Budget & Finance

States Bet on Gambling to Raise Money for Schools

By Alan Richard — March 10, 2004 5 min read

Play a video slot machine in Oklahoma, and soon you could be raising money for public schools. Try your luck on slots proposed for horse-racing tracks in Maryland, New York, and Pennsylvania, and taxes from the machines might one day pay for textbooks or teacher salaries.

Debate over gambling as a way to help pay for public education is again raging in many state capitals.

Leaders in several states wager they can expand gambling, then tax the proceeds to raise money for public schools. While proponents argue the approach may shore up states’ bank accounts, others worry that it could prove to be an unstable source of revenue, and that it could worsen societal ills.

“The states are just in a fiscal crisis right now, and they’re looking for the only politically painless way of taxing citizens—and legalized gambling is voluntary taxation,” said Patrick A. Pierce, a political scientist at St. Mary’s College in Notre Dame, Ind., who studies gambling.

Those issues were likely on the minds of Oklahoma lawmakers two weeks ago when they passed a plan to share revenues from video slot machines at about 80 casinos on Native American reservations across the state, earmarking the money for education.

The legislation also allows four horse- racing tracks that were struggling economically to provide slots for the first time.

Eighty-eight percent of shared revenue from the racetrack slots will go to K-12 schools, and the rest for college scholarships, said Paul Sund, a spokesman for Oklahoma Gov. Brad Henry. The Democrat backed the bill and was planning to sign it.

Hoping for a Jackpot

“We could regulate [tribal casinos], we could help the horse tracks,” Mr. Sund said, and “the side benefit is that we can raise money for education.”

Gov. Henry heard from religious groups that battled against the gaming legislation, Mr. Sund said, but decided the chance to regulate the industry and raise more money outweighed any misgivings.

“It’s already here,” Mr. Sund said of the gaming industry in Oklahoma. State proceeds from the machines at the tribal casinos could reach $71 million in the first year, and might grow as the industry thrives, he said.

The Cherokee Nation, among other American Indian groups, wanted to expand the types of games already in place at its gaming centers.

The legislation more clearly defines which games are allowed under Oklahoma law. It will allow the Cherokees, for example, to provide new games at their casino resort, which is being expanded, outside Tulsa.

“That’s a win-win for everyone,” said Mike Miller, a spokesman for the Cherokee Nation, which covers 14 counties and includes about 100,000 residents on its territory.

The Cherokees run preschools and a 375-student high school, though most Cherokee students attend public elementary and middle schools. “We’re happy that it is being used for education,” Mr. Miller said of the upcoming state proceeds from the games.

Oklahomans also will decide in November on a state lottery that was part of Gov. Henry’s successful election campaign in 2002. The lottery, which would compete with across-the-border lotteries in Texas and Kansas, would raise money mainly for college scholarships. Twenty states now have lotteries that help pay for education programs, according to Education Week research.

But Mr. Pierce warned that states with lotteries that do not dictate a single purpose for the profits eventually spend the money in other ways.

“There’s no reason to believe that gambling revenue would be used [any] differently,” said Mr. Pierce, who co-wrote a book called Gambling Politics: State Government and the Business of Betting, to be released in July.

Elsewhere, New York Gov. George E. Pataki has proposed expanding the number of video-lottery terminals at the state’s horse-racing tracks. The number of terminals allowed at a single location would rise from eight to 20.

Gov. Pataki, a Republican, contends that the expansion would raise $320 million next year—mostly for education to meet a court order to spend more on public schools—and up to $2 billion a year within five years.

Real Money?

Michael A. Rebell, the executive director of the New York City-based Campaign for Fiscal Equity, was glad to see the governor propose some new education aid. He just wondered how serious the state is about providing the extra money, and whether such a plan actually would raise the kind of money the governor estimates.

“As a citizen, I’m not real excited about the idea of using gambling revenues to pay for education,” said Mr. Rebell, whose group filed the lawsuit that has resulted in the court order.

“If the money is real, we’ll take it,” he added. “Our concern is whether it’s for real. Many people tell us these video-lottery projections are overstated.”

Next door in Pennsylvania, a legislative battle over the state budget, school funding, and gambling is entering its second year.

Gov. Edward G. Rendell, a Democrat, wrangled with the Republican-majority legislature until finally passing a spending plan in December. (“School Aid Remains Rendell’s Big Challenge,” Jan. 14, 2004.)

This year doesn’t look any smoother. Gov. Rendell’s push for property-tax relief and higher school spending includes up to $1 billion that the governor claims—and critics refute—could be raised if the state legalized slot machines at horse-racing tracks.

Advocates of increased school aid in Pennsylvania say it doesn’t really matter where the money comes from, as long as it comes.

“To start with, there should be more state funding,” said Janis Risch, a spokeswoman for Good Schools Pennsylvania, a coalition pushing for more school spending. She praised lawmakers for its “down payment” on higher school funding in December.

“We’re eager to see the rest of it,” even if the money comes from the slot-machine proposal or other sources, Ms. Risch added.

In his campaign, Maryland Gov. Robert L. Ehrlich Jr., pushed for legalizing slot machines at horse-racing tracks. Now the Republican wants taxes raised from the proposed slots to help fund Maryland’s ambitious school funding program passed in 2002, which calls for $1.3 billion in annual increases for schools over six years.

The Maryland Senate passed the slots bill on Feb. 27, but observers weren’t willing to bet on where the proposal might land in the House.

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