Tuesday, October 23, 2007 • 9:21 AM Comments (5)

The Lure of Casinos by Robert Goodman and Stephen Simurda

posted by Robert Goodman

Governor Deval Patrick faces daunting budget challenges and a political agenda that includes repairing infrastructure throughout the state, improving public education and providing some financial relief to cities and towns. The prospect of hundreds of millions of dollars a year in revenue from gambling casinos must be tempting. Not only would three new casinos bring in new revenue, but they would also allow the commonwealth to trap all those dollars being spent by Massachusetts residents who now travel to Connecticut when they want to place their bets. But like the gambler who hopes to wipe out his debts with one big score (and rarely does), Patrick and other state politicians may want to look at the consequences of relying on casinos to solve budget problems.

Casinos can bring the state lots of revenue – over $400 million a year is projected. And many Massachusetts residents will likely change their gambling venues and opt to lose their money closer to home if the three casinos the governor is proposing are built. But at the same time those casinos may cost the state even more money in lost business and tax revenues, hurt other businesses throughout the state, and create costs for taxpayers that result from an increase in problem gambling.

If casinos become available in the state, more Massachusetts residents will gamble. This will divert discretionary spending away from other businesses. Dollars spent at casinos will be dollars not spent in restaurants, furniture and clothing stores, movie theaters, and many other businesses. Even revenue for the state lottery could be expected to decline. Research by William Thompson of the University of Nevada estimated that with the introduction casino-style gambling in Pennsylvania, “local areas will lose approximately $267 million annually from their local economies.”

According to many studies, the closer a casino is to where people live; the more likely they are to develop gambling problems. Research done for the 1999 National Gambling Impact Study Commission found that “the availability of a casino within 50 miles is associated with about double the prevalence of problem and pathological gamblers.” The Commission also reported that the average cost of each of these gamblers to other residents and businesses in a state, in terms of lost productivity, unemployment and welfare benefits, health care, and other activities is approximately $2,000 per year. And that doesn’t take into account the costs of the problem gambler’s unpaid debts, bankruptcies and white-collar crimes, such as embezzlement and insurance and credit card fraud, and the criminal justice costs of prosecution.

The Commission concluded that in four New England states, including Massachusetts, 4.2 percent of residents (273,000 in the Commonwealth) are at risk of becoming problem or pathological gamblers. The math is simple: 273,000 Massachusetts residents multiplied by $2,000 equals $546 million a year in costs. In addition, according to a number of researchers and therapists, although problem gamblers are a small percentage of the population, they account for as much as 25 to 50 percent of a casino’s revenues.

Of course, not all of those at risk will develop gambling problems, but with casinos closer to home many will. And taxpayers and business people who may never set foot in a casino will end up paying for it. Add to this the economic loss to other businesses in the state that depend on discretionary spending and the additional costs of unpaid debts and white-collar crimes, and it’s not hard to envision casinos doing more harm than good to the state’s financial well being.

Massachusetts political and business leaders would do well to examine the experiences of other states that have dealt with casinos. In Iowa, less than four years after casinos were legalized, problem gambling more than tripled. In South Dakota, five years after casinos opened in the town of Deadwood, the state’s attorney testified before a congressional committee about the large numbers of people who had no previous criminal record who had since turned to crime to cover gambling losses. And after years of concerns about the consequences of casinos in Connecticut, legislators there recently voted to initiate a major gambling impact study.

Before the first person loses a dollar in Massachusetts slot machine, Governor Patrick and the state’s legislators need to make sure they know the gamble they are really taking. It’s too easy to simply rely on the fantasy of an easy score.


--Robert Goodman is the author of The Luck Business and was former director of the United States Gambling Research Institute (USGRI). He teaches public policy and environmental design at Hampshire College in Amherst.

--Stephen J. Simurda was associate director of the USGRI and teaches journalism at the University of Massachusetts, Amherst.

Comments (5)
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That there are social costs involved in casino gambling is undeniable, and those costs need to be confronted. But they ought not to be exaggerated. The claim that 273,000 Massachusetts residents are ?at risk of becoming problem or pathological (pathological?) gamblers is dubious, to say the least. And the notion (?the math is simple?), that every one of these residents might actually become compulsive gamblers and cost the state more than a half billion dollars a year is, well, ridiculous. So is the argument that casinos ought not to be built because they will compete with other (read ?legitimate?) businesses for discretionary spending. If that?s a serious consideration, then it applies to any new non-essential business whatsoever. The new Cineplex puts the Bijou out of business. We may mourn the loss of the grand old Bijou, but that?s how the free market works. Out with the old, in with new. The proximity argument would appear to be rendered moot by the prevalence of on line gambling sites. Gambling at your computer does not have the lure of free drinks and scantily clad pit workers, but it beats all in terms of accessibility. At least casinos bring problem gamblers out into the open where it might be possible to help them. For the vast majority of casino goers, gambling is just a form of entertainment. The alleged impact of casinos in Deadwood, South Dakota has little relevance for Massachusetts. The Connecticut experience would seem to have great relevance and if casino gambling in the Nutmeg State were a huge social problem, I think we would be hearing about it. It?s telling that only now, 15 years after the first casino opened in Ledyard, has the Connecticut Legislature initiated a gambling impact study. It suggests the Legislature may be attempting to mollify a few disgruntled members who probably oppose gambling for other reasons altogether.
Posted by Idiosocrates on 10.23.07 at 11:49
I was interested to read the social-cost statistics and hypotheticals, and they hadn't figured into my own reaction to the idea of MA casinos, which is a visceral, negative reaction to the idea of the huge development and the ever-broadening highway system. I noticed when I read the New England Casino Gaming update prepared by the Center for Policy Analysis at UMass Dartmouth (http://www.umassd.edu/cfpa/docs/gaming_update_2007.pdf), that the infrastructure costs--exits, on-ramps, sewer systems, etc.--had not been figured into the analysis of revenue.
A couple more links to reports:
Gov. Patrick's Casino Proposal Public Opinion Survey:
http://www.umassd.edu/cfpa/docs/casino_poll_07.pdf
A recent article in Commonwealth Magazine called "Betting the Farm," by Sean Murphy:
http://www.massinc.org/index.php?id=652&pub_id=2175
And the site for the UMass Dartmouth Center for Policy Analysis, which includes links to some other reports on the likely effects of casinos in Southeast MA that they've prepared:
http://www.umassd.edu/cfpa/
Posted by Hayley on 10.23.07 at 13:12
Idiosocrates wrote: "The Connecticut experience would seem to have great relevance and if casino gambling in the Nutmeg State were a huge social problem, I think we would be hearing about it. It?s telling that only now, 15 years after the first casino opened in Ledyard, has the Connecticut Legislature initiated a gambling impact study. It suggests the Legislature may be attempting to mollify a few disgruntled members who probably oppose gambling for other reasons altogether. " Another interpretation for the delay of the impact study is that legislators were turning a blind eye to the social costs until they became too obvious to ignore. I don't know much about this issue, but the lack of study is hardly an argument for OR against casino gambling.
Posted by Jack Cheng on 10.23.07 at 18:52
I found this Feb. 07 article about a group of conservationists in NY's Sullivan County who were/are trying to block the development of the Monticello Raceway, a huge casino complex. They claimed that the US Interior Department's Bureau of Indian Affairs failed to require a full environmental impact evaluation.
http://www.nrdc.org/media/2007/070213.asp
I wonder what kind of an environmental impact study will be required of the would-be developers of the MA casinos?
The League of Women Voters oppose MA casinos. For more information on their stance, see: http://www.ma.lwv.org
Posted by Hayley on 10.24.07 at 6:10
For those interested in using Foxwoods and Mohegan Suns as models relevant to Massachusetts, here is information from 2005 study , "The Casino Gamble in Massachusetts" by Baxandall and Sacerdote (which can be found on line.) Incidence of crime in Ledyard Connecticut was 214 in 1991 and 1353 in 1998. After 4 years violent crime increased by 95, auto theft by 24% and roberies by 27%. Local government revenue in the casino area was reduced by 7%. Tom
Posted by Tom Larkin on 11.11.07 at 18:36
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