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It’s not easy going green

And by “going green” I mean legalizing pot, at least in Texas.

Zonker

Advocacy groups and lawmakers say marijuana policy reform in Texas could be the fiscally responsible thing to do in light of the state’s decreasing oil and gas revenues.

Texas legislators should look to marijuana policy reform to save, and even make, money in the face of looming budget shortfalls, said SXSW panelist Phillip Martin of Progress Texas, in front of what he called the “wake and bake crowd” Tuesday morning.

“It’s not an ideological barrier,” said Martin. “Anything that’s going to move is going to move because of money.”

The “Turn Texas Green” panel brought legislators and advocates together to to discuss how the Lone Star State could legalize pot for medical or even recreational use.

Zoe Russell, from the Houston nonprofit Republicans Against Marijuana Prohibition (RAMP), said some “establishment” Republicans already “see the writing on the wall” with decriminalization policies at the local level. In 2015, Harris County’s Republican DA implemented a “First Chance” policy allowing non-violent offenders with small amounts of marijuana to be ticketed, rather than arrested.

But so far, few statewide elected officials have been willing to put their names on marijuana legislation, Russell said.

“Behind closed doors, they’re really supportive of ideas like this,” Russell told the audience of around 15 or so. “[But] they’re scared of their shadow.”

As Texas’ oil and gas revenues drop dramatically, panelists said the state’s money woes may override the squeamishness many legislators have about legalizing weed.

With all due respect – and I have a lot of respect for Phillip Martin and Progress Texas – the argument that Texas could make some money by legalizing pot and that this would help with the current budget situation is a complete nonstarter. I say this because advocates for expanded gambling, both the slot-machines-at-horse-tracks and the casinos groups, have been making this same argument for well more than a decade and during the budget crunches of 2003 and 2011, and they have nothing to show for it. If there’s one thing we should have learned from those past experiences, it’s that not only is the Republican leadership in this state unreceptive to proposals that would add new revenue streams in Texas, they are actively hostile to them. They’re not interested in more revenue. Budget crunches are to them opportunities to slash spending. It really is an ideological barrier. I don’t see that changing until the leadership we have in Texas changes. I wish that weren’t the case, but I see no evidence to suggest otherwise.

It also pains me to say that even under the most optimistic scenarios, the amount of revenue Texas would likely gain from legalizing and taxing marijuana is way too small to have any effect on a real budget shortfall. The state of Colorado took in $125 million in pot tax revenue in 2015, which sounds like a lot until you remember that the Texas budget is roughly a thousand times bigger than that for a year. This is like saying that Colorado pot revenue is a penny to Texas’ ten dollars. Putting this into a more workable context, $125 of pot tax revenue represents about two percent of the $5.4 billion that was cut from public education in the 2011 budget. I’m the first to agree that in a crisis situation, every little bit helps. The point I’m making is that this really would be a little bit.

Which is not to say that there are no economic arguments to be made for at least loosening pot laws, if not outright legalizing it. The case that Texas will spend a lot less money, at the state and county level, with smarter pot laws has some traction and a chance to gain ground. You’re still going to have to overcome the fear that not punishing all these potheads will lead to a spike in crime – it won’t, but you’re going to have to convince some people of that – as well as the strong distaste a lot of people have for pot and the people who indulge in it, but the prospect of spending less will help. (You also have to overcome the fact that some of our legislators are complete idiots, but that’s more of an electoral issue.) Here I think the short-term potential is greater at the county level, since as Harris County has demonstrated some of what can be done is a simple matter of discretion on the part of one’s police department and District Attorney, but the Lege is where it’s at for the longer term, and the real gain. I wish everyone involved in this fight good luck, and I hope we all remembered to vote for candidates who will pursue smarter laws and strategies regarding marijuana in the primaries.

No gambling expansion this session

This should not come as a surprise to anyone.

Casino1

It’s a sure bet that when Texas lawmakers convene every two years, legislation will be proposed to expand gaming in the state.

This year, there are nearly a dozen pieces of legislation covering casino games, slot machines and eight-liners. And just like each time before, the bills face long odds of passing.

Prospects are so dim that the Texas Gaming Association isn’t bothering to actively support a bill drafted on its behalf, as it has done in each of the approximately 10 previous legislative sessions, Chairman Jack Pratt said. The association represents casino-resorts operator Las Vegas Sands Corp.

“We have nothing going on because we know that there is no possibility of getting anything passed in the Legislature (the way) it’s structured there currently,” Pratt said. “We just didn’t want to waste our time nor our money.”

Pratt was referring to the makeup of the Texas Legislature. After last fall’s elections, Republicans continue to outnumber Democrats by about 2-1. But the majority is viewed as the most conservative in recent memory. Lt. Gov. Dan Patrick also has come out against expanded gaming.

[…]

The Texas Gaming Association has endorsed casinos at large destination-resort properties that would cost $2 billion to $3 billion each to construct, Pratt said. It does not favor adding slots as a way to rescue struggling racetracks, including Retama Park in Selma.

“There’s no reason for us to bail them out,” Pratt said. “They’ve just got a poor business plan. They ought to bury it and go on.”

Andrea Young, president of Sam Houston Race Park, disagreed. Texas racetracks have been competing on an “unlevel playing field” with Louisiana and Oklahoma racetracks that allocate gaming money to purses — the money awarded to the highest finishers. The purses at those tracks are higher than those in Texas, and thus can attract better horses. Sam Houston is partly owned by racetrack and gaming giant Penn National Gaming Inc.

While Young conceded there’s not much momentum for gaming legislation, she said that hasn’t stopped Sam Houston Race Park from backing legislation. “Doing nothing is not really an option for us,” she said.

You can see in the paragraphs above one reason why gambling expansion never came close to passing in previous sessions when the conditions might have been more favorable. This session, I heard basically nothing from the usual suspects of gambling expansion. Not surprising, given tax cut mania and the other priorities expressed by the new gang, but different. As Pratt says elsewhere in the piece, you can expect these guys to be back again some day. Their economic argument, whatever you think about it, remains the same in good times and in bad. Maybe in 2017, if oil and gas prices are still low, it will have some sway. Just not this time.

On game rooms and gambling

Looks like Fort Bend County wants to follow in the footsteps of Harris County when it comes to dealing with game rooms.

Last weekend, Fort Bend County sheriff’s deputies raided the H-90 Game Room on U.S. 90A east of Richmond, hauling away 97 slot machines, interviewing and releasing about 30 customers and charging one employee with a misdemeanor.

Unlike many places that get shut down, though, the business that opened in July had not been the subject of any police calls for service.

The raid has prompted a discussion about how much of a threat game rooms actually pose to community safety.

Some Fort Bend residents had been pressing authorities to crack down on game rooms that sprouted up in the wake of Harris County’s enforcement of new rules targeting the establishments, often the scenes of shootings and other criminal activity. They didn’t want a proliferation of game rooms bringing the same problems to Fort Bend.

Sheriff Troy Nehls acknowledged that residents’ concerns prompted his department’s recent action, which involved four divisions of his office.

“We’ve received calls from the community, so we did what we could to address the issue,” the sheriff said. “This one was right off Highway 90, so it was more visible. Thus, we had more people calling concerned about the operation.”

Nehls said he takes game rooms seriously, but he played down their impact so far. He noted that he has seen no evidence of an uptick in violence, nor had there been any calls for police service at either the H-90 Game Room or another gambling parlor, on FM 359. It was open just a few months before voluntarily closing under pressure from nearby homeowners.

[…]

Other residents say authorities are wasting time cracking down on an activity they think should be legalized, even if it is only to discourage the gang activity that was often attracted to the cash-based operations in Harris County.

Larry Karson, a criminology professor at the University of Houston, said it’s the responsibility of police leaders not only to crack down on illegal activity, but to educate communities about the actual level of crime, particularly when an issue becomes a public debate.

“One generally expects any law enforcement official to recognize the concerns of the community,” Karson said. “If, based on that officer’s experience, it’s not quite as dangerous as might be assumed, he obviously needs to communicate that.”

The Texas Constitution bans most forms of gambling, but the poker-based eight-liners common to game rooms are legal to own as long as the prizes do not exceed $5 per play. Police, prosecutors and other Houston-area officials argue that most game rooms do not operate within those narrow rules, awarding larger cash sums illegally and drawing other criminal activity. To thwart enforcement of the state’s ban, officials say, many game rooms require paid memberships designed to keep out undercover officers.

Karson differentiated between the risk of crime at game rooms and at casinos, both of which attract robberies because of their cash payouts.

“You run into that security nightmare that legitimate casinos deal with by coordinating with police,” Karson said. “Any business that’s illegal doesn’t have that option. That leads to a potentially nasty cycle.”

As we know, Harris County has tightened its enforcement on game rooms thanks to some legislative help, and after surviving a lawsuit, enforcement is on in full swing. It’s not a surprise that some of this activity might cross the border into Fort Bend, or that Fort Bend might be a bit proactive about trying to stop it. I figure Fort Bend will get the legislative help it now seeks in expanding its authority against game rooms, much as Harris did in 2013, and I won’t be surprised if other counties follow suit.

What did surprise me in that story was the almost casual mention of the “other residents” who think game rooms should be legalized. I’m not sure if there are actual people making that case, or if that’s just sort of a clumsy shorthand for support for expanded gambling in Texas, as there wasn’t any further exploration of it. I wouldn’t have given it much more thought had I not also received this email from Houston Controller candidate Carroll Robinson, which discusses the very subject of game rooms and legalized gambling:

The Houston Chronicle has recently reported that “local investigations have revealed how lucrative the illegal gaming trade can be, providing operators with as much as $20,000 per day. With such establishments spread across some 700 strip centers in the county, their total proceeds could be larger than the [$1.55 billion] budget for all Harris County government.…”

Not only are illegal gaming rooms generating hundreds of millions of dollars per year in untaxed revenue, they are also magnets for crime. Wouldn’t it be better to legalize slot machines (at existing legal horse and dog racing tracks) and Casinos in Houston and allow the city to regulate them and collect extra revenues to pay for city services?

Legalizing slot machines at existing race tracks and legalizing casinos would also help eliminate illegal gaming rooms and the crime associated with them.
Even Metro would receive revenue from the increased sales tax revenue generated from legalized gaming.

The City of Houston should investigate and evaluate all its options for legalizing and regulating slot machines and casino gaming under its Home Rule Authority.

I can’t say I’ve seen many city candidates take a position on expanded gambling in Texas, as that’s a matter for the Legislature and not likely to directly intersect with Houston. Sam Houston Race Park is outside city limits, and I can’t imagine a casino being built here. I’m sure there would be some effect on the city if one or both of these things were to be legalized, but I doubt it would be much. I don’t know how much effect it would have on the game rooms, but my guess is that we’d still have them regardless. You can like the idea of expanded gambling or not – as you know, I’m very ambivalent – I just don’t think it has much to do with the game room issue.

Just a reminder that “more gambling” does not necessarily mean “more revenue”

If Atlantic City can go bust…

The winning streak has run cold for Atlantic City, N.J.

Earlier this week, the upscale Revel Casino Hotel announced it will close, bringing the total number of casinos in the city expected to close by the end of the year to four. Thousands of workers are confronting unemployment.

The state has long guaranteed Atlantic City a monopoly on gambling within New Jersey’s borders, but gambling revenues there have been declining due to increased competition from new casinos in neighboring states and the lingering effects of the financial crisis. The monthly report from the state Division of Gaming Enforcement issued Wednesday shows that the trend is continuing, as July’s take declined 7.7 percent year over year.

Pennsylvania, which only legalized casino gambling in the past decade, has replaced New Jersey as the state with the second-largest gambling industry. More casinos have been proposed in New York. Yet revenues have been disappointing across the region. In New Jersey, they have declined by around half from a high of $5.2 billion in 2006.

Most disappointing for investors has been the performance of the casinos’ new online gaming businesses. The prospect of online revenues has kept several casinos open despite declining income.

“A lot of these casinos have been unprofitable for quite some time,” said Alex Bumazhny, an analyst at Fitch Ratings.

Online gamblers haven’t anted up, though, and several casinos have folded. Bumazhny estimates that online gaming revenues for New Jersey businesses will total only around $125 million this year. Revel follows The Atlantic Club, which closed in January, and the Showboat and the Trump Plaza Hotel and Casino, also expected to close this year.

I like to note this sort of news item because as sure as the sun rises, at some point in the fall as the elections get settled and legislators start pre-filing bills, I’m going to get a press release from a pro-gambling expansion group touting the economic benefits of slot machines at horse racing tracks and/or casinos. Said press release and its accompanying economic study will point out the vast number of Texans that are currently gambling in Louisiana, New Mexico, Oklahoma, and other non-Texas states, and will lament the money that could have been spent and gambled right here. My point is that the casinos and riverboats and what have you in Louisiana and New Mexico and Oklahoma and wherever else won’t simply give up the business those traveling Texans bring them without a fight, and the competition they will bring to hold onto their existing customers as well as lure new ones may possibly have a downward effect on those numbers in those press releases and economic studies. This isn’t about whether one does support or should support expanded gambling in Texas – as you well know by now, I am deeply ambivalent about it. It’s just a reminder to keep a sense of perspective when the issue heats up as it always does every two years.

That’ll just about do it for gambling this session

Sen. Carona calls the chances “slim”, but it sounds like slim just left town to me.

[Sen. John] Carona, chairman of the Senate’s Business and Commerce Committee, said last week he expected to vote his sweeping gambling bill out of his committee Tuesday. But the morning committee hearing came and went, and Carona declined to bring the bill up for a vote.

Carona’s fellow senators told him they didn’t want to take a vote on the controversial topic if it doesn’t have much of a chance, especially in the Texas House, Carona said.

State Rep. John Kuempel, R-Seguin, agreed that there is not much of an appetite for gambling in the House this year.

“I don’t think it has a great chance over here,” said Kuempel, who supports expanded gambling to bring additional revenue to Texas. “It’s challenged in the 83rd legislative session in the Texas House.”

[…]

Even if his legislation fails this session, Carona said a lot has been accomplished in the past several weeks. Notably, two often clashing pro-gambling interests — those seeking slot machines at racetracks and those advocating casinos — have worked well together on a broad gambling bill.

“Time is always your enemy in a legislative session,” Carona said, adding that he is not ready to pronounce gambling dead just yet.

Sure sounds dead to me, but as always, you never know. There will almost certainly be a special session to deal with school finance next year, however, and barring anything unexpected from the Supreme Court the Lege will need to find more revenue for the schools, so expect the subject to be on the front burner. Having the cover of a court order sufficed to get the business margins tax created, and it could well do the same for some kind of gambling measure. If nothing else, we’re going to have to pay for Rick Perry’s irresponsible tax cuts somehow. So don’t bury expanded gambling too deeply just yet.

Gambling interests narrow their focus

This is usually how it goes.

Let Texans Decide, a pro-gambling organization that is fronted by former state Sen. John Montford, was aligned at the beginning of the 2013 legislative session with big casino interests in a call for full-scale casino gambling in Texas, whether at horse and dog tracks or at yet-to-be-built destination resort casinos.

But as the session progressed, the chances of passing a measure for casino gambling appeared to grow slimmer. And now, Montford’s group, which advocated legislation in 2011 to permit slot machines at tracks, has returned to its old way of thinking.

“This was the position we originally took,” Montford said. “I do believe that this is a reasonable approach.”

The goal has always been the same: to get a gambling-related bill through the Legislature and have the matter put in front of the voters of Texas, the former senator said.

[…]

While it is always difficult to gain approval for gambling legislation from the Texas Legislature, some factors at play now could help, Montford said.

For one, there is growing support among Republicans in the House for slot machines at racetracks, he said. Recently, John Kuempel of Seguin and Rep. Ralph Sheffield of Temple signed on to a slot bill by Rep. Richard Raymond, D-Laredo. Montford said he was encouraged that more members are willing to allow constituents to vote on a gambling initiative.

Montford is also happy that a slots-at-tracks measure by Sen. Juan “Chuy” Hinojosa, D-McAllen, has been assigned to the Senate Finance Committee, where more senators could hear the testimony.

See here and here to compare what’s being said now to what was said before. I have my doubts that this was a consensus decision, since the casino interests and the horse racing interests have generally not been on the same page in the past, but whatever. I’ll believe there’s movement when something gets passed out of committee. As it happens, while there are three pieces of legislation relating to expanded gambling – the latest, SJR64 by Sen. John Carona, was filed this week – none have yet been scheduled for committee hearings.

The other players in the game, notably the big Las Vegas casino companies, might be quiet now, but that doesn’t mean they have lost hope in the long run.

Some gambling proponents could see an opportunity if there is a special legislative session, as expected, focusing on financing public schools.

If lawmakers are scrambling in a special session for new money to comply with an expected court order to put more money into education, then casinos are “more optimistic for serious consideration,” said John Pitts, a lobbyist for several large casino interests.

Maybe. A scenario where more revenue is required and there’s no two ways around it is probably a prerequisite for any expansion of gambling to happen. I still think it’s highly unlikely, but I suppose anything is possible. I wouldn’t bet on it, though. The equally pessimistic Burka has more.

It may not matter where the casinos are

I don’t know if the gambling industry will finally gain traction in their effort to legally expand operations in Texas, but I do wonder if they’re fighting the last war and missing out on what’s happening now elsewhere in the country.

Silicon Valley is betting that online gambling is its next billion-dollar business, with developers across the industry turning casual games into occasions for adults to wager.

At the moment these games are aimed overseas, where attitudes toward gambling are more relaxed and online betting is generally legal, and extremely lucrative. But game companies, from small teams to Facebook and Zynga, have their eye on the ultimate prize: the rich American market, where most types of real-money online wagers have been cleared by the Justice Department.

Two states, Nevada and Delaware, are already laying the groundwork for virtual gambling. Within months they will most likely be joined by New Jersey.

Bills have also been introduced in Mississippi, Iowa, California and other states, driven by the realization that online gambling could bring in streams of tax revenue. In Iowa alone, online gambling proponents estimated that 150,000 residents were playing poker illegally.

Since that story was published, the states of Nevada and New Jersey have passed their laws to allow online gambling. I’m sure others will follow. Now, online gambling will never truly replace casinos. No matter how good the online experience may become, it won’t include low-cost buffets, cocktail waitresses, or Wayne Newton. Some things you still have to do in person to get the full effect. But online gambling is sure to cut into the profit margins of casinos, and perhaps reduce the overall market for them. If so, that weakens the case for expanded gambling here, at least as far as the current proposals for casinos and slot machines at racetracks go. Of course, the current proposals can be amended to allow a vote on online gambling. I don’t know if the spirit of cooperation that exists now can handle that, but who knows. In any event, this is something to keep an eye on.

Gambling has always polled well

In addition to their self-reported efforts to work together, the pro-gambling expansion forces have released a poll showing public sentiment on their side.

A poll paid for by Let Texans Decide, a pro-gambling group made up of interests that wanted slot machines at racetracks last session, asked 1,001 registered voters in Texas: “Regardless of your views on gambling, would you support or oppose allowing Texas voters to decide on a constitutional amendment to allow the expansion of gaming in Texas?”

The answer was a loud “yes.”

Of all respondents, 82 percent said they’d support being able to vote on a constitutional amendment to allow gambling, and 78 percent of Republican primary voters — the folks that, let’s face it, decide our statewide elections — also supported the idea of putting gambling to a public vote, according to poll results.

[…]

The poll was conducted by Wilson Perkins Allen Opinion Research, the same firm that did the surveys for U.S. Sen. Ted Cruz during his run for the Senate last year.

Respondents were contacted by phone between Jan. 27 and Jan. 30. The margin of error is ±3.1 percent, with an oversample sufficient to achieve 511 Republican primary voters with a margin of error +4.4 percent.

You can see the poll memo here, and crosstabs can be found here. There are two points to note. One is that asking people whether they favor voting on something is not the same as asking them if they favor the thing they’d be voting on. I suspect most propositions would get a favorable response to the question “should the people be allowed to vote on this”. Two, previous polls on the subject have generally shown a positive response from Texans towards expanded gambling. This 2009 Baselice poll found that 63% of respondents favored allowing slot machines at horse and dog racetracks, with 82% being in favor of being allowed to vote on the question. This 2010 Texans for Economic Development poll found that people preferred slot machines at racetracks as a way to raise revenue by a 57-22 margin over increasing taxes. None of that has made any difference in the Legislature in the past, and the safe bet is that this poll won’t make any difference, either. But there you have it anyway. Hair Balls has more.

One big happy pro-gambling expansion family

If the pro-gambling forces in the state all join hands and agree to work together, will this finally be the year that gambling expansion gets a vote? Maybe.

John Montford, chairman of Let Texans Decide, a coalition of gaming companies, track operators, trade groups and others who want Texas to legalize casinos, has met with groups representing casino and slot machine interests and is optimistic that they could agree on potential legislation that would bring a constitutional amendment on gambling before Texas voters.

“We’re working hard to build coalitions in favor of a referendum,” said Montford, a former state senator from Lubbock and the author of the legislation that created the Texas Lottery. “The members of the Legislature don’t have to be pro- or anti-gaming to support a referendum. We want people to have a fair say so.”

Efforts at such collaboration are not new in the industry, though they haven’t proved successful in bringing a proposed amendment to voters on creating casinos, allowing slot machines or other such gambling measures.

But those interests haven’t always been on the same page. Some previous efforts have come undone when race track and casino proponents battled to get a competitive advantage built into proposals pending in the Legislature.

In recent sessions, conflict between bills that would have allowed slot machines at horse racing tracks and those that would allow resort casinos have been part of the reason no such legislation made progress. Competing lobbyists and dollars sent mixed messages to legislators who may not have been keen to promote gambling in the first place out of fear of alienating anti-gaming voters.

See here for the story so far. Hard to know what to make of this, since Montford appears to be the sole person speaking on behalf of Let Texans Decide. The story notes that Sen. Rodney Ellis’ SJR6, which would allow a vote on various forms of gambling, is what’s being talked about now. It also notes that the horse racing interests are pursuing their own bill, though they may be willing to support SJR6. So yeah, not clear whether this session represents a change of tactics or just more of the same and hoping for a different outcome.

Time once again to talk about expanded gambling

There’s a legislative session coming up, right? That can only mean one thing: A new effort to expand gambling in Texas.

Track and gaming interests say voters should be allowed to decide whether to give Texas a shot at the benefits of $2.5 billion they say is wagered in surrounding states annually by Texans.

“They are taking our money to fund their programs, and I think they frankly have just been smarter than we have. My hat’s off to ’em,” said John Montford, a former state Senate Finance Committee chairman. He carried the legislation that established Texas’ lottery and now is involved in the casino battle.

Critics doubt the figures and call expanded gaming a losing proposition for Texas, saying gaming would take money from the pockets of people who can ill afford it.

Montford has been hired by the partnership of Penn National Gaming and Sam Houston Race Park to push the gambling expansion under the name of Let Texans Decide.

Among supporters listed on the group’s website are Valley Race Park, the Texas Association of Business, the Greater San Antonio Chamber of Commerce, Greater Houston Women’s chamber, Houston Hispanic chamber and Houston Northwest.

Remember the name Let Texans Decide, whose Facebook page is here. Whatever arguments or talking points you hear for expanding gambling in Texas will have come from them.

The Legislature has repeatedly turned down the chance to amend the state constitution to expand gambling, which would require a two-thirds vote of lawmakers before going on a state ballot.

The battle doesn’t look to be any easier this time.

State lawmakers who faced a huge revenue shortfall in their last regular session in 2011 now are seeing a recovering economy, and the House and Senate are no less conservative. Several incoming senators are viewed as further right than their predecessors.

“Before this session, there was probably a shot at passing something like that through the Senate. I think with the new members that we have in the Senate, it’s probably less likely than it was before. And I think it is very unlikely that either one of those proposals would get through the House,” said Senate Finance Committee Chairman Tommy Williams, R-The Woodlands, when asked about slots at tracks or casinos. Williams said he has never voted to expand gaming in Texas, adding that revenue figures presented in years past by supporters of the idea appeared unrealistic.

“I don’t have a big, huge moral objection to it, but I’m not sure it’s for the benefit of the state,” Williams said.

Dale Craymer, president of the business-based Texas Taxpayers and Research Association, said, “One of the considerations for casino gambling is the fact that it raises revenue, and that’s a big issue during a session when they are looking for revenue. This is not going to be a session where they are looking for revenue.”

Yes, God forbid we should seek out any new revenue sources any time outside of a severe crisis, not that we do then either. I’m not saying that more gambling is the way we should go to raise more revenue for the state, I’m just saying we’re a million miles from being at a point where we can say that we don’t need any more revenue sources. Between water, transportation, Medicaid, mental health services, education, and a whole host of other needs, there are plenty of issues in need of more funding.

Texans for Public Justice, which tracks money in politics, found that gambling interests donated $1.6 million to Texas political action committees and candidates going into the 2010 elections.

TPJ, in a check of reports available for this year, found top gambling PACs from 2010 donated more than $904,000 this cycle. The total included only reports covering up until eight days before the election, so the total is sure to be higher.

According to Let Texans Decide, the Chickasaws and Choctaws, which have Oklahoma casino operations, have given Texas candidates five times as much as they gave Oklahoma candidates since 2008 — more than $807,000 in Texas compared to nearly $152,000 in Oklahoma. The Chickasaws also have invested in a Grand Prairie track.

There may not be money for the things Texans need, but there’s always money for the campaigns. As always, keep an eye on that as the debate progresses. There’s a scandal lurking out there somewhere.

More on the economic effect of casinos

I’m just noting this for the record, since I am sure that gambling expansion will come up again in The Lege this spring.

Melissa Kearney, an economist at the University of Maryland, released a literature review in 2005 summarizing work on gambling done to date. A study by Maryland’s William Evans and Julie Topoleski that focused on Indian casinos found that they created a significant number of jobs. The ratio of jobs available to adults increased, on average, by 5 percent. This in turn lead to a 2 percent decline in mortality, as residents’ economic conditions improved.

But the casinos also lead to a plethora of social ills, including increased substance abuse, mental illness and suicide, violent crime, auto theft and larceny, and bankruptcy. The latter three all increased by 10 percent in communities that allowed gambling.

Other work backs up the crime finding. The University of Georgia’s Earl Grinols, Baylor’s David Mustard, and the University of Illinois’ Cynthia Dilley found that 8 percent of crime in counties with casinos was attributable to their presence, a crime increase that cost residents, on average, $65 a year.

And the bankruptcy finding has been replicated as well. The St. Louis Fed’s Thomas Garrett and Mark Nichols found that Mississippi riverboat gambling increases bankruptcies not just in Mississippi, but in counties outside the state where many residents gamble in Mississippi. The effect was largest in neighboring states, with the Mississippi casinos responsible with a 0.24 percentage point increase in bankruptcy filings. Interestingly, other casinos — such as Las Vegas, Atlantic City, and so forth — didn’t have statistically significant effects on other areas’ bankruptcy rates.

Unsurprisingly, legalized gambling also exacerbates problems with gambling addictions. The National Gambling Impact Study Commission found that having a casino within 50 miles doubles one’s likelihood to become a problem gambler. That suggests that the new DC-adjacent Maryland casino could create major addiction problems here in the District.

The evidence on casino gambling’s distributional impact is much weaker than that concerning state lotteries, but there is extensive evidence that the latter amounts to a regressive tax, given that lottery ticket purchasers are disproportionately poor. But some evidence — admittedly from industry groups — suggests that casino-goers are richer than the average American, so the story could be quite different than with lotteries.

But as with the liquor industry, much if not most of the gambling industry’s revenue come from addicts. Grinols estimates that 52 percent of revenue at the typical casino comes from problem gamblers, while an Ontario study put the figure at 35 percent and a Louisiana one at 42 percent. So even if gambling takes more money from the middle-class than the poor, it largely takes that money from middle-class people who aren’t exactly rationally willing to spend it.

Casinos aren’t even a particularly good source of tax revenue. Kearney notes that a number of studies have found that Indian casinos cannibalize business at nearby restaurants and bars, and in so doing actually reduce state tax revenue.

Some of these studies are several years old, so it is certainly possible that things have changed. I’m sure the casinos and racetracks will have their own data to add to the debate as well. Given that there’s already a lot of casino-like gambling going on in Texas, it may be that we’re already suffering most of the ill effects we’d see with casinos without getting any of the benefits. Like I said, I’m just noting this for future reference when the subject comes up again.

The state would like for the counties to enforce the law against eight-liners

Apparently, some legislators who don’t much like gambling had a few things to say about that article about eight-liners.

“Eight-liners that provide cash prizes are against the law, and the law needs to be enforced,” [State Sen. Dan] Patrick said in a statement. “Without oversight, illegal game rooms become hot spots for crime.”

Patrick noted that there have been a number of shootings in and outside of game rooms recently.

“The state cannot just look the other way anymore,” he said. “The law must be enforced.”

[…]

[State Rep. Patricia] Harless, who authored a failed bill in 2009 on illegal eight-liners, agreed officials shouldn’t effectively sanction illegal activity by collecting a fee without making sure the businesses operate within the law. “They shouldn’t be able to collect a fee on something that is considered illegal,” she said.

But Harless said there hasn’t been much of an appetite for tougher eight-liner-related legislation in recent sessions of the Legislature. “It’s not a very popular concept,” she said. Too many businesses with legitimate games could be affected if lawmakers pass a measure, she said.

Again, I pronounce myself largely agnostic on the issue. I will say, however, that given the counties’ concerns about the cost of enforcing the anti-eight-liner laws, legislators who are unhappy with their lack of action ought to pony up the resources to help them do something about it. Otherwise, Patrick and Harless ought to accept the fact that they’re just prioritizing and making decisions based on their capacity.

Counties are skirting the state on gambling, too

When eight-liners are outlawed, cities and counties will tend to look the other way rather than try to deal with enforcing the laws against them.

Some of the money has arrived at the Duval County building in five-figure money orders or checks. But much of it has been in cash. This past April, county Treasurer Robert Elizondo took delivery of $33,700, most of it in hundreds and twenties.

“It’s very exciting to count all those twenties,” he said. “I’m going to be a bank teller after this; I’ve got the training.”

The money began pouring in soon after this sparsely populated county 90 miles west of Corpus Christi decided last summer to start charging an $800 licensing fee for each so-called eight-liner amusement machine inside its borders.

So far this year Duval County has collected just under $600,000 (about a quarter of it in cash), an amount equal to nearly 9 percent of its $7 million yearly budget.

More is expected; over Labor Day weekend, a sprawling new room with hundreds of eight-liners opened just outside the county seat of San Diego.

It could be the local government success story of the year: Confronted with a struggling economy and stagnant tax revenues, entrepreneurial officials in a county perhaps best known for its rich history of graft and political corruption uncover a lucrative new source of revenue.

But there’s a small catch.

“Of course the machines are illegal, as I understand it,” said Jo Ann Ehmann, the part-time bookkeeper for the tiny city of Gregory.

[…]

Texas’s eight-liner statutes are a mess. In their attempts to parse the differences between “amusement” and “gambling,” and determine the point at which jackpots become morally impermissible, lawmakers have rendered the statute all but unenforceable.

“The state’s definition of a gambling device is lengthier than the definition of murder,” said Shannon Edmonds, head of governmental relations for the Texas District and County Attorneys Association. “In the real world, if you want to make something clearer, you simplify it. This was drafted by people who wanted it to be vague.”

Even those willing to plunge into an anti-eight-liner campaign find the deck stacked against them. Mounting an undercover operation takes weeks or even months of dedicated police time. Prosecutions cost money that could be spent pursing more serious crime — in all, “about $50,000 of taxpayer money to shut down an establishment,” Simpson estimated.

Tiny rural jurisdictions face their own unique hurdles. For example: How to initiate a covert operation when everyone knows all your police officers?

“As soon as one of our officers walks in, he’s recognized,” admitted Robert Brake, who, as chief of the Gregory Police Department, oversees two officers. With only one typically working at a time, Brake said, he hasn’t expended a lot of effort investigating the game rooms: “We stay pretty busy with accidents and thefts and so on. I don’t have the time.”

Any parallel to the Medicaid expansion situation is of course entirely coincidental. I have as you know some conflicted feelings about gambling, and I think unregulated gambling is even more problematic, since there’s no mechanism to protect customers from getting ripped off, but it’s easy to see this from the point of view of these small jurisdictions. There’s no upside to cracking down on the eight-liners, while taxing them provides a much-needed revenue source in tough times. What else would you expect them to do? One way or another, this is a problem for the state to fix. Just don’t expect it to happen any time soon.

Casinos expanding nationally

I have no idea what the political or budgetary climate will be like for the gambling industry here in Texas when the Lege next convenes in 2013, but they have been gaining a lot of ground elsewhere in the country.

You got to know when to hold em...

States have embraced casinos, after years of trepidation about their societal costs, for two simple reasons: a promise of a rich new revenue source, plus the possibility of stimulating tourism.

“They are faced with tough decisions. They are in recession … And we pay taxes far over and above normal taxes,” said Frank Fahrenkopf, president of the American Gaming Association.

Last week alone, Genting’s new gambling parlor at Aqueduct, now limited to 4,500 video slot machines and another 500 electronic table games, made nearly $13 million — putting the “racino” on pace to make $676 million per year, with 44 percent of that take going to a state education fund.

And that total is nothing compared to the $1.4 to $2 billion per year Genting predicts it would bring in at the huge complex it is planning in Miami.

Some experts, however, have questioned whether revenue bonanzas that large are realistic, and say states should be cautious about giving up too much to lure these projects. Competition for a limited pool of gambling and tourism dollars is already fierce, and recent years haven’t been kind to casinos.

Nevada’s larger casinos lost $4 billion in 2011, according to a report released this month by the state’s Gaming Control Board, as the state continued to feel the effects of the global economic slump.

As gambling options have increased in the East, revenue has slid substantially at the pair of Indian tribe-owned casinos in Connecticut and declined by a dramatic 30 percent in Atlantic City, which has lost customers in droves to the new casinos in nearby Philadelphia, according to David Schwartz, director of the Center for Gaming Research at the University of Nevada Las Vegas.

Other than that one mention of Nevada, the story is entirely East Coast-focused, so I can’t say what kind of action there may be in these parts. No question, Texas is a big prize, and I’m sure there will be yet another large push for casinos, slot machines at racetracks, or both. There’s also been a push for online gambling of late, which may add a new wrinkle to the usual legislative battle. As always, worth keeping an eye on.

States looking at online gambling

Until the economy returns to the point where states aren’t completely strapped for revenue, I expect them to look at all possible sources of new money.

It’s an idea gaining currency around the country: virtual gambling as part of the antidote to local budget woes. The District of Columbia is the first to legalize it, while Iowa is studying it, and bills are pending in places like California and Massachusetts.

But the states may run into trouble with the Justice Department, which has been cracking down on all forms of Internet gambling. And their efforts have given rise to critics who say legalized online gambling will promote addictive wagering and lead to personal debt troubles.

The states say they will put safeguards in place to deal with the potential social ills. And they say they need the money from online play, which will supplement the taxes they already receive from gambling at horse tracks, poker houses and brick-and-mortar casinos.

“States had looked at this haphazardly and not very energetically until the Great Recession hit, but now they’re desperate for money,” said I. Nelson Rose, a professor at Whittier Law School, where he specializes in gambling issues.

When it comes to taxing gambling, he said, “the thing they have left is the Internet.”

I don’t really expect this to come up in the Texas Lege in 2013, because casino and horse racing interests have too much at stake to let it happen. While I am not an advocate of expanded gambling myself, if it ever does happen in Texas I would prefer it to be in the form of real casinos and/or slot machines at racetracks, on the grounds that they would provide more jobs than online gambling. Having said that, once this is up and running somewhere, it’s not really clear to me how you could prevent someone in Texas, or anywhere else, from playing.

There are other ways that a state could leverage the Internet to feed its own gambling habit:

Some states, including New York and North Dakota, already sell lottery subscriptions online. Since 2005, New York has offered a subscription service that allows people in the state to enter a string of Lotto or Mega Millions drawings. The state says 100,000 people subscribe.

New York is exploring whether to allow people to draw from an escrow account when they decide to buy into a single drawing — say, when the jackpot reaches alluring levels.

Again, I can’t recall hearing of anything like this in Texas. Unlike the virtual casinos, I could imagine something like this being implemented by the Texas Lottery Commission, without direct input from the Lege. I wonder if they haven’t thought of it, or if they think it’s illegal for them to try it. Anyone know anything about that?

The racetracks have given up on gambling for this session

Here’s a clear answer for those of you who may have been holding out some hope for an expansion of gambling.

Retama Park officials have all but lost hope that lawmakers will act before the end of the regular legislative session to let voters decide whether to legalize slot machines at state racetracks.

While a gambling bill could be taken up in a special session this summer, any delays only would prolong the agony for money-losing Retama and other racetracks.

The tracks depicted this legislative session as do-or-die time for saving Texas’ racing industry, while pitching video-lottery terminals as one answer to the state’s fiscal problems.

“The real question to me is how long would the industry be able to survive without getting legislation?” Retama Park CEO Bryan Brown said. “I don’t think the industry will go away tomorrow or next week or next year or two years from now. But little by little, it (will).”

[…]

A spokesman for Sen. Juan Hinjosa, D-McAllen, who co-authored a resolution to expand gaming at 13 racetracks, confirmed that proposals are “effectively dead.”

A Senate resolution never got out of committee. A house resolution made it out of committee, but no further action has occurred.

The proposals could never muster much support despite polls that showed a majority of voters favored expanded gaming.

So much for that special committee. Modulo any conspiracy theories, we’re done here. As I’ve said before, if the racetracks really couldn’t survive without slot machines, then I don’t think they were truly viable for the long term anyway. Frankly, I expect to see them again in 2013 saying more or less the same things they’re saying now.

Some gambling advances in the House

It’s probably too little too late, but you never know.

A Texas House committee surprised the casino lobby Friday night when it voted out legislation that would allow video lottery terminals — slot machines — at state racetracks and Indian reservations. The casinos were left behind.

Casino interests wanted any legislation approved by the House Licensing and Administrative Procedures Committee to also allow destination casinos in major cities and on the state’s barrier islands.

Rep. Mike “Tuffy” Hamilton, R-Mauriceville, said he still doesn’t have the 100 votes required in the House to advance the constitutional amendment his committee approved.

[…]

The bill approved by the committee includes a constitutional amendment and the legislation putting it into effect if it passes. Those bills, by Rep. Beverly Woolley, R-Houston, would allow VLTs at dog and horse tracks and on reservations and would raise $548.2 million for the next budget.

The legislation in question is HJR111 and HB2111. I still don’t see any evidence that the Senate is willing or able to pass similar legislation, and without assurance of at least a vote in the Senate it’s not clear that enough House members will commit to voting for it. So as always, I don’t really expect anything to happen. Click over to the link to see statements from the casinos (short version: boo!) and the racetracks (short version: yay!) about this development.

House says it may be close to approving expanded gambling

This would be as far as they’ve gotten in recent sessions.

Rep. Mike “Tuffy” Hamilton, R-Mauriceville, who chairs the Licensing and Administrative Procedures committee, said he is close to having enough votes to pass his ever-morphing gambling bill.

As Hamilton seeks to gather a comfortable number of “aye” votes, he and his committee members have been working to change the bill to make it more palatable for on-the-fence lawmakers who might oppose slot machines at race tracks and full-scale casinos at various places across Texas.

“I think that we have a really good chance right now,” Hamilton said. “We’re really close in the numbers.”

One way to gain support in this revenue-hungry Legislature is to promise to feed the state coffers.

Hamilton said he expects the bill to add about $3 billion of general revenue in the 2012-2013 biennium. The bulk of the money would come from $2.4 billion in licensing fees from groups seeking to slots at race tracks and would-be casino operators.

Hard to know what that means. I guess we’ll find out when and if it gets voted out of committee. Of course, Sen. Robert Duncan says there’s no support for gambling in his committee, so this may all be academic. My expectation is the same as before, that ultimately no action is taken.

Gambling interests tout job creation benefits

From the inbox:

REPORT OUTLINES 77.5K JOBS BY REGION, SECTOR CREATED BY SLOTS BILL

Confirms Texans Continue To Spend Billions Gaming in Neighboring States

AUSTIN, Texas – Win For Texas released a new report today outlining the specific regions and sectors of the 77,500 new, permanent jobs that will be created when slots are allowed at Texas horse and greyhound tracks and recognized Indian reservations. TXP, a Texas economic policy consulting group, prepared the study.

The study also details the $2.7 billion dollars Texans spend on gaming in a seven state region every year. TXP estimates that $2.2 billion of this “leakage” could be kept here simply by allowing slot machines at existing racetracks and Indian reservations.

“TXP estimates that approximately $2.4 billion in gaming revenue (and $3.8 billion total) would appear in-state by the end of 2013,” said TXP President, Jon Hockenyos. “This in turn would create $8.5 billion in total economic activity, $2.6 billion in earnings, and about 77,500 permanent jobs.”

The new report breaks down the specific economic and job creation into five regions: Austin Area, DFW, Houston and the Rest of Texas.

“The economic benefits of implementing slots are well-distributed across the state, as Dallas-Fort Worth and Houston each stand to gain close to 20,000 permanent jobs, Austin and San Antonio will realize approximately 10,000, and the balance is distributed across the rest of Texas,” said Hockenyos.

The legislation that would bring this proposal to Texas voters to decide is HJR 111/ SJR 33. The enabling legislation that details the implementation and oversight are HB 2111/ SB 1118.

The study was commissioned by Win For Texas and is attached in its entirety. For more information about this proposal or Win For Texas, please visit www.winfortexas.com.

Please see the report for your region’s specific benefits. The TXP report is attached and may also be downloaded here: http://www.winfortexas.com/TXP_Regional_Impact_Slots_Tracks_Spring_2011.pdf

I will simply note that TXP issued a similar report in 2009, which I blogged about here. I’ll leave it to you do compare the two and see what differences there are. Hey, we’ll need something for all those soon to be unemployed people to do.

As for the ubiquitous question of gambling’s prospects in the Lege, it doesn’t look any clearer now than it did before the session. The good news for gambling interests is that a consensus bill may emerge from the House.

A Texas House committee will listen to several gambling proposals at a hearing today , and in the coming days, the chairman of the committee will take all the proposals and roll them into one measure.

The forthcoming piece of all-encompassing legislation by Rep. Mike “Tuffy” Hamilton, R-Mauriceville, could lead to seven new Las Vegas-style casinos, slot machines at 13 horse and dog tracks across the state, slots at a few Indian reservations and slots at bingo halls across Texas, he said.

“Something for everybody,” Hamilton said. “We’ll put them all together.”

But there are competing gambling interests in Texas, and getting them to work with one another could prove difficult; casino proponents and the group wanting slots at tracks have not been able to work together this session or in sessions past.

There are also pro-gambling groups representing bingo halls and Indian reservations.

Hamilton, though, said he can get them all together.

Asked how he’d reach a consensus among the competing groups, Hamilton said, “Because I’m the chairman, and there will be just one bill passed out of committee.”

Whether that’s a bill that makes the casino interests, the racetrack interests, and the Indian tribes happy or one that makes some or all of them feel disgruntled remains to be seen. It’s also not clear that this consensus bill, or any other gambling bill, will get a hearing in the Senate.

While a new statewide poll shows that 86 percent of Texans believe the public should vote on whether to legalize casinos, an influential state Senate chairman with jurisdiction over gambling said Monday he has no intention of advancing the necessary legislation.

“There is no support in my committee,” said state Sen. Robert Duncan, R-Lubbock. “I just don’t think there are the votes in the Senate. I don’t see any chance of passage.”

Duncan’s opposition signals almost insurmountable odds for the expansion of gambling in Texas, despite the industry’s hopes that lawmakers would look favorably upon casinos this year as a solution to the state’s fiscal crisis.

So far, Lt. Gov. David Dewhurst has referred all gambling resolutions and bills filed in the Texas Senate to the State Affairs Committee, which Duncan chairs.

His spokesman, Mike Walz, said Dewhurst also likely would refer all “stand-alone” gambling bills passed by the House to Duncan’s committee. He noted that the issue could be attached to other significant legislation that traditionally is heard by other committees.

So the door isn’t completely closed, but it’s far from wide open. I thought gambling’s odds may have improved somewhat after the terribly austere Pitts and Ogden budgets first surfaced, but this doesn’t lend support to that thesis.

As for the poll mentioned in the story, there’s no details or references to the poll data, and I’m not interested in seeking them out. We’ve seen plenty of polling data that suggests Texans support the idea, so this is no revelation. I still think the fundamental issue is a lack of legislators that support it. If Hamilton’s “consensus” bill never makes it to the House floor, that will tell you all you need to know. The Trib, Texas Politics, and Postcards have more.

Horse racing folks feeling good about gambling’s chances this time

They always say that, but maybe this time they’re right.

The chief executive officer at Retama Park expressed cautious optimism Thursday that the state could one day allow slot machines at horse racetracks, a move that has long been deemed as critical to the financial well-being of a struggling industry in Texas.

Retama CEO Bryan Brown made his comments in the wake of legislation introduced in Austin earlier in the day.

[…]

Brown said he has never felt better about the prospects that the track in Selma, in operation since 1995, could build an alternate facility on site that would house slot machines.

“This has been a work in progress,” Brown said. “And, you know, a lot of times (during this process) we’ve been excited. A lot of times we’ve been down about the prospects. But we’ve never felt this good about what might happen.”

As noted before, I’m rethinking my pessimism about gambling. The budget issues may just be enough to overcome legislators’ resistance to it. I still think it’s an underdog, I still think the horse racing interests and the casino interests will ultimately work at cross purposes as they always have – see the last paragraph of this story for an example of what I mean – and I retain the right to my skepticism until someone shows me at least one legislator who’s flipped on the issue, but I do see a possible way forward now, which I had not seen before.

Legislation to allow slot machines filed

Fresh from the inbox:

BI-PARTISAN LEGISLATION FILED TO ALLOW STATEWIDE VOTE ON SLOTS AT TEXAS TRACKS, INDIAN RESERVATIONS

AUSTIN, Texas — Texas State Senator Juan “Chuy” Hinojosa (D-McAllen) and Texas State Representative Beverly Woolley (R-Houston) filed legislation today to allow Texas voters to decide whether to allow slot machines at existing horse and greyhound tracks along with federally recognized Indian reservations.

Both Legislators filed Joint Resolutions (HJR 111, SJR 33) that would trigger statewide constitutional amendment elections as well as the corresponding enabling legislation (HB 2111, SB 1118) detailing the proposal.

“For years Texas has missed out on billions of dollars in gaming and entertainment revenues while neighboring states pocket the winnings,” said Senator Hinojosa. “This proposal is the first major revenue generating proposal of this session – it will help keep the money we lose to other states in Texas, and put new revenues on the table without increasing taxes.”

Economic studies indicate that the legislation as proposed would bring in about $1 billion a year in tax revenue and create more than 77,000 Texas jobs across a wide variety of sectors. Currently, Texas loses revenue to Louisiana, Oklahoma and New Mexico at a rate of $2.5 billion a year.

“The people of Texas should have the opportunity to decide whether or not to add slot machines to Texas’ racetracks and federally recognized Indian reservations,” said Representative Woolley. “This legislation gives Texans a voice to decide our economic future.”

In a recent poll conducted by Baselice and Associates, Inc., 82 percent of Texas voters favored the right to vote on adding slot machines to racetracks and federally recognized Indian reservations. Sixty four percent favored the specific proposal. Support was evenly spread across all partisan and demographic subgroups.

For more information, please visit www.winfortexas.com

Here’s HJR 111, SJR 33, HB 2111, and SB 1118. You can read more about that Baselice poll here; a similar poll from 2009 found a nearly identical result. Finally, here’s a DMN story about the newly-filed bills.

You know what my opinion is of how likely any such measure makes it out of the Lege, so I’ll spare you another accounting of it. I will say this, though. Lately, we’ve started to see Republican legislators not only embrace the idea of using at least some of the Rainy Day Fund to ease the budget cuts a bit, we’ve also seen one Republican make the case for some form of tax increases, too. Sen. Deuell is still out on a pretty lonely limb right now, but the mere fact that he’s there is remarkable. I certainly wasn’t expecting it. As such, I must consider the possibility that I’m overestimating Republican resistance to gambling legislation. I still want to see some news story showing new House members being on board with this, or former opponents of gambling stating their willingness to vote for a particular measure this time around before I really change my mind. But for the first time, I’m beginning to think that it’s within the realm of the possible that something might pass. Postcards has more.

UPDATE: And now there’s a casino bill, too.

Rep. José Menéndez, D-San Antonio, filed a casino gambling bill in the Texas House. He filed it hours after Rep. Beverly Woolley, R-Houston, filed another bill that would allow slot machines at racetracks.

Companion bills were also filed in the Senate. Sens. Juan “Chuy” Hinojosa, D-McAllen, and Jeff Wentworth, R-San Antonio, filed the slots bill. And casino proponents said Sen. Rodney Ellis, D-Houston, filed a casino bill.

House Joint Resolution 112, which is supported by the Texas Gaming Association, would call for an election on a constitutional amendment that would allow the creation of a five-person Texas Gaming Commission. A fiscal note has not been published.

Once created, the Texas Gaming Commission would issue up to eight licenses to operate slot machines at racetracks.

It also would issue up to six licenses for casino gaming in different urban areas in Texas.

Additionally, the bill also would allow the commission up to two licenses for casino gaming on islands in the Gulf of Mexico.

The commission would also allow an Indian tribe to operate slot machines or have casino gambling.

Here’s HJR 112, and here’s a statement from Sen. Ellis about his bill, SJR 34.

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.

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.

SHRP gets an investor

File this under “general gambling news”.

Sam Houston Race Park will announce today it has entered into an ownership and operations agreement with racetrack and gaming giant Penn National Gaming Inc. as Texas track owners prepare to push for expanded gaming options from the Texas Legislature next year.

Penn National will acquire a 50 percent interest in the joint venture, which operates Sam Houston, Valley Race Park in Harlingen and a planned racetrack in Laredo. The value of the transaction, which is subject to approval by the Texas Racing Commission, was not disclosed.

Today’s announcement comes as the financially troubled Texas racing industry gears up for a full-scale lobbying effort before the 2011 Legislature to approve slot machines and other gambling options that industry observers say will benefit the racing business and the Texas economy.

“This industry is struggling, and so to have somebody with a national footprint is a great thing for us,” said Shawn Hurwitz, the track’s chief executive officer. “They have tremendous financial resources, which is a great thing from the perspective of our current operations and from an effort to get other gaming passed in the state of Texas, which ultimately is the answer not only for racing but to help Texas in this tough economy.”

The story has a lot of well-known background information on the upcoming legislative fight to expand gambling in Texas, but no new information about how proponents plan to win that fight. The way I see it, this is basically Penn National placing a bet that Texas does in fact expand gambling to include slot machines at racetracks, which obviously they think will be a winner for them. They may or may not have a strategy to facilitate this, and if they do it may or may not be anything more than “give more money to the people that already support our position”, I can’t tell from the story. Like I said, they’re putting their chips on expanded gambling happening next session. Make of that what you will.

Retama Park

Here’s another story about another horse racing track – Retama Park, which is northeast of San Antonio in Selma – hoping to hit the jackpot (as it were) with slot machines. The bit that interests me is this:

If slots pass, [Retama CEO Byron] Brown envisions a massive transformation at Retama with an investment of more than $200 million in new facilities, gaming terminals and other amenities.

Still, that isn’t likely to happen until late 2012 at the earliest if slots are approved. Approval requires a vote of two-thirds of the Legislature, with voters getting the final say.

It’s not clear what would happen to Retama if slots don’t pass. Gary Baber, board chairman of track owner Retama Development Corp., a municipal subdivision of Selma, fears it could become home to a flea market or motor racetrack.

Built in the early 1990s for a reported $80 million, Retama Park had trouble right out of the starting gate. It missed financial projections its first year and landed in bankruptcy a year later in 1996.

Joe Straus Jr., who is the father of Joe Straus, the speaker of the Texas House, is part of the group that got Retama built. Straus blamed the arrival of the state lottery, the rise of Internet gaming and the spread of eight-liner slotlike machines for hampering the track.

While Retama Development emerged from bankruptcy, it didn’t shed its financial problems. Since its reorganization, it has ended every year in the red. In each of the past 13 years, auditors have cited Retama Development’s recurring losses and growing liabilities for raising “substantial doubt about Retama’s ability to continue as a going concern.”

“It’s kind of a minor miracle, in my opinion, that we have kept (Retama) alive as long as we have,” Baber said.

I had thought that maybe the racetracks might have a bit of an edge in the forthcoming gambling expansion fight on the grounds that they could install slot machines and start generating revenue for the state a lot faster than casinos, which would have to be built from scratch. But if Retama is typical, then that isn’t necessarily the case. Point being, and I want to commend Sen. Rodney Ellis for being clear about this when I interviewed him, whatever the potential long-term revenue from expanded gambling may be, there will be almost no effect on the next budget.

I got a good chuckle out of Straus’ daddy’s excuses for Retama’s lack of profitability. I mean, the Lottery was created in 1991, five years before Retama was built. I suppose it could have had an effect on their bottom line, but it’s not as if they never saw it coming. Really, they should have seen the threat from online gambling back in 1996, too, but that’s a more understandable oversight. I have to ask, though – if online gambling is keeping people away from the tracks now, how much would the addition of slot machines really change that?

Retama is an example of an industry, once touted as a financial savior for Texas, now in deep distress. Yet here it is, touting the addition of slot machines to their businesses as an savior for Texas, and by the way for themselves. You do have to admire the tenacity, I’ll say that much.

The state of horse racing in Texas

It’s not very bright right now.

The Texas Racing Commission faced a packed house Friday in the enclosed confines of the Founder’s Room at Sam Houston Rack Park. They heard a tale of woe from an industry in rapid decline, a decline precipitated by a close escape of Texas dollars flowing across the Sabine and Red rivers to horse tracks with a racino attached.

You can imagine what they believe the solution to their woes is. Look, I’m not a horse racing enthusiast. The one only time in my life I’ve been to a racetrack was 1988 at Bandera Downs, which was back before you could place a bet on a race. But I sure do remember being told that allowing bets on races would be a financial windfall for the state. It’s primarily because of that that I remain skeptical about the claims now being made by “racino” proponents; that is, proponents of allowing video lottery terminals – slot machines – at racetracks. I do believe that will draw more people to the tracks, but I don’t see how it’s going to make more people interested in horse racing, and because of that I have doubts about its long-term viability. If the races themselves aren’t drawing people in, what’s to keep them from getting drawn away by some other shiny new object later? Anyway, this is an interesting story about something I generally pay little attention to, so check it out. Thanks to Hair Balls for the link.

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.

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.

Filling the void

I’ve heard a number of reasons why we “need” video lottery terminals at horse racing tracks, but this one, espoused by Texas Racing Commission Chair Rolando Pablos, may be the most entertaining.

Though he does not gamble, Pablos studied gaming models during postgraduate studies at UH. He continues to study them. He perceives one disconnect with many horse race spectators — idle time between races. He understands that some spectators enjoy partying between races. Others bury themselves in handicapping the next race. Still, he contends, there’s “a void.”

“Horse racing needs to get more creative,” he said. “We see examples of creativity, like at Sam Houston Race Park with its programs and concerts. But revenue from horse racing is still declining. We need even more creativity.”

At Louisiana, Oklahoma and New Mexico tracks, Pablos noted, “People run to the slot machines between races. That (electronic gaming) model works well for our neighboring states. We don’t know if it will work here.”

Well, that is creative. Maybe they can adapt a line from the Weird Al Yankovic song “Horoscope” as their motto: “Fill that void in your pathetic life by playing VLTs seventeen hours a day”. I’ve not been to a horse racing track in years, so I can’t say if this “void” of which he speaks really exists. I do know that many other sports seem to manage their breaks in the action without the need for VLTs, so I trust you’ll pardon my skepticism here. The real question is whether or not allowing VLTs actually would be a net plus for Texas’ bottom line. Remember, the racetracks themselves were once supposed to be a financial windfall for Texas. Filling voids isn’t really a concern to me.

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.