So Casinos Really Pay Off for Local Governments?

As more and more cites and states turn to gambling venues, especially large casinos, for extra revenue, many are finding that the payoff is not as quick in coming as they might have hoped. An example of how casino location is playing out comes from Maryland.

In Maryland, several groups have been promoting an aggressive and expensive campaign concerning a question that they hope to get on the ballot next month. Those who support the issue say that casino infusion will promote more jobs as well as help to fund schools. Those who oppose are not so sure, and suggest that gambling does not pan out at the financial levels that are often estimated to public officials and voters.

Over the last two years, many states have turned to casinos for added income and jobs. Casinos have been launched in Kansas, Illinois, New York, Ohio and Pennsylvania during this two year period, with another being proposed for Arkansas (which subsequently had to be removed from the ballot because of its language).

Overall, there are now 22 states that allow commercial gambling and there are 30 states that allow gambling that is operated by Indian tribes. The vast majority of this expansion was due to the slowing economy and states and cities trying hard to find ways to bring in more cash and jobs. As more casinos have sprung up, the stigma that they are sinful places has diminished a great deal, making it an easier sell to many voters.

In 2011, nearly $8 billion was paid out in local and state gaming taxes by the US gaming industry which happened to post a whooping $35.6 billion in revenues for that year. It has been reported by the American Gaming Association that the gaming industry employs almost 340,000 people. The majority of these jobs are low-skilled positions but they do pay competitive wages. This is another reason so many locales are looking to bring in casinos, especially those with high unemployment rates.

There is a downside however. The current recession has hit the industry which has resulted in less tax collections for states. The gaming industry peaked its revenues back in 2007 at $37.5 billion, and that level has not been reached since. In 9 states, commercial casino tax dollars actually fell. Another downside to casino expansion, some might say, is that as new venues are built, older venues such as Atlantic City and Las Vegas lose business.

Lastly, there is no guarantee that a casino will make money. In Ohio, for instance, its first two casinos, both of which opened this year, have each seen declining revenues for three straight months. At this rate, the revenues that the state can expect to see will only be a fraction of what they had hoped for earlier.

It should be noted that when it comes to casinos and the amount of revenue they can generate for a locale, both gambling and tourism are critical parts of the solution. If a casino loses revenues on hotel rooms, for example, as tourism in the area declines, it will not be able to make up the loss through its gambling efforts alone.