the states’ need for more revenue,” the executive director of the National Council on Problem Gambling, Keith Whyte, said. “It’s seen as politically expedient. It’s not seen as a new tax.”