Texas State Representative Raul Torres penned this piece for the Corpus Christi Caller-Times. The original column can be found here.
CORPUS CHRISTI — As Texas looks for solutions to this legislative session’s $27 billion shortfall, I am often told: “We need gambling in Texas.” Representing you means I must consider all reasonable means of revenue to pay for over $77 billion the state is projected to spend in the 2012-2013 budget.
I believe that any new revenue source we select must be part of a strong economic plan to ensure job and business growth, must be predictable and sustainable over the long term, and must not be a financial burden to taxpayers. With these guidelines in mind, I have completed a brief initial study to determine if gambling is a good bet for Texas.
In 1976 only a few states allowed gambling; today, 47 states and the District of Columbia permit some form of gambling. Gambling has become more than simply an entertainment past-time. It has emerged as an economic mainstay in many communities and plays an increasingly prominent role in state and local economies.
According to the American Gaming Association, legalized gambling has had certain positive economic effects in some of the communities in which it has been introduced. Among these are overall community improvements, an increase in the general betterment of life for the citizenry, growth in the hotel industry, more money for local government, reduced unemployment and increased construction. However, there is another side to this story.
In 1991, Texans were assured that the lottery would solve education funding problems. Yet, according to a report issued by the Texas Education Agency in 2006, revenue from the lottery paid for only 2.9 percent of the state’s share of education funding.
Likewise, pari-mutuel horse and dog racing were introduced with the same promise of unlimited jobs due to increased tourism and hundreds of millions of dollars in new revenue to the state. To date, live racing has produced zero dollars in state revenue because race tracks have never met the threshold to pay state taxes.
Texas’ results are consistent with other states where gambling in any form whether casino, lottery or racing, produced lower-than-expected revenue growth.
Supporters of gambling argue that Texas loses $1 billion to $2 billion annually because Texans go to other states to gamble. However, careful analysis of actual revenue derived from gambling shows us a different picture. According to the Christian Life Commission typically 93 percent of each dollar wagered in a machine is placed in the prize pool. That means only 7 percent, or 7 cents of every dollar, becomes “net terminal income” and is therefore eligible to be taxed. At a 28 percent tax rate, the state earns .0196 dollars for every dollar wagered. Therefore, approximately $52 billion must spent by Texans on slot machine play to meet gambling proponents’ projections. Friends, this is never going to happen!
There are other issues that Texans should consider before rushing out to embrace any new form of gambling in Texas. According to a report issued by the Texas Public Policy Foundation, titled, “Small Odds of Texas Winning at VLT’s” (Video Lottery Terminals), states have found themselves faced with unexpected results when gambling was permitted in that state. Here are some examples:
* 24 out of 57 counties with gambling in the U.S. experienced job losses.
* 50 percent of Atlantic City retail businesses and restaurants closed within 10 years of allowing gambling.
* Additional costs incurred by communities include an increase in crime, bankruptcy, suicide, illness, unemployment and other state supported social service costs just to mention a few.
When confronted with a financial crisis or a major financial decision, experts tell us that a person should seek the advice of an independent financial adviser, wait for the crisis to subside, and should consider the facts of the issue more than the emotional strain of the event.
Unfortunately, this is often not the case. In today’s political environment of sound bytes and emphasis on “spin” rather than the facts, too many of these decisions are turned into favoring politics over good public policy.
Based on my review of the information researched, it seems to me that the expansion of gambling in Texas may not be the silver bullet that many think it is. The choice is now up to us to decide what is best for Texas so be sure your voice is heard. What do you say?
State Rep. Raul Torres, R-Corpus Christi, represents District 33