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Another story analyzing gambling’s odds in the Lege

I have three things to say about this story.

[W]ith a budget crisis looming — and funding to public education, health care and other state services on the chopping block — gambling opponents aren’t taking any chances.

Both sides have said legalizing gambling could generate at least $1 billion in state revenue, which lawmakers could dole out as they see fit. Even with a more conservative Legislature this year, some believe a billion-dollar temptation could sway more lawmakers.

“It’s a situation where a lawmaker could hold his nose and say, ‘public education is too important for me to not take advantage of this financial opportunity,'” said Chuck McDonald, a legislative consultant in Austin who has worked on pro- and anti-gambling efforts in the past.

And it’s still the case that getting a constitutional amendment for anything remotely controversial passed is an exercise in counting votes, and I have yet to see an article that really explores what that means in this Lege. The fact remains that a number of legislators who supported expanded gambling – almost all Democrats – lost in 2010. Those votes have to be replaced, and a few legislators who had previously voted No would have to change their minds, since this same effort has fallen apart in previous sessions. Where are those votes coming from? How many House freshmen are open to voting for more gambling? Are there any opponents who may now be reconsidering? I agree that if a referendum makes it onto the ballot that it is a favorite to pass, as public opinion is in favor of the idea now. It’s how a joint resolution gets passed, that’s what we need to know.

Suzii Paynter, director of the Christian Life Commission for Texas and staunch gambling opponent, is bracing for a fight.

“It’s always tempting and there’s always a big push at the capital . . . especially at a time when revenue is short,” Paynter said.

She has polished up her talking points and put together a fact sheet, ready to tell lawmakers why gambling would not be the best way to collect revenue: Unlike the lottery — where the state makes 33 cents for every $1 spent — Texas stands to make only 2 cents on every $1 bet in a slot machine, Paynter said, noting that sales tax is 8 cents to the dollar.

Instead, she argues, taxes on beer and wine could be raised by $1, bringing in $786 million immediately.

“And you don’t need to build anything or plant any palm trees,” Paynter said.

And again, this isn’t an either-or choice. You can raise the alcohol tax and support gambling, and bring in more money now and hopefully in the future as well. That’s assuming the gambling industry is being honest about its potential, which brings me to this:

In Pennsylvania, for example, supporters of legalizing slot machines in 2004, including then-Gov. Ed Rendell, said it would generate $1 billion a year once all 14 casinos authorized by the law were up and running. Ten are open today, while plans to build four others have been stalled by lawsuits, collapsed financing and local opposition. In the current 2010-11 fiscal year, those casinos are on track to provide roughly $800 million in money for tax cuts and additional funds to support civic development projects, the equine industry and local governments.

That was a remarkably accurate projection, especially given the current economic climate. It doesn’t address the social costs of more gambling, of course, but to predict $1 billion in revenue from 14 casinos and get $800 million from 10 is impressive. I’ll consider us fortunate if Texas has a similar experience, if it ever comes to pass. The Trib has more.

The gambling industry keeps trying

I’m not sure how successful an approach this will be, but I guess it’s better than nothing.

Expanding gaming requires a vote of two-thirds of the legislature, with voters getting the final say. A new poll done for the Chronicle and the state’s other major newspapers found 60 percent favored an expansion of gaming.

Expanding gaming may be a last-ditch attempt at saving racing. Without slots, Texas track operators say, they won’t have the additional revenue to increase purses and attract quality horses .

“You will likely see the fall of several players,” predicted Andrea Young, president and chief operating officer of Sam Houston Race Park . She wouldn’t say whether Sam Houston would be one of them.

Bryan Brown, chief executive of Retama Park in Selma, had an even more fatalistic view if lawmakers can’t be persuaded.

“Our industry, over a period of years, will just disappear,” Brown said. Retama hasn’t turned a profit since opening in 1995.

I blogged about the poll in question the other day. I have to say, this is not an approach I’d take if I were the horse racing industry. There were plenty of Republicans who were perfectly content to let the US auto manufacturers die back during the early days of the economic crisis. If this is the pitch, I have no trouble imagining it being recast as a “bailout” in the 2012 primaries. Stick with your projections of economic benefit for the state and hope for the best, I say. The gloomier the budget picture and the harder it gets to make cuts, the better it’ll sound to them.

To be fair, the racetracks did also talk up the economic benefits they say allowing them to have slot machines would bring:

Under the racing industry’s proposed legislation, the state would get 30 percent of the slots revenue. The tracks would keep 58 percent, and the remaining 12 percent would be earmarked for purses and other items for the horse and greyhounds industries, Hooper said.

If slots pass, Sam Houston’s Young said it will spend $350 million for new facilities, gaming terminals and other amenities. Retama expects to spend $200 million.

Young pointed to Parx Casino in Philadelphia as a venue she’d like to emulate, raving about how well it has integrated slots (and table games) with horse racing.

“It feels like you’re walking into a Vegas-style casino,” she said, referring to the layout and finishes.

I still don’t think much of their odds of success, but this is as sensible an approach as you could expect.

I nearly did a spit take when I read this:

The Texas Gaming Association, which represents casino operators, is proposing four to eight casinos. Three would be in the largest counties – Harris, Bexar and Dallas – and at least one other would be in a coastal town, said spokesman Scott Dunaway.

Whoa! I’ve been following this issue for awhile now, and this is the first time I can recall seeing any specific location mentioned for a casino, especially Harris County. In the past, the talk has always been that there would be local elections to determine whether or not a given city would allow a casino to be built there. (Go take a listen to my interview with Joe Jaworski, now Galveston’s Mayor, in which we discussed this issue, for an example.) I was sufficiently surprised by this that I contacted Harris County Judge Ed Emmett, to see what his position was. Judge Emmett told me that it was the first he had heard of it as well. As such, I don’t know if this is something new, something that’s always been there but is just now coming out, or if the story got it wrong.

Whatever the case, the casino interests say they will be releasing their financial projections next week. I can hardly wait to see it, and I’ll be sure to write about it when I do.

Expanded gambling: Still doomed

The Dallas Morning News does a little checking, and the math isn’t good for gambling fans.

The Dallas Morning News, canvassing all lawmakers, found that expanded gambling lacks the votes, mostly because of objections to social ills and new tax revenue being too far off to help now.

The results may indicate that the Legislature, already facing a host of confrontational issues when it convenes Jan. 11 for the 140-day session, could give short shrift to a gambling debate.

[…]

Sen. John Carona, R-Dallas, who heads a key economic committee, said he has turned down a request to carry a casino bill.

“It is highly unlikely that any version [to expand gambling] will be found acceptable by the required number of members in either chamber,” Carona said recently.

[…]

In the House, 115 of the 150 members responded to the gambling question, with 54 saying they would not support its expansion in any form. Only 27 said they favored doing so, and 26 said they were undecided. The rest who were reached declined to comment.

Because of the two-thirds mandate for constitutional amendments, 51 “no” votes would kill the proposal in the House.

In the Senate, 24 of the 31 members responded, with 11 saying they would oppose expanding gambling and six saying they would favor it. The others said they were undecided or declined to comment. Eleven “no” votes would kill the proposal in the Senate.

Asked about the various plans, some of the lawmakers who were counted as favoring gambling said they might be open to allowing slots at existing racetracks under limited circumstances, but would oppose casinos.

I know I’ve beaten this horse many times, but it bears repeating. Gambling expansion is a tough sell, which is why it hasn’t happened after all this time. It’s certainly possible, as suggested by gambling lobbyists and State Sen. Jeff Wentworth elsewhere in the story, that some legislators who are currently opposed to expanded gambling might reconsider once they see what a cut-only budget approach begins to look like. This assumes that they will recoil from such a realization, and I at least am not prepared to make that assumption. I say it’s doomed, and I don’t see any reason to change that assessment.

Gambling proponents still optimistic for some reason

The conventional wisdom, to which I subscribe, says that the results on this election are bad news for proponents of expanded gambling. One reason for this is that the Republican wave means more socially conservative members. Gambling proponents are doing their best to put a smiley face on their prospects in the new Lege in spite of this.

Jack Pratt, chairman of the Texas Gaming Association and a proponent of casinos, said he is not discouraged by the recent election results.

“I have witnessed the debate over expanded gaming firsthand in at least 16 states and followed it closely in several others. It’s just a fact that many Republican legislators around the country voted for these measures and were an essential part of the majority in those state legislatures that passed expanded gaming legislation,” Pratt said. “A proposal to allow a limited number of destination resort casinos in Texas makes sense on the merits and is very compelling at a time when Texas needs jobs and new sources of nontax revenue.”

Chris Shields, who also works with the Texas Gaming Association, said an overwhelming number of Texas voters support expanded gambling measures and even more support putting the issue to the voters, based on a poll commissioned by the association. And the newly elected candidates know that, he said.

“We think the new members have a very strong connection to the voters right now,” Shields said.

Mike Lavigne, spokesman for Win for Texas, which is supported by track owners and the horse industry, said his group believes an expanded gambling bill can pass in the upcoming session, which will begin in January.

Most of the Legislature’s new blood ran on platforms of no new taxes and less government, Lavigne said. They ran on fiscally conservative values, not on socially conservative ones. To prove his point, he produced a short stack of direct mail pieces from Republican challengers that include tea party-approved tax messages and not a word about abortion or other favorite topics of the socially conservative.

And because increased gambling raises money without raising taxes, these soon-to-be-sworn-in candidates could get behind a gambling measure, Lavigne said.

Sure, if you believe that any of them want to find new revenue sources, which is at best an open question. But there’s a fundamental issue here that the gambling proponents don’t address.

Jason Isaac, the Republican who defeated Rep. Patrick Rose, D-San Marcos, represents hope for gambling proponents.

Isaac said he hasn’t decided how he’d vote on a gambling bill. He’d have to see it first. But he said he is not necessarily opposed to the idea of expanded gambling.

“My concentration is going to be on fiscal matters,” Isaac said, adding that his initial reaction is to be more open to slots at racetracks where gambling already exists rather than casinos.

Isaac said one of his concerns is that gambling could lead to bigger government — something that he and many other newly elected people staunchly oppose.

The position of Paul Workman, another newly elected Central Texas Republican, proves that gambling proponents will have to work for every vote. He said he’ll oppose a gambling measure.

Workman, who defeated Rep. Valinda Bolton, D-Austin , said he enjoys trips to Las Vegas and does not see gambling as evil. But he thinks expanded gambling of any kind in Texas would be a mistake. He might not be opposed to gambling on moral grounds, but he objects to the crime and other social costs associated with it.

“I think it brings more trouble than it solves,” he said. “I think it would add an undue burden to cities and counties.”

What goes unmentioned here is that Rose and Bolton were both gambling supporters. To be more precise, they were recipients of financial support from the gambling industry. In their place is one guy who might support a gambling resolution, and one guy who won’t. That means that they need at least one of the other new members to be a proponent and to have replaced someone who wasn’t just to break even from 2009, when they didn’t have enough votes to pass anything. What are the odds of that?

Further, I’m sure that if you looked at more of the individual cases, you’d see more of the same. Here in Harris County, for example, Rep. Ellen Cohen was a gambling supporter – in her interview with me, she stated unequivocally that she would vote for a resolution to allow expanded gambling. There’s nothing on Sarah Davis’ wafer-thin issues page that mentions gambling, but an anti-Cohen site attacked her for having “voted for legalizing gambling on Indian reservations”. In other words, at best the pro-gambling forces have broken even, and at worst they’re down another vote. I doubt it will be different in the other races the Democrats lost. And there’s still the passing of Rep. Ed Kuempel, too.

The bottom line, then, is that a number of legislators who were known to be supportive of a gambling resolution will not be there next year. In their place are a bunch of people who are almost certainly less supportive as a group than their predecessors. If there’s an example of an anti-gambling person being replaced by a gambling supporter, I’m not aware of it. The craps table offers much better odds than this.

More on SHRP’s investment partner

I mentioned before that Sam Houston Race Park is getting an investor that will help them with the push to expand gambling in Texas. Here’s some more about the investor and the push.

The Philadelphia-area company [Penn National] is, at least, expert at shoehorning electronic gaming into existing race tracks. It has a glowing record of legislative persuasion in states where slots were illegal. The company also develops tracks for electronic gaming success, then operates the gaming well.

“This (50-50 venture) was more a business decision than anything else,” [SHRP CEO Shawn] Hurwitz said. “It demonstrated our fundamental belief that Texas should have and can have the best horse racing.”

He emphasized, “In our new partner, we have an organization with lots of experience in other environments. With authority, Penn National Gaming can tell us, ‘Here’s what worked here, and here’s what worked there. Here’s what people liked, and here’s what people didn’t like.’

“When Penn National looked at us, I think their people started to get very excited about coming into Texas. I think they also see opportunity to have the best in racing here.”

As always, there’s an annoying lack of anything specific. What do they think will work in Texas? I presume at this point it’s a lobbying strategy, since it’s a bit late in the game to try to swing elections. I don’t really expect them to spill their game plan to a reporter, but some clue of the general outline would be nice to know.

Many roadblocks and obstructions lie ahead. One committed foe will be other states’ gambling interests.

“If casinos or tracks near Texas borders have parking lots filled 80 or 90 percent with Texas license plates, you know they will work hard to keep those customers,” Hurwitz said.

The world’s third-largest casino is WinStar. It’s just inside Oklahoma, about 75 miles from the Dallas-Fort Worth area. Casinos and racinos (horse tracks with gaming devices) could collapse without Texas revenue.

“Nevada will also be involved in the resistance,” Hurwitz said. “Texas is second to California in gaming at Nevada casinos.”

I assume we’re now talking about the battle that will come after the legislative victory, which is the battle to get all those Texans who cross into neighboring states for their gambling fix to stay at home and lose their money here. I note this just as a reminder that however much gambling money leaves the state, not all of it will come back. Be careful when reading projections about the size of the potential windfall.

Casinos look to the Internet

Interesting.

Many of the country’s largest casinos, long opposed to gambling games like poker on the Internet, are now having second thoughts.

Although online gambling is popular with millions of Americans, it is illegal in the United States, and the casino industry has considered it a threat.

But a trade group that represents major casinos like Harrah’s Entertainment, MGM Resorts and Wynn Resorts is working on a proposal that would ask Congress to legalize at least some form of online gambling, the group’s chief executive said.

The group, the American Gaming Association, issued a statement in the spring suggesting that online gambling could be properly regulated — the first public indication that its hard-line stance was softening.

[…]

The move by casinos to open the door to online gambling could bring a powerful new lobbying force into Congressional debate. It would also most likely intensify fights in state legislatures as various gambling interests — groups that include lotteries, racetracks and Indian tribes — push lawmakers to grab more gambling dollars for states by moving to the Web.

California, Florida and New Jersey recently made unsuccessful efforts to legalize Internet betting on casino-style games, said Mark Balestra, the director of the BolaVerde Media Group, a consulting firm in St. Louis that tracks Internet gambling. Current law does not prevent in-state gambling over the Internet but to do so across state lines would require a change in federal law.

Just something to keep an eye on in the event that the push for expanded gambling in Texas finally succeeds next year. It’s possible that language to allow for such betting might be proposed, but I doubt it could get enough support to actually be included. But if and when casino gambling is legalized here, expect the campaign to expand it to online action to follow.

Interview with State Sen. Rodney Ellis

Sen. Rodney Ellis

We move from the House to the Senate this week for conversations with the Democratic Senate delegation of Harris County. First up is State Sen. Rodney Ellis, who served three terms on Houston City Council in District D before being elected to represent SD13 in 1990. Ellis has championed many causes in his time in the upper chamber, with criminal justice reform and issues relating to innocence being the most prominent. He authored the bill that enabled the creation of the new Harris County public defender’s office and was the Senate sponsor of the bill that created the Timothy Cole Advisory Panel on Wrongful Convictions, and has led the push for a statewide Innocence Commission. In addition to that, he authored the bill that created the back-to-school sales tax holiday, and has been a leading proponent of expanded gambling in Texas. Those were among the subjects we discussed:

Download the MP3 file

You can find a list of all interviews for this cycle on the 2010 Elections page.

The limits of gambling

People who like to gamble have a lot more options available to them than they used to.

The Marcuses’ three-day pilgrimage had taken them across a region suddenly awash in slot parlors and Las Vegas-style casinos, what with New York, New Jersey, Connecticut, Delaware and Pennsylvania getting in on the action. And the competition between the gambling halls is growing fiercer.

Mount Airy, the working-class resort once known for its red heart-shaped bathtubs, is one of three dozen combatants in a market where the only way to survive is by taking customers from a rival.

New Jersey is so worried about a $1 billion drop in annual revenue at its 11 Atlantic City casinos that Gov. Chris Christie proposed a state takeover of the gambling district and a large cash infusion to rejuvenate the beachfront resort.

New York already has electronic slot machines at eight racetracks, including the Yonkers and Monticello raceways, and is trying to get another gambling hall up and running in the biggest market of all: New York City, at the crumbling Aqueduct racetrack in Queens. And the Shinnecocks of eastern Long Island recently won federal recognition as an Indian tribe, allowing them to open a casino, as the Mohegan and Mashantucket Pequot tribes of Connecticut did.

So Pennsylvania authorized the introduction of table games last month at its thriving slot machine parlors, a move that officials hope will bring even more gamblers and tax revenue to the state. In the year ending June 30, Pennsylvania collected nearly $1.2 billion in slot machine taxes, 23.4 percent more than in the previous 12 months.

I bring this up for two reasons. One, even if all of Texas’ gambling interests see their champagne wishes and caviar dreams come true next year, the casinos and resorts of Louisiana and elsewhere that now attract Texas’ gamblers won’t give up all that business without a fight. They’ll offer incentives, reduce room rates, increase prizes, and generally do things that will decrease everybody’s profit margins. This is something else to keep in mind when you hear yet another rosy projection about how much money gambling will mean to the state.

And two, as a boy from New York City, I can’t read the words “Mount Airy” without hearing this:

They had other seasonal variations, but it’s the “Beautiful Mount Airy Lodge” bit that’s forever etched into my brain. When Olivia and I were in the Hudson River Valley last month, as we were driving from Newark Airport to Hyde Park, we passed an exit for The Poconos, and my dad and I instantly started singing the jingle. Some things, you just never escape. Link and post title via Yglesias, who I’m pretty sure is too young to remember those ads.

Will the racetracks and the casinos work together?

At the very end of this Trib story about more legislative hearings on gambling expansion comes this tidbit:

The Win for Texas group — which includes current racetrack owners who’d like to add slot machines and other games to their facilities — is touting that updated study on the “Economic and Tax Revenue Impact of Slot Machines at Racetracks in Texas.” The Texas Gaming Association — those are the folks who want to legalize and build resort casinos around the state — will update their economic studies and polling closer to the legislative session, according to Chris Shields, the group’s chief lobbyist. Their previous work has promised larger revenue numbers for both the state government and for the economy. And the rivalry between the various gaming factions has been the secret weapon of gambling opponents. Casinos vs. tracks has been a losing proposition in recent sessions.

“It’s different this year because of the situation with the budget,” Shields says. “What hasn’t changed, but I think will change, is the willingness of the gaming interests to work together. I don’t think there’s any way for a bill to pass without that — and everybody wants a bill to pass.”

I’ve noted the racetrack/casino rivalry a few times myself. If they really are going to work together to get a bill passed, that changes things considerably. The question is, what does it mean for them to work together? Since it isn’t in the interests of one group for there to be legislation that would only allow for the other – indeed, such legislation might close the door on them for years to come – what this suggests to me is that they’ll jointly push for a multifaceted expansion. The question then is will that be too much for some legislators, or does the budget situation make this just the right time to reach for the brass ring? I don’t know how this will play out, but it will definitely be worth watching.

By the way, you can see the study mentioned in that last paragraph here (PDF). I blogged about a similar study I got from this group last year, which was sent to me in response to a previous post that had asked questions about the economic impact of expanded gambling. This study is an update to that one, as noted in their press release. The Trib also has a from the hearing.

LSG hearing on expanded gambling

The Legislative Study Group held a hearing on Wednesday to start the discussion about the various proposals for expanded gambling in Texas that will be brought to the Lege next year.

Racetrack and casino interests that want to expand Texas gambling dangled promises of new tax revenue before lawmakers Wednesday, but faced tough, skeptical questions from Democrats about the economic benefits and social costs.

“Could I make a suggestion to you? Don’t pretend like there’s not a downside. Somebody needs to talk about how we’re going to mitigate the downside,” Rep. Garnet Coleman, D-Houston, told Jack E. Pratt Sr., chairman of the Texas Gaming Association, which is pushing a proposal that would include destination resorts with casinos.

[…]

Their questions ranged from details of the $1 billion to $1.5 billion projected annually in new state tax revenue to the likely bidding process for casino licenses, as well as the people likely to play and whether they can afford it.

Rep. Lon Burnam, D-Fort Worth, said the hearing was meant to make public the private conversations that are occurring about the possible legislation for the 2011 session. He said he would like to get updated revenue figures besides those generated by the interests involved.

Racetrack and casino interests testified, as did gambling opponents from the Texas Baptist Christian Life Commission. At this point, I’m just glad to see decent information getting out there. If people are going to be called upon to vote on this next year, they should have as much accurate data at their disposal as possible. Texas Politics and First Reading have more.

Poll says people prefer slots to taxes

I don’t think that’s a great revelation – I’d think many people would claim to prefer a bout of the flu to having their taxes raised – but for obvious reasons, this is a noteworthy finding.

A new poll conducted for horse track owners indicates that Texans would rather legalize slot machines at race tracks than pay higher taxes to offset a projected $18 billion revenue shortfall in the next state budget. The poll of 801 registered voters in Texas, conducted by Austin-based Perception Insight, showed the preference for slot machines across the political spectrum – Democrats, Republicans and independents.

Results of the poll mirrored earlier surveys that found Texans generally would rather see new revenue raised in ways other than through increasing taxes. The new poll, conducted from June 8-13, was paid for by Texans for Economic Development, which represents horse and dog track owners in the state. Efforts to expand gambling in Texas have picked up steam as projections for the state’s revenue shortfall next year have continued to grow.

According to the poll, 57 percent of voters favor slot machines over higher taxes when given a choice, while 22 percent would rather raise taxes.

You can see the poll memo here. There’s a lot of context missing – these were a couple of questions from a larger poll, about which we have not been told anything, and there’s no crosstab data – so don’t read too much into it. In particular, I think any time you ask the question “Would you prefer for the state to raise taxes or do X”, I think “do X” is going to win handily most of the time. Not to put too fine a point on it, but even the most optimistic estimate of potential gambling revenue for the state is far short of the structural deficit caused by the ginormous unaffordable property tax cut of 2006, let alone the actual shortfall for this biennium. In other words, this isn’t an either-or choice, even if we assumed there were no other possible options. I understand there’s only so much you can do in a poll, but that means there’s only so much you can take from it, too.

To me, the more interesting finding is that there is no apparent downside for a politician who supports expanded gambling. That’s not going to stop hardliners like Empower Texans, who have been peddling the misleading claim that gambling expansion is a Democratic issue – someone should tell that to Rep. Ed Kuempel, as he was the lead author of the joint resolution and its enabling legislation to expand gambling last session – from trying to scare Republicans about it. It wouldn’t be any fun if it weren’t for stuff like that. Whether this changes anyone’s position or not, I couldn’t say, but it’s not likely to make anyone shy away from supporting more gambling.

Finally, note that the questions only asked about slots at horse racing tracks, not about casinos. As we know, those two interests are competitive and not cooperative, so there’s no guarantee that even if we do see some kind of gambling expansion move forward that it will take this specific form. Maybe casinos would be less popular than slots, I don’t know. Just something to keep in mind.

Here come the bingo interests

In the discussion of expanded gambling so far, I’ve spoken of two potentially competing interests, casinos and racetracks. Turns out there’s a third player in the game, and they’re not about to be left behind: Bingo interests.

Steve Bresnen, who represents bingo halls as a lobbyist for the Bingo Interest Group, said charitable bingo groups would be devastated if the state expands gambling without giving them the electronic-game technology that would allow them to compete in a market that includes casinos or video lottery terminals at racetracks.

The industry previously has sought the ability to offer electronic instant bingo in a gambling expansion, which has failed before in the Legislature.

State law prohibits using bingo proceeds on lobbying the Legislature and prevents bingo charities from working for or against a proposed constitutional amendment on the state ballot, which a gambling extension would require.

Bresnen said a federal court lawsuit is planned to challenge that law.

They plan to use the Citizens United decision to argue their case. Quite the can of worms the Supreme Court opened there.

Bingo charities net about $36 million a year in bingo proceeds, Bresnen said. Bingo interests want to establish a fund of at least $5 million “to mount a major media campaign that will allow bingo charities to defend their interests,” according to a “plan of action for survival of Texas charitable bingo.”

Even if the bingo industry doesn’t prevail in the lawsuit, it will work to affect the debate through such means as a statewide voter registration and mobilization campaign targeting those attending Texas bingo halls.

Well, if they’re looking for someone to design a logo for them, I have a suggestion for them. It’s going to be very interesting trying to keep up with all of the groups that want a piece of whatever gambling pie that may come out of the next legislative session. Seems to me a viable strategy for the anti-gambling folks will be to get these competing interests to work against each other as much as possible. Just keeping track of all the bedfellows is going to be a full-time job.

I should note that there is at least one other interest that will be involved, though I have not heard anything from them yet: Poker interests, who managed to get a bill passed out of committee last session, but it died without coming to a vote in the House. Someone may want to print up a scorecard, we’re going to need all the help we can get.

Obstacles to expanded gambling

Burka lays out the reasons why expanded gambling will have a tough road ahead in the Lege next year, even as budget writers openly speculate about it, and concludes it won’t happen. I think the situation is more fluid than he gives it credit for, but I definitely agree that competing interests between the racetrack and casino factions will be a hindrance. We saw this in the last session, and the dynamic is unlikely to change. Racetrack owners can make a credible argument they can generate cash for the state more quickly, but casino licenses are where the real tax revenue is. Eventually, anyway, which as I’ve said isn’t much help for this biennium. Anyway, it’s worth keeping this in mind. Even if the will exists for more gambling, what form it takes will be a fight that maybe no one can win.

And in case you were wondering about gambling

And to complete this impromptu threeparter about the state’s budget situation, we ask the question “What about gambling?”

Lawmakers had been warned to expect a shortfall of at least $11 billion in the next two-year budget period. But Appropriations Chairman Jim Pitts, R-Waxahachie, on Tuesday put the gap at $18 billion — and said lawmakers should consider casino gambling as one way to fill the hole.

[…]

The expansion of gambling would require a constitutional amendment, Pitts said. That means a two-thirds vote of lawmakers and voter approval on a statewide ballot.

Casino gambling could bring in $1 billion in the next two-year budget period and $4 billion annually in the future, he said.

“I’m going to look at every revenue enhancer that we can get,” Pitts said, adding that Texans now travel to other states to gamble “and we need to grab that money.”

While I agree there’s revenue to be had by these means, I remain skeptical of pretty much any actual number that gets put out to quantify it. I’m particularly dubious of the $1 billion claim for the next biennium, especially if we’re talking casino gambling. Assuming a joint resolution passes, and it gets ratified by the voters, there would still be the need for local option elections in places like Galveston where any proposed casino would be situated. By the time you get past that, it’s already May of 2012, and you haven’t even started construction yet. I suppose this could be an opening for the slot-machines-at-racetracks crowd, since those could be in place within days of the November constitutional amendment vote. We’ll see if anyone picks up on that argument when the session opens. Just remember that there’s still plenty of opposition to expanded gambling out there, so even getting to the first step is not guaranteed.

The pitch from the gambling industry

We know that the gambling industry, which never sleeps, has been busy preparing for the next legislative session. The Trib gives us an overview of their pitch, about which I’m sure you’ll be hearing plenty more in the coming months. Most of this is familiar territory, so let me just zoom in on two points. One has to do with the numbers:

Promoters of gambling have been trying to get everything from slot machines to casinos legalized in Texas for years, but they were brushed aside last year after the stimulus money relieved the budgeteers of many hard choices. Now, the gambling side says, the continuing recession improves their odds, and they’ve managed, for now, to keep all of their own constituencies from squabbling.

“They’re all getting along and singing from the same hymnal,” says Mike Lavigne, who’s working for Texans for Economic Development, a group of track owners, horsemen and others who want the state to okay expanding gambling at tracks. They’ve got a web site — winfortexas.com — and have lobbyists and others strategizing in advance of the 2011 legislative session.

That group wants lawmakers to allow video lottery terminals, or VLTs, at the state’s horse and dog tracks and on reservations of the state’s three Indian tribes: the Tiguas, the Kickapoos, and the Alabama Coushattas. They say those “racinos,” (a combination race track and casino, would bring $1 billion into state coffers each year (twice that for a two-year state budget) once they’re up and running and would be an economic boon to their communities and to the horse business in Texas.

“Eventually, they’ll be facing taxes, or fees, or something else,” Lavigne says. “This is the lowest-hanging fruit. If you need $2 billion fast, call us.”

[…]

Rob Kohler, who’s been lobbying against legalized gambling for years, doesn’t buy the budgetary justifications. “The difference between now and when we did horses and the lottery is that, then, we didn’t have a lot of data,” he says. “Now we have the data. This isn’t a viable revenue mechanism.” Horse and dog tracks never produced any more than a trickle of revenue for the state in spite of flagrantly optimistic economic forecasts at the time lawmakers were asked to legalize it (at the start in 1986, proponents forecast the state would net $110 million annually; the revenues have never been more than a small fraction of that amount, and the costs of regulation have negated any fiscal benefit to the state treasury). The lottery has produced more or less as predicted, but didn’t become the public school funding panacea sold to voters, he says. “The perception is that they were sold a bill of goods,” he says.

Slot machines, Kohler says, would bring the dangers of expanded gambling without much benefit. Racinos, he says, would add little to the state’s annual budget, which is approaching the $200 billion mark. “Take 200 pennies. Throw them in a bag. Throw in one more penny. That’s what you’re getting,” he says.

Kohler’s point about the relative size of gambling revenue to the overall budget is correct, but not particularly responsive. What matters now is the size of the deficit and how it can be shrunk, and even a small new revenue source still contributes to that. Note that one reason we’re having the conversation about gambling as a source of revenue is because all of the more sensible sources are for a variety of reasons politically untenable, and even in Texas most people recognize that cuts only get you so far. If we could have an adult conversation about the state’s tax structure, there would be less attention being paid to casinos and video lottery terminals.

Of course, as we’ve discussed before, even if the gambling industry got everything it wanted in the next session, the revenues they promise would not materialize right away. That’s the second point, the timeline:

The racinos wouldn’t produce money immediately. [State Rep. Ed] Kuempel and others say the state will need the money in subsequent budgets and argue that the earlier the gaming is allowed, the quicker the money will come in. One proposal would let the state sell licenses for the VLTs — that would bring in money up front — but the track operators say they can’t afford the licenses until the gaming parlors start generating cash. And they say the Legislature isn’t ready to approve full-blown resort casinos, either. “We’re not talking about opening up new casinos all over the state,” Lavigne says. “These things don’t happen overnight.”

However we answer the question about gambling this session, the questions about the budget shortfall will have to be answered separately. Expanded gambling will not do anything to affect this biennium.

The gambling industry is ready for the next legislative session

Bad budget times are fertile ground for those who want to see an expansion of gambling in Texas.

“We are planning to lay out our case again to the Legislature,” said Duane Galligher, a spokesman for the Texas Gaming Association, which led the push to bring Las Vegas-style casino gambling to the state during the 2009 Legislature. “Anytime the state is looking for additional revenue, gaming always gets a more serious study. We believe this will generate a substantial amount of revenue.”

Galligher cited previous studies showing that 68 percent of Texans would approve the proposals, despite resistance in the state Capitol. Studies over the past several years have shown that revenue for casino gambling would generate between $3 billion to $4.5 billion in state and local tax revenue, he said.

Sen. Rodney Ellis, D-Houston, a leading sponsor of the 2009 casino gambling bill, has also said that he plans to revive the bill, presenting it as a huge revenue generator that could put billions into public schools and highways. The Fort Worth Stockyards have long been eyed by gambling interests as a potential site for a casino.

“If we’re going to ask Texas families to sacrifice in these tough economic times, I think it’s the responsibility of the Legislature to consider all reasonable options to help generate revenue,” Ellis said.

Remember, the gambling industry never sleeps. Doesn’t matter that neither candidate for Governor is much of a fan, they’re out there working it. You have to respect that. Again, not to rehash old debates, the main point is that even if all their dreams come true in 2011, it still won’t help with the current situation. I agree with Sen. Ellis that we need to consider all reasonable options for generating revenue, I just don’t think this one should be in the top half of the priority list.

White: No expansion of gambling

I’m okay with this.

Democratic gubernatorial nominee Bill White said today he does not support the legalization of slot machines and does not think Texas should legalize casinos across the state.

“I don’t think the State of Texas should be promoting gambling and something for nothing,” White said.

White said he does not want to get distracted from issues such as education and workforce development and developing a long-term transportation plan for the state.

You are all familiar with my feelings about expanded gambling in Texas, which ranges from ambivalence to general dislike. Had White come out in favor of more gambling, which as Marc Campos notes would put him more in line with his supporters in the Lege, I can’t say I’d have been okay with that, but I would not have cared that much. Casinos and slot machines are just not that high on my priority list one way or the other. I do think that White is correct to emphasize those other issues, and I hope that will help to remind people that even if expanded gambling were a sure thing for adoption next year, it still wouldn’t affect the current budget situation. Focus on that, and on fixing those real problems we face in education, employment, and transportation, and then we can talk about stuff like this.

How are you going to balance the budget?

If you’re thinking that the candidates for Governor are being a bit vague about how they’re going to deal with the looming budget shortfall, you’re not alone.

Texas expects a shortfall of at least $12 billion when lawmakers meet to write the next budget, but major candidates for governor have few specifics on how they would exert their leadership to close the gap.

“The silence is deafening,” said House Ways and Means Committee Chairman Rene Oliveira, D-Brownsville. “None of the candidates are really coming out with a plan or even an awareness of how bad the situation is.”

Asked how they would close the budget gap, the five major candidates suggest largely unspecified spending reductions.

[…]

The five’s suggestions leave more blanks than specifics as lawmakers prepare for a projected minimum budget gap of $12 billion to $13 billion, before accounting for expected population growth.

“You can’t just get there with a simple brush stroke. It’s going to require a fair amount of spending cuts, and probably they’re going to have to look at other things they can do to raise revenue as well,” said Dale Craymer, of the Texas Taxpayers and Research Association.

Yes, raising revenue has to be part of the solution, despite what the know-nothing types would like to make you believe. I’ll defend the lack of specificness to some degree, in that I’m sure everyone is hoping that the picture will improve a bit in the next few months, and no one wants to come across as too alarmist. In addition, it’s really the Legislature’s problem more than it is the Governor’s, since it’s the Lege that writes the budget. The Governor can effect some cost savings via the line-item veto, but he or she would be doing so to a budget that’s already been certified as being balanced. Mainly, the Governor can provide big picture guidance, plus the threat of vetoing a solution he or she deems unacceptable. As far as that goes, we really don’t know what’s truly off the table – Rick Perry, for example, has waffled quite a bit on the subject of the gas tax – which leaves us with this largely theoretical conversation.

Let’s also talk about casinos for a minute, since they were mentioned in the story. I’m at best ambivalent about an expansion of gambling in Texas, whether that means casinos or slot machines at racetracks or whatever. I probably would vote against any constitutional amendment authorizing an expansion of gambling, but I probably wouldn’t crusade against it, though I do reserve the right to change my mind about either of these. My point here is simply that whatever the merits of casinos – and as you know, I am skeptical that they will do much to benefit Texas’ bottom line – they will not be a part of the solution for the 2011-12 biennium. If the Lege manages to pass the joint resolutions to put an amendment on the November, 2011 ballot, and if that manages to get ratified by the voters, then casinos – if that’s what gets authorized – still have to be built. Slot machines at racetracks can happen more quickly, but it still won’t be instantaneous. I could imagine there being some revenue from expanded gambling for the 2013-14 budget, but that won’t help any next year. Again, gambling is not a fix for the next budget. Beyond that, maybe, but we still have to make it through the next two years.

One more thing:

Senate Finance Committee Chairman Steve Ogden, a Bryan Republican facing a primary challenge, said he was not too worried about whether the candidates have budget ideas. Although he said governors have significant powers, including the line-item veto, and their suggestions are welcome, he noted that lawmakers craft the budget.

“At the end of the day, governors don’t write the budget,” Ogden said. “If they can’t think of anything, it’s not essential.”

I note that mostly as a reason to link to this Trib story about Ogden’s primary race, in which he faces a challenge from the right from someone who doesn’t really have a firm grasp on what’s in the budget. This pretty much said it all to me:

In an apparent attempt to solidify his more-conservative-than-Ogden bona fides, Bius has made the elimination of “generational welfare” a centerpiece of his campaign. “If we begin requiring drug testing for those trying to get cash payments for welfare and require them to be citizens of the United States and Texas, it’ll go along way toward solving our social problems,” Bius says. “My momma told me, you get what you pay for. If you want drug addicts, give them money. If you want illegal immigrants, give them money.”

Ogden brushes off the idea as cynical stereotyping of the poor — and wholly unnecessary in a conservative state that already has among the nation’s stingiest public doles. “It bothers me, because it’s kind of a code word,” he says. “I’m not sure exactly what he means by it, but Texas is the least-generous state when it comes to welfare. The majority of people on it are children. Another large category is people in nursing homes. Neither of these groups fit into the category of ‘generational welfare.’ … We have not incentivized anti-social behavior, but when you’re dealing with unemployed mothers with children, you have to do something. You can’t just say, ‘It’s not our problem – good luck.’”

Yes, it is a code word, and not a particularly subtle one. It’s weird being put in the position of defending Steve Ogden, who’s far too conservative to be the guy I want writing the budget, but that’s the state of the GOP these days. The alternative to Steve Ogden is someone who lives in a fantasy world. The sad thing is that Ogden’s experience and understanding of reality won’t be an asset for him in his race.

With more gambling comes more problem gambling

The never asleep gambling industry in Texas likes to point out how much business the casinos in Oklahoma and Louisiana get, which includes a hefty amount from Texans. But as gambling becomes more prevalent, so do gambling addictions.

Tribal casinos have grown in size and number since voters in 2004 approved a law expanding tribal gaming. There are now more than 100 tribal casinos in the state. Four horse racing tracks, the state lottery and even the Internet offer more gaming options.

“Of course the number of problem gamblers is on the rise,” said Wiley Harwell, executive director of the Oklahoma Association for Problem & Compulsive Gambling office in Norman. “Anytime you have casinos, per se, you’re gong to have this come along with it. If you’re in the casino business, you’re in the problem gambling business as well. We’re just now seeing our fair share of it.”

Figures from the Oklahoma Department of Mental Health and Substance Abuse Services show the number of people who called the state’s gambling helpline increased from 627 in fiscal year 2007 to 912 in fiscal year 2009. The number of people seeking treatment for gambling addiction at a state-funded facility rose from 149 to 350 in the same time period.

“Gambling addiction used to be a hidden problem in poker rooms,” Harwell said. “Now you see more and more casino gamblers.”

Harwell said many of people who call the helpline see the number on posters and brochures that are required at casinos.

These numbers don’t address those who seek private help. Many more do not seek help at all.

I refer you back to this post about the concept of “playing to extinction”. The point, simply, is that there is a cost to expanding gambling, and that cost is in my opinion understated. I just want to make sure we all keep that cost in mind, especially if the prospects of casinos in Texas are getting brighter.

One step closer to expanded gambling in Texas?

Maybe, though I’m not sure how much closer this really gets us.

[The] Chickasaw Nation of Oklahoma is poised to take possession of an existing horse racing track in Grand Prairie. The tribe runs one of the biggest Indian casinos in the United States, just across the Texas border.

Gambling proponents believe the tribe may tip the balance to legalizing casinos across Texas.

“The Chickasaw Nation has very successful casinos,” said Jack Pratt, chairman of the Texas Gaming Association. “They certainly didn’t buy this track just to run the ponies.”

A Chickasaw-owned company, Global Gaming Solutions LSP, is expected to buy Lone Star Park next month as part of a bankruptcy settlement involving the track’s majority owner, Magna Entertainment Corp. of Canada.

The most dramatic change Chickasaw ownership of Lone Star is likely to bring to the casino debate in Texas is to alter the dynamics of the fight in the Legislature to amend the state Constitution to allow casino gambling.

The Chickasaw Nation has put more than $362,070 into state political races since 2006. But because of its Winstar Casino on the Texas border, the Chickasaws opposed expanded Texas gambling. With the purchase of Lone Star, the tribe likely will support casino-style gambling — at least at race tracks.

A Global Gaming spokeswoman said the company will support whatever horse owners at the track believe will make Lone Star successful.

One of the biggest stumbling blocks to passing casino legislation in recent years has been infighting between track owners and casino owners. Horse and dog track owners have wanted a law that allows slot machines at tracks but no destination resort casinos. The casino industry has wanted both. Now, there will be a major horse track owner with a foot in both camps.

“Track owners have been cross-wired with the commercial casino owners,” said Pratt. “The track owners have been trying to get a monopoly.”

Mike Lavigne, a spokesman for Texans for Economic Development, an association of track owners that want slot machines at tracks, said his group sees the Chickasaw move as a positive because the tribe in the past has not supported expanded gambling, but now likely will.

Well, there certainly was some bad blood on display between the two sides of the industry this spring, so perhaps this arrangement will bring them all closer, much like the arranged marriages among European royalty in the pre-industrial days was supposed to do. I’m not convinced this makes any progress on an expansion of gambling in the near term, however. None of the constitutional amendments to expand gambling made it to a floor vote in either chamber; only one such resolution even made it out of committee. Rick Perry is still opposed, as are Kay Bailey Hutchison and Tom Schieffer, and while the Governor doesn’t have veto power over joint resolutions, he or she certainly wields influence. I suppose if the industry is serious about getting traction it ought to pour some money into Hank Gilbert’s campaign, since he’s willing to let a resolution come to a vote of the people. (Yeah, I know, Kinky supports casino gambling. I think the gambling industry is smart enough to know where not to place its chips.) Longer term, surely sooner or later a pro-gambling, or at least not-anti-gambling Governor will be elected, and then they can really push if it’s still an issue. Even then, the requirement of a two-thirds majority in both chambers is no small task, and the opposition is quite dedicated. All I’m saying is that I wouldn’t bet on anything being all that different in 2011.

Poker bill dies

Last night at midnight was the first major deadline in the House. Any bill that had not been passed on second reading was officially dead for the session, though some may get reincarnated as amendments to already-approved bills. About three quarters of the 5000 bills filed in the House suffered this fate, including some high profile ones such as the concealed-carry on campus bill and, I’m sad to say, HB222, the poker bill.

A proposed constitutional amendment to legalize casino gambling never made it onto the calendar. Sponsors had said they would not ask it to be set unless there were enough votes to pass. They never reached the necessary 100 votes.

The bill to legalize poker games at horse and dog tracks had a chance of getting on the calendar, but sponsor Rep. Jose Menendez, D-San Antonio, said he was pulling it off because Gov. Rick Perry’s staff assured him the governor would veto it.

“Sometimes you flush good will if you put a dead bill out on the floor,” Menendez said, explaining his decision to withdraw the measure without debate.

And with that, none of the bills that would have authorized an expansion of gambling made it through.

Their chances looked better than ever this year, with a strapped state budget and a new House speaker with interests in a San Antonio racetrack.

But in the end, lawmakers say, the expectation of federal stimulus dollars kept the state from getting desperate for money. And the major casino gambling legislation needed 100 votes in the 150-member House, a threshold that the bill’s sponsors couldn’t reach in such a divided chamber. And even if the poker bill had passed, Gov. Rick Perry probably would’ve vetoed it.

“We came into the session billions of dollars short. The stimulus pulled us out of dire straits,” said Menendez, D-San Antonio. “If we were cutting school budgets and not giving teachers raises, we would see a lot more willingness.”

Gambling opponents say it’s easy to blame the bill’s failure on a budget bailout. But they argue that the real reason gambling gets no traction session after session is because it’s bad policy.

Suzii Paynter, with the Baptist General Convention’s Christian Life Commission, said the promises of jobs and tax revenue that supporters make are exaggerated.

“Gaming legislation has failed because the more people look into the promises that are made, the more weaknesses they see in the proposal,” Paynter said.

I think there’s some merit to the argument about stimulus money having an effect. I certainly thought the gloomy budget picture at the start of the session would act as a catalyst for gambling proponents. The real test will come next session, when everyone is already expecting a huge deficit and a fight over the rainy day fund, and no stimulus package to come to the rescue. I do agree that the claims of jobs and tax revenue are overstated, but they’ll likely look a lot more tempting when the alternative is deep, slashing cuts to needed programs.

Tuesday Lege roundup

Some more notes about what has been happening in the Lege…

– It looks like the program to test high school athletes for steroids will be scaled back.

Texas lawmakers have reached a deal to slash steroid testing of public high school athletes to less than half of the current program, but still leave it big enough to test thousands of athletes over the next two years.

The deal was struck by House and Senate members negotiating the 2010-2011 budget, lawmakers said Tuesday.

The current $6 million program was designed to test up to 50,000 students by the end of the current school year. The tentative deal for the new program would slash funding to $2 million over the next two years.

Good! Zeroing it out completely would have been better, but I can live with this. Maybe next time it’ll go away.

– There’s still some hope for the omnibus gambling resolution, but Rep. Ed Kuempel has a backup plan ready anyway.

UPDATE: Brandi Grissom tweets that “the fat lady has sung” for the gambling bill.

– If you’re under 21, getting a driver’s license for the first time just got harder.

– A tax on smokeless tobacco, which would fund a medical school repayment fund for doctors who agree to move to rural areas, passed the House.

– And finally, Rep. Senfronia Thompson’s HB982, the alternate strip club tax, has passed the Senate.

The Texas Senate voted on Tuesday to repeal a $5-per-person admission fee on strip clubs that has been ruled unconstitutional and agreed to replace it with a new tax on sexually oriented business.

The bill now goes to Gov. Rick Perry for his consideration even as House members were poised to debate a competing bill favored by sexual assault victim advocates.

Passed in 2007, the strip club admission fee has been ruled unconstitutional by a judge and is currently under appeal. Money collected under that fee was sent to a fund to help sex assault victims and a pool for uninsured Texans.

The new tax proposed by Rep. Senfronia Thompson, D-Houston, would apply to adult movie theaters, adult video stores, adult bookstores and other sexually oriented businesses that charge admission fees. It would total 10 percent of gross admissions receipts.

According to a legislative analysis, the new plan would send 25 percent of the new fee to a state school fund and the rest to a sexual assault victims fund.

But some advocates for victims say the new bill is a ruse put forth by strip club owners, who would not be required to charge admission to their clubs, and would sharply reduce the money collected to help assault victims.

The Texas Association Against Sexual Assault instead supports a separate House bill by Rep. Ellen Cohen, D-Houston, who pushed the original $5 fee. Cohen’s bill would reduce the club entry fee to $3 and dedicate all the money to the sexual assault fund.

Rep. Cohen’s HB2070 is still pending in the House. More here.

Poker bill coming to a vote

HB222, the bill that would legalize poker rooms, is on the House calendar for today, so barring a point of order or some other complication it will get a floor vote. It hadn’t looked too good for the bill’s prospects last week, so this is a turnaround. That may be because, as its author Rep. Jose Menendez said, that it was “ratcheted back” to limit poker to racetracks and Indian casinos, in the event they get legalized. I can’t quite tell from the bill’s text if that’s the case. In any event, I know about this addition to the calendar because of an email alert I received from Texans Against Gambling, which included a statement of their opposition to HB222. I have also solicited and received a response to TAG’s statement from Mike Lavigne on behalf of the Poker Players Alliance. Both are reproduced beneath the fold for your perusal. I appreciate TAG’s position, but I still support HB222. We’ll see if the House does as well.

UPDATE: And it’s off the calendar and possibly officially dead for the session as Rep. Menendez postpones it to seek an assurance from Gov. Perry not to veto it.

(more…)

Omnibus gambling bill gets committee approval

Brandi Grissom reports.

State Rep. Norma Chavez, D-El Paso, said today the House Licensing and Administrative Procedures Committee approved the omnibus gambling measure that contains language that would allow the Tigua tribe in El Paso to resume gambling at Speaking Rock.

The measure, HJR137, would amend the Texas Constitution to allow voters to determine whether gambling should be allowed in their region.

I assume what this means is that the language for the omnibus bill has been approved, and will next go to the committee for a vote to be sent to the House floor. I say that because the Texas Legislature Online shows no recent activity for HJR137, and because the listed text of the bill is different from what Grissom provides (Word doc). A draft version of this bill had been released last week, so this is progress for it. Rep. Ed Kuempel, the chair of the committee, believes there is enough support in the House for this to pass. At this point, as with everything else, it’s a matter of time.

UPDATE: And now the TLO page has been updated to reflect the fact that this bill was in fact approved by the committee, on a 6-0 vote with three members absent. So it just needs House approval, then a vote in the Senate, along with the adoption of the enabling legislation.

The Mayorals and gambling

What the Mayoral hopefuls think about expanded gambling in Texas, in particular for the Houston area, is an interesting question, but I’m not sure it’s a relevant one.

Three candidates for Houston mayor bobbed and weaved today as they were asked about government issues during a video-taping of this weekend’s Red, White & Blue program on KUHT Channel 8.

Republican Gary Polland, who co-hosts with Democrat David Jones, mentioned that the legislature is considering a bill allowing local government to conduct elections on whether to have legalized gambling in their areas, beyond what the state has now. If the bill passes, should Houston, which once was home to a football team called the Gamblers, have more gambling, especially now that cities are scrambling for new revenue sources?

Councilman Peter Brown: “I think we ought to look at term limits (instead).”

City Controller Annise Parker: “I don’t know about gambling necessarily in Houston . . . I have long thought since Ike that it would be of great benefit to Galveston to be the first city in Texas to have casino gambling.”

(Of course, Galveston did have casino gambling, legal or not, through the 1950s).

Lawyer Gene Locke: “To me the operative word is that we should have a local referendum . . . I’m a big proponent of letting the people decide.”

Maybe I’ve missed something, but the only election I’m sure will accompany an expansion of gambling bill would be a state constitutional amendment referendum. I’ve looked through my archives and don’t recall seeing anything about local option elections. There are plenty of gambling-related bills out there, so it’s entirely possible that one or more of them have such provisions, I just can’t say I’ve seen them. I think if anything gets through, it’s likely to be one big omnibus bill that the casino and racetrack interests can both agree on. Such a bill is still in flux and may never reach the House floor, but that’s what’s out there. I’m wondering if this is what Polland had in mind, or if he was referring to a different bill.

In any event, this post was worth linking to for this bit of poignancy:

Candidate Roy Morales was not invited to the taping because, the hosts said, the studio can only accommodate three guests at a time.

Poor Roy. Poor, poor Roy.

Seventeen casinos?

Wow.

The chairman of the House committee that oversees gambling said Friday he has strong support for legislation that would open the door for 17 casinos, slot machines at racetracks, and Indian gaming in Texas.

Rep. Edmund Kuempel, R-Seguin, said the omnibus gaming bill, which would let voters decide whether to allow gambling in Texas, probably won’t be firmed up in his committee until next week. But he said the measure lawmakers are negotiating merges the interests of oft-competing resort casino developers and racetrack operators – as well as Indian reservations that had their casinos shuttered in 2002.

Maybe the Tiguas will get what they wanted after all.

Kuempel stressed that the details of the bill could change in the next week. But he said right now, lawmakers on the Licensing and Administrative Procedures Committee have a framework that would allow up to 17 resort casinos: 3 on Indian reservations; 2 on the South Texas barrier islands; 1 in the Port Arthur area; 3 at Class 1 racetracks; 2 at Class 2 racetracks; and 6 others spread out across the rest of the state.

The measure would also allow slot machines at racetracks and other forms of gaming on Indian reservations.

That’s a hell of a lot of casinos, that’s all I know. Take a look again at the economic projections made by the racetracks and see if you think there’s room here for that large an expansion of gambling. I can’t wait to see what numbers get thrown around next week.

In the meantime, it would seem that the competing interests may have found a way to put aside their differences and get something on the table, as it were.

Outside a Capitol hearing on casinos and other gambling not allowed in Texas, an advocate for legalizing slot machines at horse and dog tracks called a pro-casino lobbyist a “pathological liar.”

Separately, the critiqued lobbyist said anyone suggesting that he scrawled on a handout and misrepresented Lt. Gov. David Dewhurst’s position on casinos was lying.

The testy moments last week served as reminders that the fight over bolstering legal gambling in Texas beyond betting on dogs and horses remains a legislative spectacle, entwining lawmakers, lobbyists, developers, Indian tribes, casino interests, tracks, and horse and dog owners, some of whom might feel like perennial players in a gamblers’ version of the movie “Groundhog Day.”

The renewed bickering this session could again bog down efforts to expand gambling.

[…]

Rep. Edmund Kuempel, chairman of the House Committee on Licensing & Administrative Procedures, has said a gambling measure should be achievable this year.

Kuempel, who presided over hours of public testimony last week, huddled privately Monday with House sponsors of various proposals in hopes of reaching a common-ground package. “We’ve got to explore every possibility,” he said.

[…]

At the start of the session, Kuempel provided space in his office for casino and track interests to hammer out an agreement potentially bringing legislators together. Noting the state’s financial straits, Kuempel exhorted: “If you can’t get it together this time, all of you should be shot.”

Hey, as Adam likes to say on Mythbusters, “Failure is always an option”. And in this case, the entertainment value is nearly as high.

No Tigua casinos

We may still get some form of expanded gambling in Texas, but at least one form of it is off the table for this session.

The Tiguas hopes to restart lucrative gambling operations on their reservation are dead for this legislative session, state Rep. Norma Chavez, D-El Paso, said Friday.

Part of the reason was the criminal record of Tigua Gov. Frank Paiz.

“I believe the Tigua legislation is not salvageable,” Chavez said in an interview.

Lawmakers this week told the tribe chances were minuscule that any gambling legislation would pass this year.

Paiz’s 20-year criminal history, they said, diminished what were already small odds.

“There are insurmountable obstacles,” said state Rep. Pete Gallego, D-Alpine, who spoke with the tribe this week about its flagging gambling efforts.

My understanding of this is that bills specific to Tigua matters, such as HB1308 and HJR 108, both of which are Chavez bills, are dead. Other gambling bills, such as HB222 and SJR 31, are still in play.

More details are in this version of the story.

The El Paso Times reported on Paiz’s long history with the law last year after he was elected to lead the tribe.

Court records and police documents show that Paiz was charged with offenses including theft in 1987, drunken driving in 1992 and assaulting a police officer in 2001. He repeatedly failed to comply with the terms of his probation, and spent at least a month in jail. He was also charged with domestic violence, though the case was dismissed.

Paiz said then that he had changed, had gotten an education and had become a leader in the tribal community. The tribe, he said, knew about his past and decided to give him a second chance.

[…]

Chavez said she told the Tiguas that Paiz’s past would be a problem for legislators.

The only chance for gambling this year, she said, was an amendment to the Texas Constitution. That requires approval from 100 of the 150 House members and 21 of the 31 senators before the proposal could be placed on the ballot in November for voters to make a final decision.

Chavez said she could not ask 100 of her colleagues to vote for the tribe when its leader had such a problematic background. Doing so, she said, could put the lawmakers at risk in future elections.

“A CEO of any gaming corporation with the same exact background of the governor wouldn’t be allowed to sign a contract with the state, so it’s hard to ask my colleagues to do something a CEO can’t do,” she said.

So there you have it.

CLC gambling update

Today there will be committee hearings on various gambling-related bills. I am reprinting here an email sent by Suzii Paynter of the Christian Life Coalition, which is one of the leading organizations that are fighting the expansion of gambling in Texas, as it has a pretty good summary of what has gone on so far.

Casino Hearing

On Wednesday, April 8, the House Committee on Licensing and Administrative Procedures will hear all the major gambling bills filed in the House this session. There are 16 gambling related bills currently on the notice of hearing which can be found here. This hearing is sure to draw the most vocal gambling proponents from all segments of the casino industry. We think it is important that the committee hear the other side of the argument as well. The CLC will be at the hearing to offer testimony. This is an entirely new committee made up of members who may not know this issue. It is important that they know people out in the state care about the issue and are paying attention. If your representative sits on this committee it would be an excellent time to let them know you oppose the expansion of gambling in Texas. A list of the committee members and their contact information can be found here.

The CLC recently completed a comprehensive newsletter outlining our most important arguments against the expansion of predatory gambling and in support of our current family-friendly economy. You can view the newsletter here (large PDF).

First Gambling Bills Voted Out of Committee

On the same afternoon that the House Licensing and Administrative Procedures Committee announced the agenda for Wednesday’s hearing, they quietly passed out two gambling expansion bills. Both bills now sit in the Calendars committee and await a chance to be considered on the House floor.

The first bill is HB 222, by Rep. Menendez (D-San Antonio). This bill would legalize poker to be played at electronic tables in certain bars, restaurants, horse and dog race tracks and on Indian reservations. The proponents claim that only simple majorities in both the House and Senate are needed to pass this bill. It is the opinion of the CLC, based on previous opinions offered by the Attorney General, that the element of chance inherent in this card game requires a constitutional amendment and the support of 2/3rds of the House and Senate. Additionally, the electronic facsimile of a game of chance makes this a Class III game as described under the Indian Gaming Regulatory Act (IGRA). As other states have experienced, and according to IGRA, the approval of a Class III game in Texas will lead to the expansion of Native American gambling in Texas above and beyond what is contemplated in this bill and in a way that weakens the state’s ability to control further casino expansion.

The second bill is HB 1474 by Rep. Geren (R- Ft. Worth). This bill is meant to be a “clean up” bill to standardize and improve the regulation of Bingo in Texas. However, the bill also greatly increases the number and type of organizations that are eligible to receive a bingo license. The CLC is concerned that bingo in this state is moving far beyond the original public understanding of the game and that the charitable purpose is being watered down. Specifically, during the legislative interim period after last session, the lottery commission approved new bingo games which would allow versions of electronic pull tab bingo as well as a type of Keno. We are concerned that these new games could lead to a rapid expansion of electronic casino-style games. This threat is even more possible with the broadening of organizations eligible to apply for a license stated in HB 1474.

The list of members on the Calendars Committee can be found here. If your representative is member of this committee, let them know that the best way to defeat these bills is to never allow a vote on the House floor.

Indian Gambling Bills Get Hearing

On Monday, March 30, two Native-American casino bills by Rep. Chavez (D-El Paso) were heard in committee. The first bill, HB 1308 was heard in the subcommittee on Criminal Procedure of the Criminal Jurisprudence Committee.

The CLC testified in opposition to this bill. HB 1308 would give a defense to prosecution for Indian tribes that conduct otherwise illegal casino gambling operations. The bill is the exact same piece of legislation which failed to pass the House last session. According to Rep. Chavez and other supporters, the bill would simply allow two tribes, the Tigua of El Paso and the Alabama-Coushatta of Livingston to reopen illegal casinos that were shut down several years ago. While sympathetic to the desperate conditions on these two reservations, the Christian Life Commission opposes this piece of legislation because we believe that the consequences of passage may be far more expansive than what proponents are indicating.

HB 1308 does not improve the legal standing of gambling by the Texas tribes bound by the Restoration Act. The state has never used criminal charges to shut down illegal Native-American casinos. The state has the right to sue the tribe in federal court and seek injunctive relief. This is how the casinos were closed in the past and the bill cannot prevent the state from closing any casino opened by the Tigua or Alabama-Coushatta. The gambling activity the tribes seek to conduct is not just an illegal violation of the penal code that this bill amends; it is UNCONSTITUTIONAL according to the Texas Constitution. A statute passed by a simple legislative majority cannot trump the state constitution. While it may preclude criminal penalties the state may still seek to have any operating casino shut down in federal civil court. The bill is an attempt to expand gambling by a simple majority vote in the legislature rather than the two-thirds majority needed for a constitutional amendment. The end result of this bill would likely be more costly litigation on the part of the state in federal court.

Additionally, the vague language in the bill would actually open a legal loophole to Native-American tribes that are 1) named in the list of tribes referenced in the bill, 2) which have historic, recognized land ties to Texas and 3) are not bound by the Restoration Act. The list of tribes referenced in the bill includes over 300 tribes from across the country, several of whom have entered into agreements with state agencies acknowledging “historic property” in Texas. There are currently letters of intent to petition for recognition on file with the Bureau of Indian Affairs from 10 tribes seeking recognition in Texas.

The members of the Criminal Jurisprudence Committee should hear from those opposed to this bill so that it is defeated in committee. A link to the committee and their contact info can be found here.

That afternoon, the House Committee on Border and Intergovernmental Affairs heard testimony on HJR 108. This Joint Resolution proposes a constitutional amendment to allow the Tigua tribe of El Paso to operate a full blown, Las Vegas style casino. The CLC testified in opposition to this bill as well. Any constitutional amendment which would allow Class III gambling as defined under the Indian Gaming Regulatory Act (IGRA) would be a “trigger” for further Native-American casinos beyond what is authorized in this resolution. It is impossible to authorize gambling for only one tribe without affecting the rights of other tribes in this state. As has been the case in other states, once the Class III threshold is crossed, the state loses much of the ability to control casino expansion since many of the decisions will be made on the federal level.

A link to the members of the Border and Intergovernmental Affairs Committee can be found here.

A news report of these two hearings can be found here.

To learn more about HB 1308 and the history of Native-American gambling in Texas see here (PDF).

Couple things. First, as you know, I support HB222. Of all the various gambling expansion options I’ve seen, allowing for poker seems to me to be the most sensible and least potentially harmful. Plus, as a bridge player who has had the chance to play for money legally, I think poker is a legitimate game of skill and should be treated as such. In fact, poker players in Pennsylvania and South Carolina recently won court rulings that agreed poker is a game of skill. As such, it’s not clear to me that the AG’s opinion would agree with the CLC about the inherent level of chance here. Of course, I Am Not A Lawyer, and Lord only knows what Greg Abbott will do. The point is that recent legal history is on the poker players’ side. I welcome any feedback on that question, and on the other legal points raised, by anyone who has more expertise on the topic.

Second, you can’t talk about the Tigua and Alabama-Coushatta tribes and the litigation over their past attempts to open casinos without noting that a lot of the opposition to them has come from out of state Indian tribes and casinos, who have an obvious interest in minimizing their competition, and that along the way some really sleazy double-dealing was done by former Christian Coalition honcho Ralph Reed and Tom DeLay’s felonious friend Jack Abramoff. Here’s some previous blogging on the subject, plus a couple of corrected links to Observer articles to give you the background.

Finally, just to reiterate, outside of HB222, I am officially agnostic on the subject of expanded gambling in Texas. I have plenty of issues with it, and I may wind up voting against any future ballot propositions to allow for more gambling, but I am not comfortable being opposed to the idea. I thought this email was informative and worth highlighting, but please don’t take that as an endorsement, because it’s not intended as one.

“Play to extinction”

In my previous post on gambling, in which I presented the economic case for “racinos” as made by the racetracks, I alluded to the moral case against gambling. Bringing moral arguments into political discussions is fraught with pitfalls, but sometimes they just can’t be avoided, and this is one of those times. What’s interesting about the fight over gambling in Texas is how it hasn’t broken down strictly across party lines, which leads to some interesting bedfellows as well as the occasional double reverse. (For instance, despite his avowed opposition to expanded gambling now, Governor Perry once explicitly supported video lottery terminals at racetracks and on Indian reservations, which is to say pretty much exactly what the racetracks are pushing for now.) That in turn means that I sometimes find myself nodding in agreement with members of Texas’ Christian conservative movement, something which doesn’t happen very often. This Fred Clarkson article gets at the heart of this.

“It is a myth” says Leslie Bernal, executive director of DC-based Stop Predatory Gambling, “that liberal and conservative religious groups can’t get along.” The same, he says, goes for the many religious and secular groups that work comfortably together all the time. “This is something I take for granted.”

The transformation of the religious community’s understanding of and response to the situation turns on two key points. One is distinguishing between what they call “predatory” forms of gambling and “social gambling,” such as church bingo nights, buddies playing poker, or the office football pool.

“Predatory gambling,” Bernal says, “is the practice of using gambling to prey on human weaknesses for profit.” He points to the highly addictive nature of contemporary electronic slot machines and video poker as the primary source of the profound “social costs” related to gambling addition. “Slots are,” he says, “designed to make you play as fast as possible for as long as possible,” and in gambling industry parlance, “to play to extinction.”

The other key transformational understanding is a growing recognition that state-sponsored casino gambling is incompatible with constitutional democracy itself. This argument is being championed by eminent historian of the civil rights movement Taylor Branch, who says that raising revenue via state-supported gambling addiction is a betrayal of the citizens and an avoidance of critical questions about our democracy: what do we want our government to do and how we are going to pay for it? “State-sponsored predatory gambling is essentially a corruption of democracy,” he said recently.

“[T]his violates our social compact, and the trust we must have in the belief that we are all in this together,” he continued. “And the first step away from it is to play each other for suckers. We’re going to trick them into thinking they are going to get rich, but they are really going to be paying my taxes.”

Read the whole thing, it’s well worth your time. It’s easy to think of casinos and slot machines and whatnot in libertarian terms (and I often do), in which consenting adults make their own choices about how they spend their own money. If that were all there is to it, there really wouldn’t be much of a case against gambling, in my view. But the fact is that the casinos make a huge chunk of their money off of the problem gamblers, those who “play to extinction” and in doing so create a host of social problems that we are unequipped, and frankly unwilling, to deal with.

(You may note there’s a parallel to another kind of legalization debate. As Mark Kleiman puts it, “The money in any drug, including alcohol, is in the addicts, not the casual users.”)

So that’s a big part of my qualms on this issue. There’s no way to capture the revenue from social gamblers without getting the problem gamblers as well, and we just don’t acknowledge those costs, much less account for them. How big a problem this represents is to some extent a matter of personal conscience. I must admit, I don’t know how many of these people we’re already dealing with, and how many more there would be if and when we make it easier to gamble right here. It’s possible the difference isn’t as big as I think it might be. But just as I believe the economic claims being made by the casino interests have gotten a woefully insufficient vetting by the press, so do I believe the costs associated with expanded gambling have been overlooked. If HJR 31 or something like it passes and we do wind up voting on an amendment this fall, I suspect some of these issues will get vetted as the various advocacy groups make their case. I just wish there’d be more discussion of them now, before the Lege takes action.

Response from the racetracks

When I wrote my earlier post about how much revenue expanded gambling would generate for Texas, I said I’d be more than happy to do a similar exercise for someone on the pro-gambling side of things. Sure enough, I got an email from Mike Lavigne on behalf of Texans for Economic Development, who sent me a copy of a study done by TXP that examined the question for the horse racing interests. I’ve uploaded it here (PDF) for your perusal. The main thrust of the argument is as follows:

Texans are already gaming at a high level. Based on data from a variety of sources, including state gaming commissions, convention and visitors bureaus (CVBs), and other academic studies, TXP has estimated the current gaming revenue in a seven-state region that is attributable to Texans at approximately $2.3 billion during 2007, the equivalent of about 3.8 percent of the national total. This is the assumed universe of current Texan gaming; while there undoubtedly are individual instances of Texans gaming elsewhere in the country, it does not appear to be significant.

The Innovation Group was engaged by Texans for Economic Development to estimate the size of Texas’ gaming market. A summary of their results follows. As the table indicates, the total Texas market approaches $4.2 billion in gaming revenue at full implementation. However, there is still leakage out of state, as some Texans will continue to game elsewhere.

A significant share of the revenue that would occur in Texas with the implementation of racinos would be recaptured from other states where Texans currently game. Measurement of the volume of this spending is done through subtracting the leakage out-of-state ($840.2 million) from the $2.4 billion figure, yielding recaptured spending of approximately $1.8 billion.

They estimate a total of about $3.4 billion in gambling revenue, which when taxed at 30% (the rate for racetracks is higher than what has been proposed for casinos) yields about $1 billion a year for the state. They make other claims as well about related economic activity and employment, which I’ll leave to you to examine.

I remain basically skeptical of the claims made here – I think some of these projections are optimistic, especially the ones made separately about the economic benefits for other businesses that flow from expanded gambling. I also think it’s foolish to rely on gambling revenue for anything other than “found money” – the Texas Lottery should be an object lesson there. Finally, there is a moral case to be made against expanded gambling, and I think we greatly underestimate the social costs associated with it, which the state does precious little to mitigate. I’ve got a future post planned for that, since it’s outside the scope of this one. Having said all that, I can at least see where the racetracks’ numbers are coming from, and while I think they’re sunny, they’re comprehensible and reasonable. We can argue over these numbers because they’re here to be argued over, which remains more than I can say for the casino interests, whose claim that they would generate $3 billion for the state looks even more ludicrous to me based on this.

I also asked Lavigne in an email exchange after he sent this to me about the bleak picture the racetracks have painted for their industry today, and why they would be a better vehicle for capturing the “leakage” than regular casinos. Here’s what he said, reproduced with permission:

The Racing Commission did indeed paint a glum picture. There is no denying the shape the industry is in right now. The primary reason is that purses in Texas are so low, there is no incentive for breeders to breed in Texas. If they take the same horse and breed it in Louisiana, NM or OK they will be eligible for much larger prizes. A large chunk of the money made in this bill will go toward growing purses here that will be competitive with not only with our neighbors, but with the eastern seaboard, where racing has had a lot more success. This model is the reason our industry in Texas has fared so poorly. When parimutuel wagering was legalized in Texas, there were very few (if any) racinos in our bordering states.

We don’t oppose the proposal for regular casinos on its face, but we do object to the disparate tax rates. That would surely kill any chance racinos would have to be successful.

As to why we think racinos would better capture the money than casinos? I think that is the wrong question. Both would be able to get at that money. We do have to look at political reality though. What is more palatable to the legislature? Full on casino gambling overnight? Or a smaller expansion at existing sites with legal wagering already taking place.

The Governor and many Republicans have repeatedly said that they do not want to expand the footprint of gambling. We believe our proposal is a more modest one.

The most important thing to remember about these figures is that the Comptroller will ultimately make the decision as to how much money these proposals would raise. She will do her own math.

So there you have it, the case for racinos. My thanks to Mike Lavigne for engaging me on this. If someone with the casino interests wants to show me their numbers, I’ll be more than happy to do this for them as well.

Finally, on a related note, whatever reservations I have about casino and/or racetrack gambling, I do support an expansion of legalized poker in Texas. HB222, introduced by Rep. Jose Menendez as the Poker Gaming Act of 2009, would establish poker as a “game of skill and not a lottery or gift enterprise prohibited by the Texas Constitution” and would thus allow for the creation and regulation of legalized games. In particular, it would allow establishments that hold a license to serve alcoholic beverages issued by TABC or a license issued by the Racing Commission to have the ability to host the game of poker. There was a hearing for this bill yesterday in the House before the Licensing and Administrative Procedures committee. I have no issues with this bill and support its passage.

How much money would expanded gambling generate?

Throughout this session, every time the subject of expanded gambling in Texas comes up, along with it comes some kind of projection of how much revenue it might generate. Those estimates always come from the proponent of that form of expanded gambling, and as expected are wildly optimistic. For example:

Texas Insider, February 13:

“Our breadth of support cuts across all lines of gender, race and party,” said Tommy Azapardi, Executive Director of Texans for Economic Development. “In these economic times, voters are very motivated by the 53,000 new jobs and the billion dollars a year for state coffers racinos could generate for the state.”

Texas Politics, February 23:

Proponents say casinos in Texas could generate anywhere from $3 to $4.5 billion per year.

Houston Chronicle, February 25:

Backers of Joint Resolution 31 and Senate Bill 1084, the broad gambling legislation, said their proposal would bring in at least $3 billion a year in new state and local revenue.

So how realistic is any of this? Well, consider this.

During 2008-09, the [Economic Forum] expects gaming taxes to drop from $804 million to $715 million, an 11 percent decline. Gaming revenues will increase by 3.3 percent to $739 million in 2009-10, and by 3.9 percent to $767 million in 2010-11, according to the forum.

That’s from Nevada, a state which has more gambling than we do or would even if HJR 31 passes. The $715 million in gaming revenue comes from a gross gaming revenue tax of 6.75% (it’s actually slightly less than that, but this is close enough), which in turn implies statewide gambling revenues of about $10.5 billion. If you assume the casinos’ margin is seven percent – that is to say, a total 93 percent payout on all bets – that means gamblers dropped a total of about $150 billion at Nevada casinos.

So the question is, do we think Texas casinos will generate more than Nevada’s? HJR 31 sets the revenue tax at 15%, so we could generate as much tax revenue on less than half the amount – about $4.8 billion, or $68 billion in bets at the same payout rate. To get all the way to $3 billion, though, you’d have to have the casinos take in $20 billion, which in turn is about $270 billion in bets. I don’t think that’s going to happen.

By the way, a little further Googling led me to this article, which suggests that gross casino revenue in Louisiana is about $2.5 billion. That strikes me as a better comparison to Texas – note that Louisiana has 13 riverboat casinos and one land-based casino, while HJR 31 would call for 12 casinos in Texas – and would generate $375 million in gambling taxes at 15 percent.

Now of course, the casinos have other ways to make money for themselves (food, drink, hotel occupancy, entertainment, etc) and for the state (sales taxes, hotel taxes, alcohol and cigarette taxes (assuming smoking would be legal in the casinos, which I’m guessing would not be the case), property taxes, business margins taxes, etc). I don’t know what the components are to that $3 billion figure for the casinos, or the $1 billion figure for the “racinos” (I still hate that word). It’s entirely possible – likely, really – that I’m not comparing apples to apples. But at least you can see where my numbers are coming from. It would be nice if the gambling industry could do some of the same kind of calculation, and show their work, so that a proper comparison, as well as a judgment of their projections, can be made.

Full disclosure: The two Nevada links came to me from Teresa Kelly of Texans Against Gambling, after she commented via email about an earlier post of mine. That was the inspiration for this post, though the rest of the research is mine. I’ll be more than happy to do a similar exercise for someone on the pro-gambling side of things if they want to as well.

Two stories about gambling

The Chron’s David Barron talks to some experts about putting slot machines at horse tracks, which is one of several major proposals to expand gambling in Texas this legislative session.

William Eadington, an economics professor at the University of Nevada and director of the university’s Institute for the Study of Gambling and Commercial Gaming, questions the accepted wisdom in racing circles that video slots are a magic bullet for racing.

“The official argument is that this is a way to save racing and increase purses, which will attract better horses,” Eadington said. “The only thing wrong with that is that it hasn’t really held up.

“Racing continues to be in decline. If you look at handle and on-track attendance and net revenue after payment of purses — any of the standard measures — it has been stagnant for 20 years.”

While track operators stand to benefit financially from state licenses for video slots, granting such licenses during an economic downturn and limiting the field to racetrack owners cuts into potential state tax benefits by eliminating the large casino operators as competing bidders, Eadington said.

“Most of the major companies, with a couple of exceptions, are in no position to be bidding on casino licenses. They have no money for capital commitments,” Eadington said. “In that sense, this is not a great time to be putting things out for bid. You foreclose the option of doing something better if and when the economy gets going again.”

Difficult times for the resort casino industry, of course, make this a perfect time for racetracks to seek state legislation that would grandfather them in as video slot operators.

“It’s all political,” the economist said. “What (the tracks) would like is an environment that preserves the possibility of long-term excess profits. If they can have exclusivity in slots in urban areas, they are potentially very profitable.”

Nice to hear a little balance to all the rah-rah stuff the gambling industry puts out every time we go through this. I feel like it should have run on the front page, rather than the front page of the sports section, but I’ll take what I can get.

Meanwhile, John Nova Lomax has a cover story in the Press about the history of casino gambling in Galveston and the debate today about bringing it back as a means to revitalize the place post-Ike. I think this is the key bit:

You can see arguments for and against casinos before your eyes. Both major Lake Charles casinos sport huge parking lots — which begs the question of where they could fit in Galveston.

Those lots are also jam-packed with cars with Texas license plates. When you couple that with all the signs touting the many shuttles offering dirt cheap transport from nine pickup points in Houston to the casinos, you realize the magnitude of the cash drain over the Sabine.

Both the Isle of Capri and L’Auberge du Lac are vast complexes that rise mirage-like out of acres of concrete in the middle of nowhere. Each offers in-house restaurants, shops, clubs and lodging, and that underscores one of [gambling opponent Harris] Kempner’s main anti-casino contentions — that [Allen] Flores and the Strand merchants are fooling themselves if they think casinos will bring them customers. Even in the old days, he says, the Balinese Room knew well how to lock down the junket trade. “When the casinos wanted to attract banquets, they undercut,” he says. “They could afford to do that because they can make food, drink, shelter and entertainment a loss leader, and they will do it again.”

That’s been the Atlantic City experience, and I tend to think it would be Galveston’s, or any other place’s that got casinos, as well. Lomax does a good job of presenting multiple perspectives on the issue, so check it out.

Reason #437 why I’m skeptical of the gambling industry

The regulatory agency that oversees horse and dog tracks in Texas is begging for a handout to make it through the end of the fiscal year.

Faced with a 14 percent, nearly $678,000 shortfall, the commission that oversees horse and dog racing in Texas has asked Gov. Rick Perry for a $250,000 emergency grant to finish the fiscal year ending Aug. 31 in the black.

In case that strategy fails, members of the Texas Racing Commission Wednesday signed off on a letter to Perry, Lt. Gov. David Dewhurst and House Speaker Joe Straus requesting a $250,000 supplemental budget appropriation.

Members acted shortly before representatives of horse and greyhound interests painted a desperate picture of the racing industry’s health at Wednesday’s commission meeting.

“Time is clearly running out,” said Bryan Brown, CEO of the Retama Park, a horse track north of San Antonio. “We can’t continue on as an industry and face all these issues.”

The agency attributes $70,000 of the shortfall to the impact of last year’s hurricanes on track revenues. It blames the rest on a factor likely reflecting decreased betting.

[…]

Brown told the commission that from 2007 to 2008, the number of Texans involved in horse racing dropped by more than 1,200 to 3,325. He also noted drop-offs in horses bred and raced in the state, live racing days at tracks and in total revenue. He said tracks also continue losing customers to online alternatives and illegal gambling parlors.

Earlier this week, Rolando Pablos, the commission chairman, told the budget-drafting Senate Finance Committee the racing industry is on the decline.

Remember when the introduction of the horse and dog racing industries, with their legalized betting on races, was going to be a financial windfall for the state? Boy, those were the days. But hey, let ’em have slot machines, or maybe just open the door to casinos, and this time we really will be swimming in the money. For sure! We mean it! What could possibly go wrong?

Expanded gambling: It isn’t just for race tracks any more

Here’s an update to the story about the big expanded gambling bill that was filed yesterday.

Slot machines also would be allowed at the state’s existing race tracks under the proposal by Sen. Rodney Ellis, D-Houston; Sen. John Carona, R-Dallas; Rep. Jose Menendez, D-San Antonio, and House Appropriations Committee Chairman Jim Pitts, R-Waxahachie. In addition, the three federally recognized Indian tribes could operate a casino on their tribal lands.

“Texans already are voting with their feet and going out of state” to gamble, Ellis said. Menendez noted that Texas is “surrounded by gaming.”

Opposition immediately arose from conservative and Christian groups and a racetrack group pushing more narrowly for slot machines at tracks. Backers of Joint Resolution 31 and Senate Bill 1084, the broad gambling legislation, said their proposal would bring in at least $3 billion a year in new state and local revenue.

The legislation calls for $1 billion to be funneled to a trust fund for college scholarships and another $1 billion to transportation. Casino proponents also said their proposal would create 90,000 to 120,000 jobs.

I don’t believe any of those economic projections. Then again, I never believed the projections that the horse racing interests gave about their slots-at-racetracks proposals. I think there will be a net benefit to the state, at least in terms of revenues taken in – the bulk of the social costs will not be borne by the state, so the books will looks good – but $3 billion a year and 100,000 jobs is just crazy talk, as far as I’m concerned.

The way this is being done, as an alternative to slots-at-racetracks, will make for a fascinating dynamic in the sausagemaking process. I see it as lobbyist versus lobbyist, with some folks like the religious conservatives taking potshots from the sidelines. There’d be a hell of a reality TV show in there if someone had seen this coming early enough.

The legislation calls for $1 billion to be funneled to a trust fund for college scholarships and another $1 billion to transportation. Casino proponents also said their proposal would create 90,000 to 120,000 jobs.

Up to 12 casinos would be allowed statewide, with designated areas for nine of them: Galveston, South Padre Island, Bexar County, Tarrant County, Travis County and two each in Dallas and Harris counties.

A plan critic, Tommy Azopardi, of Texans for Economic Development, said the legislation would create a “widely disparate tax rate” between casinos and tracks (15 percent versus 35 percent), wouldn’t allow tracks to have the same games as casinos and would greatly expand “the footprint of gambling in the state.”

Casino backers said tracks could apply for one of the casino licenses but would have to go through the same process as other applicants.

I got a press release from Azopardi, not coincidentally sent by the same guy who sent me the earlier poll information, which I’ve reproduced beneath the fold. It’s going to be a bear trying to sort out the objective facts from the spin on this one, that’s all I know. Maybe I’ll get lucky and the CPPP or someone like that will weigh in. In the meantime, keep your hip-waders handy.

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