As states continue to search for ways to fill budget holes, the latest gimmick is to privatize the lottery.
Illinois became the first state to privatize the lottery. New Jersey, Pennsylvania, Ohio, Washington and other states are all considering proposals to privatize the lottery. The push for short-term revenue gains comes with obvious risks that include opening states up to corruption and creating more problem gamblers.
State lotteries are giant cash machines. Private operators are salivating at the prospect of gaining control to those cash cows. If history is any guide, the backroom jockeying by the private companies must be watched closely. The winning bidders will likely be connected friends and big campaign givers to the governor or other powerful pols. (Those odds are much better than the odds of hitting the Power Ball.)
But even more problematic is the likely result of the sharp rise in problem gamblers that will come with private operators. Here’s why: a private operators will have an incentive to sell as many tickets as possible because that will probably be part of their compensation. As such, the private operator will be more efficient and aggressive when it comes to selling tickets. There will likely be an increase in places where tickets are sold. There will likely be an increase in lottery games to be played. And there will likely be more expensive lottery tickets sold. For example, Texas offers a $50 lottery ticket.
The result will be more people spending more money on lottery tickets. More people getting addicted to lottery tickets. And more people spending a larger percentage of their income on lottery tickets. Studies show that the most vulnerable residents spend a higher percentage of their income playing the lottery. Expanding the lottery through private operators may provide a short-term increase in revenue but will likely lead to more problems down the road.
Tags: budget, Illinois, lottery, New Jersey, Ohio, Pennsylvania, privatize, problem gamblers, risk, state
The new Cleveland and Cincinnati casino owner Dan Gilbert also owns the Cleveland Cavaliers. But he made his money through Quicken Loans, a mortgage lender. Quicken presents itself as a squeaky clean lender, unlike the many other sleazy predatory lenders that helped drive the housing bubble by putting many unsophisticated borrowers into costly mortgages.
But Quicken’s image is at odds with lawsuits brought by employees, alleging high-pressure and abusive sales practices. In one case, a state court judge in West Virginia found that Detroit-based Quicken had committed fraud against a homeowner by misleading her about the details of her loan, charging excessive fees, and using an appraisal that exaggerated the value of her home by nearly 300 percent. The judge called the lender’s conduct “unconscionable,” the Center for Public Integrity reports. The judge ordered Quicken to by $2.7 million.
The company denies any fraud and says its lending practices followed industry standards. The company also said the lawsuits by former employees are meritless. The allegations should give the Ohio gambling commission further pause before issuing a casino license to Gilbert, who the Website Deadspin called the “Whore of Quicken.” The last thing a poor city like Cleveland needs is a predatory lender in the casino business, which also has many predatory practices.
Of course, Gilbert recently came under for fire for his past role running a sports betting ring in college and making a $60,000 loan to the former convicted mayor of Detroit. See earlier post here. That’s quite a few red flags. A casino license is a privilige not a right. At the very least, states should be able to find business owners to run casinos that don’t come with baggage. But then again the casino industry has a long history of attracting operators with dubious histories.
Tags: casino, Cleveland Cavaliers, Dan Gilbert, Detroit mayor, Ohio, predatory lender, Quicken Loans
Ohio is the latest state trying to gamble its way out of economic trouble.
But instead of improving the economic prospects for residents, Ohio lawmakers have instead opened the door for more problem gamblers. The increase in problem gamblers is expected to be especially acute in poorer cities like Cleveland, where a casino is opening in a former department store.
Providing easier access to casinos in poorer areas is expected to lead to more economic and social ills in areas that can least afford it. Studies show that the rates of crime, bankruptcy and divorce increase within a 50-mile radius of where casinos open. One study found that casinos in Ohio would increase the number of problem gamblers in the state by more than 100,000.
Lawmakers overlook these problems in their zeal to generate more tax revenue for state coffers. But it is troubling that lawmakers – who are sworn to protect citizens – would enact a policy that leaves residents poorer.
Tags: casino, Cleveland, increased social costs, Ohio, problem gamblers
The insatiable drive for tax revenue is one of the main reasons many states are turning to casinos as a way to fill government coffers. But once the casinos begin to struggle they immediately turn to lawmakers for help.
In West Virginia, the city council in Longview just approved a one-year tax break in an effort to keep the struggling casino afloat. Once the tax revenue goes away, what is the point of having a casino if all it does is create economic and social costs?The troubles in Longview offer a window into what other towns and cities can expect as more casinos open and the competition for limited gambling dollars increases.
Consider: The two mega casinos on Indian reservations in Connecticut are scrambling to refinance crushing debt loads, and will soon face increased competition from Massachusetts and possibly New York. Several casinos in Atlantic City filed for bankruptcy in recent years and continue to struggle, in part from increased competition in Pennsylvania. Meanwhile, the Revel casino needed a state bailout in order to resume construction.
Casinos in Indiana, Mississippi and other states are also experiencing a drop in revenues, in part from the sluggish economy and increased competition. In Delaware, the governor has ditched a plan to add more casinos as the existing casinos lobby state lawmakers to reduce their tax rate.
Meanwhile, other states like Ohio, Kentucky and Florida have or are considering legalizing commercial casinos, which will further increase competition. As the casino cancer spreads, look for more states to cut taxes and cut back on regulation – as New Jersey has done – in an effort to prop up the increasingly influential casino industry.
The Longview casino claims it has not made a profit since 2008. Meanwhile, the casino continues to strip wealth from the community. And now the government is extending the casino a tax break so it can continue to take money from residents. There is something seriously wrong with that picture. It shows why casinos are such a bad public policy that is insidious and unsustainable.
Tags: Atlantic City, bad public policy, bailout, bankruptcy, casinos, Delaware, Florida, gambling, Gov. Christie, Kentucky, Longview, Massachusetts, New York, Ohio, Revel, tax break, West Virginia