Rolling Snake Eyes in Albany and Trenton

Gambling will always be us, but governments, through their state sponsored games make it worse. That’s my verdict in the states of New York State and New Jersey, where the government is intimately involved in everything from casinos to lottery games and everything in between. Almost all other states have fallen for this sucker’s play, I learned in a recent story I did.

Governments have sold this to the credulous taxpayers as a way of closing budget gaps. That’s quite a comedown from the days when lotteries began in New York back in 1967 with the promise that the state would make so much money that would fund education and be able to reduce or possibly even end many taxes.

A half century later, after countless debates about expanding gambling even further in New York State, and no one can debate this: Taxes haven’t fallen. New York has some of the highest taxes in the country (By some measure they are the highest). The amount of money the government gets out of sponsoring gambling is relatively insignificant, certainly not enough to lower taxes or having a big impact on the budget.

So, it is easy to conclude that state sponsored gambling in New York and New Jersey has been a bad bet. Such is the essence of a new report that analyzes state gambling across the United States. Gambling earnings pay only a small amount of state spending, around two percent to four percent, the report says.

New York officials defended a half century of gaming, saying it has generated billions of dollars for education and just under a billion this year. (See note: “How Does Gambling Help New York and New Jersey?” at the end of this article). Still, the report argues revenues stop growing.

“In the beginning, there is some growth in state gambling revenues but then it slows up,” says Lucy Dadayan, senior policy analyst with the Albany-based Rockefeller Institute.

Why does a state or city sponsor gambling?

Rockefeller Institute officials say states facing budget problems see gambling as a solution.

Dadayan added that the revenues from racinos—the combination of racetracks with state sponsored casinos—have recently shown no growth or low single digit growth. Overall state gambling numbers were down across the nation as casinos vied for a crowded market.

However, New York officials say they’re doing better.

“New York’s trend of increasing gaming revenues,” said a spokesman for the New York Gaming Commission, “suggests the State is out competing its neighbors to attract and retain players.”

Yet some New York State numbers aren’t all good, Dadayan said. In 2014-2015, seven out of nine racinos had revenue declines.

But New York gaming officials say the report’s numbers are incomplete. They blame the bad winter of 2014-2015. In the just concluded 2015-2016 fiscal year, they add, the numbers were “record breaking.” Eight of the nine racinos had revenues rise.

The state spokesman added New York also has “the most profitable lottery in North America.” The chances of someone winning a substantial prize, he says, depends on the game. (See note: “The Powerball Scoreboard” at the end of this article).
However, New Jersey’s numbers were bad, with three casinos shuttered, Dadayan notes.

Why?

When Pennsylvania legalized casino and racino operations, it had an effect on the Garden State.

“Casino revenues in New Jersey saw declines and officials in New Jersey put the blame on the new competition in neighboring Pennsylvania,” according to the report, “State Revenues from Gambling: Short-Term Relief, Long-Term Disappointment.”

One of those failing Atlantic City casinos had once belonged to Donald Trump, who famously bullied an analyst who wrote a critical report when the casino was opening. He predicted that it would have problems because Atlantic City had too many casinos. Trump helped get him fired. The analyst later sued and won.

A spokesman for the New Jersey Casino Control Commission declined comment. I think the reason is obvious.

The financial benefits of state sponsored gambling are declining, even though they were growing in the 1990s, the report said. That’s when many casinos were new.

“Gambling revenue did not do well in 2015, relative to 2014. Lottery revenue declined by 0.7 percent in real (inflation-adjusted) terms in fiscal year 2015, with twenty-seven states reporting declines,” according to the report. “This was the second consecutive decline. Casinos experienced dramatic growth during the 1990s, but that growth slowed over the past decade.”

But the Empire State is doing a better job than most states, the New York Gaming Commission spokesman said. It is expanding efforts because of its success (See note “Lots of Gambling in New York and More to Come” at the end of this article).

Overall, New York State Gaming Commission numbers show that it will contribute $908 million to state education in the latest fiscal year. That comes from the total state “wins,” or profits, which were $1.9 billion. The net wins are what the state earned after paying out prizes. Then about $1 billion was deducted—or some 55 percent of the wins—for administrative costs.

 

NOTES:

Lots of Gambling in New York and More to Come

Fourteen facilities currently operate in New York, with nine video lottery terminal facilities at harness and thoroughbred racetracks, and five casinos operated by Native American tribes on Native American lands, according to the New York Gaming Commission.

Three resort destination casino licenses have been issued. They are slated to open in 2017. An application for a fourth facility, this one in the Southern Tier, is under review.

How Does Gambling Help New York and New Jersey?

Gambling isn’t helping that much here, the Rockefeller Institute report says.
In New York the revenues from racinos and lottery generate some 1.5% of the total state and local government general direct spending (and less than 6% of total state and local government K-12 spending).

A state gaming commission spokesman, noting that New York gambling ventures keep money away from organized crime, said lottery and casinos have provided billions since 1967, when the state lottery was approved.

In New Jersey the revenues from casinos and lottery are about 2% of the total state and local government general direct spending.

The Powerball Scoreboard

Hey, you do know!

Say you play powerball and hope to win. What are you chances of winning the grand prize, the $1 million prize or the $50,000 prize?

*One in 292,201,338
*One in 11,688,054
*One in 913,130

Hope to win $100 by picking four numbers? The odds are not as bad. They’re one in 36,526.

About The Author

Gregory Bresiger

Gregory Bresiger is an independent business journalist from Queens, New York. His Personal Finance articles have appeared in publications such as The New York Post & Financial Advisor Magazine. He is the author of the eBooks “Personal Finance For People Who Hate Personal Finance” and “MoneySense”.