States Roll Dice on New Funding

By Michele McNeil — October 13, 2008 6 min read

Amid tight budgets and shrinking revenue, states are wagering that voters in next month’s elections will agree to expand state-sanctioned gambling in exchange for increased school aid.

Initiatives on six state ballots Nov. 4 involve gambling revenue intended to raise money for everything from community college funding and college scholarships to general K-12 operating aid.

Arkansas voters are being asked to decide on a new state lottery aimed at funneling up to $55 million into college scholarships. A Maryland slot machine proposal could bring in $660 million a year for K-12 schools.

Ohio and Maine may get their first commercial casinos, and voters in Colorado’s three gaming towns will be asked to increase bet limits, extend casino operating hours, and add new games. Missouri wants to lift its loss limits so gamblers can lose more money. Oregon’s measure is an exception—education funding there could drop under a proposed change in how the state’s gambling revenue is apportioned.

For some school advocacy groups and teachers’ unions, new or expanded gambling operations are a way to raise more funding when a tax increase isn’t politically possible. Even before the current global financial crisis, the states’ revenue outlook was bleak.

The latest tally counted 31 states with budget deficits totalling $40 billion—funding gaps that have already prompted at least 12 states to make targeted cuts to K-12 programs. (“Hard Times Hit Schools,” Aug. 27, 2008.)

“The money coming into state institutions keeps shrinking,” said Judy Williams, the director of communications for the University of Arkansas at Little Rock, whose board of visitors voted Sept. 18 to endorse the constitutional amendment that would create a new state lottery. “We have to always be looking for ways to come up with dollars.”

High Stakes

Forty-two states now have lotteries, 43 states have wagering on horse racing, 32 states have gambling through Native American tribes, 12 states have commercial casinos, and 11 have “racinos”—typically slot machines housed in horse-betting facilities.

Altogether, these states reeled in $23 billion from gamblers in 2007, according to the Rockefeller Institute of Government, which is the public policy research arm of the State University of New York. But it’s unclear exactly how much of that has been dedicated to education, said the institute’s Lucy Dadayan, a senior policy analyst.

Perhaps the state with the most at stake in this round of gambling initiatives is Maryland, which has an estimated $1 billion deficit in its $14.5 billion budget.

Gov. Martin O’Malley, a Democrat, has cast the proposal to allow slot machines in the state’s horse-wagering facilities as crucial for education funding. Groups for and against the slots proposal have launched radio and television ads to try to sway voters.

Slot machines await gamblers before the opening of business at Ameristar Casino in Kansas City, Mo., Sept. 30. Missourians will vote on Proposition A, a measure that would repeal the nation's only casino loss limit, in the upcoming general election.

The stakes are also high in Ohio, where counties would share about $200 million a year in casino revenue that could be used for any purpose, including schools.

But a bet on gambling is no sure thing. Research shows that people only have so much discretionary income, and in rough economic times, the amount of money gambled can drop. Casino revenue from the 12 states with commercial casinos dropped 2.2 percent in 2008, according to the Rockefeller Institute.

“In places like Nevada and New Jersey, which have been traditional gambling states, we’re seeing declines already,” said Ms. Dadayan. “People just don’t have as much money to spend.”

And not every proposal promises to be lucrative for schools. The proposed Maine casino would bring in about $50 million its first year, with 10 percent of the net revenue going to education, mostly to college loans and scholarships. Just 1 percent would go general aid for K-12 schools.

What’s more, even if money is earmarked for education, that doesn’t mean all of the gambling profits will make it there.

A study published in the winter 2007 edition of the Education Finance and Policy journal that examined state lotteries found that only 50 percent to 70 percent of the gambling revenue earmarked for education actually was spent on it. Because lottery profits pass through state coffers before hitting their destination, money has sometimes “leaked” away to other parts of state government, the study found.

Social Issues

Pulling the Lever on Gambling-Related School Revenue

Ballot measures in six states aim to boost school funding through lotteries, casinos, slot machines, and other games.

Arkansas: Constitutional amendment to create a state lottery

Annual state revenue:
$55 million

Amount to schools:
$55 million for college scholarships

Missouri: Initiative to change state law to increase the limit on the amount of money gamblers can lose

Annual state revenue:
$156 million

Amount to schools:
$130 million for general K-12 aid

Maryland: Constitutional amendment to legalize slot machines

Annual state revenue:
$1.3 billion by 2013

Amount to schools:
$660 million for general K-12 aid

Colorado: Constitutional amendment to change bet limits, extend casino hours, add new games

Annual state revenue:
$39 million in the first year

Amount to schools:
$29 million for community colleges

Ohio: Constitutional amendment to authorize a casino in the state

Annual state revenue:
$200 million to be shared by all counties

Amount to schools:
Unknown (Each county makes its own spending decision.)

Maine: Citizens’ initiative to change state law to allow a commercial casino in the state

Annual state revenue:
$50 million

Amount to schools:
$5 million for college loans, scholarships, and general K-12 aid

SOURCE: Education Week

Many opponents also question whether important state priorities should be paid for through gambling, which they say comes with increased social costs, especially for low-income groups.

“Gambling is a troubling way to fund education,” said Tom Grey, the national field director for the Washington-based National Coalition Against Legalized Gambling, a nonprofit group. He and others argue that gambling initiatives chiefly increase revenue to casinos and to gamblers, and not to schools.

For that reason, the League of Women Voters of Maryland—which doesn’t often take a stand on legislation—took the unusual step of coming out against that state’s slots proposal.

“To say that the primary purpose of the proposed video lottery terminals is raising revenue for specified educational purposes is untrue,” the league said in a Sept. 12 statement. “The actual primary purpose of video lottery terminals in this state—as it is anywhere—is to reward gamblers for playing the game.”

That sensitivity may explain why so many gambling-related campaigns go out of their way to make the issue about anything but lotteries or casinos.

“You’d be hard-pressed to even know some of these initiatives are even about gambling,” said Mr. Grey, of the anti-gambling coalition.

In Colorado, for example, the proponents’ group is called “Coloradans for Community Colleges”—though it also contains casino groups. The main group in Missouri looking to expand gambling is called the “YES for Schools First Coalition,” whose supporters include also include the casinos.

The emotions that surround gambling have put some education supporters in a tricky opposition.

Though many Missouri educators and district school officials are listed on the Schools First Coalition’s list of supporters, the Missouri State Teachers Association hasn’t taken a stance on the question—in part because the group’s governing body that would consider such an endorsement doesn’t meet again until after the election.

Todd Fuller, a spokesman for the 44,000-member group that isn’t affiliated with the National Education Association or the American Federation of Teachers, said he was somewhat surprised that gambling advocates weren’t exploiting schools even more to try to win support for the state measure. “It’s actually not been as widespread as I thought it would be,” he said.

Even so, educators across the state are still keenly aware of the gambling initiative.

“We have members call us and they want to know about the proposal,” Mr. Fuller said. “But we tell them it really needs to be a decision they make.”

The Maryland State Teachers Association supports the slot machine proposal in that state, but decided not to launch a statewide campaign to drum up support because two large local bargaining units—in Prince George’s and Montgomery counties—decided not to take a position on it.

But Clara Floyd, the 70,000-member union’s president, said MSTA plan a grassroots campaign urging members to vote for approval. With “no appetite” for tax increases between now and the next election in 2010, teachers fear the budget hole is so large that cuts to public schools cannot be avoided.

Ms. Floyd, who said that the MSTA board of directors debated the issue for hours before deciding to support it, asked: “If not slots, then what’s the alternative?”

A version of this article appeared in the October 15, 2008 edition of Education Week as States Roll Dice On New Funding


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