Casino Gambling─A Poor Vehicle for Economic Development
By Joseph A. Glick
A debate is gaining momentum in Northeast Ohio: whether to allow casino gambling into our region. With the battle cry that $3 billion in gambling revenue leaves Ohio every year, proponents are asking, “Why should we stand by and let another regional economy, such as Detroit, enjoy the benefits of such massive entertainment revenues?” The county and city administrator’s answer, which will likely be presented on the ballot this November, is that we should vote to legalize casino gambling in Ohio, to make us more competitive with our border states. The next step will be to establish casinos in downtown Cleveland to create jobs and expand the government tax base.
At first glance, the proposal is enticing; especially in light of our region’s perpetually sluggish economy. There is the allure of big tax dollars, new buildings to line our cityscape, and the promise of hundreds of new jobs. When we take a closer look at “growth via gambling,” however, it turns out to be nothing more than a me-too strategy that is in no way forward-thinking, differentiating, or progressive. I agree that the amount of money leaving this state is difficult to ignore, but let’s stop for a moment and ask, “Who benefits from casino gambling coming to Northeast Ohio?”
Taxpayers and Our Economy? No. Short of winning a major jackpot playing the slots, the typical taxpayer loses out, because your taxes will be used to subsidize casino gambling operations. Nationwide, for every dollar that legalized casino gambling contributes in taxes, it usually costs the taxpayers at least $3 (source: Politzer, Morrow and Leavey; Better Government Association; Florida Budget Office). The $3 goes toward infrastructure costs, relatively high regulatory costs, and the additional load that gambling places on the criminal justice system and the social-welfare system (source: Illinois Governor's Office). In short, rather than the tax pool and one-time licensing fee that our county commissioners and mayor tout as being vital to our region’s survival, gambling actually places a long-term financial burden on public and local government budgets.
Despite what a Cleveland State University study (source: Cleveland State University Levin School of Urban Studies here) would have you believe—recently declared by the Ohio Roundtable [here] as “biased and focused on manipulating voters”—casino gambling is not the panacea for economic stimulus that proponents state. Furthermore, no one has yet accurately predicted the increase in the number of problem gamblers that would be created by these casinos or the state’s cost—really the taxpayer’s cost— to cover the likely increase in bankruptcies, suicide attempts, criminal activity, and health issues that are more apt to plague problem gamblers (source: Congressional National Gambling Impact Commission Report, Harvard University, State of Michigan).
Our Education System? No. Most people in favor of gambling believe that the associated tax revenue will go directly to benefit the proximate school districts, or establish college scholarship funds. Well, how has casino tax funding worked in the Detroit city schools? Last February—nearly five years after casinos were introduced into the city’s economy— Detroit Public Schools closed 34 schools, uprooted more than 10,000 students to crowd into other schools, and attempted to cut more than $500 million from their operating budget, due to an unexpected cash shortfall (source: Detroit Public Schools). Where was the casinos’ tax money to bail them out last year?
It’s not just a lack of funding or poor management that is bringing down the Ohio school system; it is also the unconstitutional manner in which funds are allocated across Ohio’s districts. Message to politicians: don’t legalize gambling to address education funding. First, fix the state’s school-funding policy, which has been declared unconstitutional four times, then identify how much funding is actually required.
The Poor? No. Legalizing casino gambling will not raise our region’s median income. In fact, based on the experience of other cities, gambling will make the poor poorer and will exacerbate many social welfare problems (source: Congressional National Gambling Impact Commission Report). Demographic studies suggest that socio-economically disadvantaged families tend to gamble a larger percentage of their income than those at or above the median income. Not surprisingly, casinos have successfully aimed their marketing campaigns at this segment of the population, which has limited many families’ ability to build savings and to budget their monthly incomes to cover basic needs (Kindt, 103rd Congress).
Northeast Ohio’s Youth? No. We will fail future generations if our region’s primary job creation effort is to set up casinos and gambling parlors. Do we plan to curb “brain drain” by asking our children to grow up in this region, attend college in this region, and settle in this region, only to find that the only jobs available are flipping cards or serving drinks at a casino? Make no mistake; these are decent jobs in which a person can take pride. However, they are not the professional and technical jobs in emerging industries promised by our administrators during the last two election cycles. In fact, the question we should be asking is, “How have our officials helped grow jobs where college degrees and highly-specialized skills can be leveraged?”
Casino Owners and Developers? Yes. Of course they will benefit. The market for gambling in the US was estimated at more than $50 billion last year. With only thirty-five states offering casino gambling, casino owners and developers obviously have a strong incentive to expand into the other fifteen.
And how are they pursuing that agenda? In early March, The Plain Dealer reported that the campaigns of Jim Petro and Ted Strickland had received tens of thousands of dollars in contributions from executives of the Heartland Jockey Club (Beulah Park racetrack) and Jeff Jacobs, a Cleveland developer hoping to cash in on building gambling casinos in downtown Cleveland. On top of that, it appears that almost all our elected officials have been swayed by the near-50% tax rate promised by prospective developers and the one-time $45 million “fee” casinos have offered to pay. In addition, casino developer hopefuls, lobbyists, and business leaders have mounted a multi-million dollar campaign tied to the Learn and Earn initiative, whose petition and signature-gathering efforts have been described as “backhanded” and “hiding its gambling roots” by not stating upfront that casinos are its primary source of funding (Source: Plain Dealer, 7/8/2006).
Instead of asking if we are missing out by not having casino gambling in our region, we should be looking for ways to differentiate our region by making it more commercially and socially attractive. Why are we not asking questions like:
And the list goes on.
Gambling for growth is, in fact, just that: a gamble that doesn’t hold much promise for Northeast Ohio’s citizens. Mr. Commissioners, Mr. Mayor, gubernatorial hopefuls - let’s place our bets elsewhere. You have the power. We can do better.
From Cool Cleveland reader Joseph A. Glick jglickATnewrycorp.com, a senior consultant with Newry Corp., a Westlake-based management consulting firm working for industrial and global consumer goods manufacturing firms.
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