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The REAL Costs of Slots and Casinos

Costs to the Lottery
Reduced local aid:  According to a Greater Boston Chamber of Commerce report commissioned in March 2008, if the lottery takes a 10% hit from the introduction of casinos and slots, as it is expected to do, state lottery transferred as state aid to towns and cities will be reduced by about $90 million. Massachusetts cannot afford this hit to the Lottery.

Costs to Individuals and Families
Money is siphoned from the local economy:  Based on an analysis of average daily profits at Foxwoods in 2007, for the state to collect $200 million in tax revenue, 40,000 people would have to lose $234 every day, 365 days a year. Massachusetts residents cannot afford to spend $234 each day on top of all the money already spent on the most productive Lottery in the country.

Costs to City and Town Budgets
Expensive impact to host regions and municipal budgets:  Infrastructure, traffic, environment, housing, public safety, education, water and sewage, have been identified by four regional groups (western, central. metro-Boston, and the southeastern region) of planners and local officials as extraordinary costs that will occur with slot parlors and casinos that local taxpayers should not subsidize. Massachusetts towns cannot afford to underwrite the casino trade.

Costs to Local Economy
Hurts the local economies:  According to a New England Public Policy Center report in 2006, 85% of patrons live locally. When money is spent at slots and is not spent on movies, local restaurants, appliances, and home improvement, it leaves the local economy. The Boston Business Journal wrote that the claim that casinos will create 20,000 new jobs "is bogus because the diversion of billions of dollars in one sector is destined to cause job losses in other sectors." Massachusetts businesses cannot afford to lose more revenue in this economy.

Costs to Taxpayers
Taxpayers subsidize the industry that doesn't pay for itself:
  California taxpayers subsidized the gambling industry paying for a $1 billion dollars per year of social costs related to slots/casino gambling. Australian taxpayers subsidized the gambling industry paying $4.5 billion dollars of social costs related to slots/casino gambling per year. The Massachusetts Budget cannot afford to subsidize an industry that doesn't pay for its costs.

Costs to Law Enforcement
Expenses of Economic Crime Bill have not been calculated.   Attorney General Martha Coakley has warned the Legislature we do not have the legal framework and capacity to deal with the money laundering, gang and organized crime that will occur with legalizing slots and casinos. There is no funding earmarked for the equipment, surveillance, personnel, judicial and corrections budgets. Massachusetts law enforcement cannot afford this additional burden.

The House Always Wins:
How the Gambling Industry Preys on Addiction

The casino industry has addiction down to a science. The casino industry has whole teams of workers who study problem gamblers and the science of addiction to learn how exactly they can best market their products to the people most likely to become addicted.1

Casinos make up to 90% of their profits from 10% of the players2. Slot machines take credit cards, not coins, and are designed so players can make hundreds of bets per minute - giving players a buzz similar to cocaine.3 Quite simply, if people were not addicted to their product, casinos would not be profitable.

The goal of slot machines is to get gamblers to play longer, faster, more intensively and to "play to extinction." Everything, from the sounds the machines make to the timing and frequency of payoffs, are all carefully designed to maximize the amount of time people sit at a machine, encouraging players to spend until they have nothing left.4

Predatory slots are not like interactive, social gambling games like bingo, Friday night poker games, or office sports pools. The state sponsors more than enough regressive gambling with the Lottery.
Predatory: adj. "unconscionable practices that take advantage of the vulnerable."
Slots take the word "predatory" to a new level: at least the lottery can't be purchased with credit cards; can't put liens on someone's home; does not serve alcohol 24/7; and does not actively seek out and market to scratch ticket addicts.

Casinos aggressively market to problem gamblers. They collect extensive information about their most frequent customers, and use statistical models to predict when targeted customers will gamble and how much they will spend -and base their marketing accordingly.5 In Illinois, a casino was fined $800,000 for marketing to problem gamblers who had voluntarily banned themselves from entering a casino by placing themselves on a self-exclusion list.6

Slot machines are highly addictive, much more addictive than any other form of gambling. Today's predatory slots are meticulously designed computers, generating precise profits, deliberately creating a false sense of near wins and regular small payoffs that create an illusion of sporting chance.

Expanded Gambling is Bad for Local Businesses

Casinos will hurt local restaurants, hotels and entertainment businesses. Money that would otherwise be spent at locally-owned small businesses will instead be dumped down predatory slot machines owned by out-of-state corporations. Massachusetts dollars are shipped far away to wealthy owners and investors, and little of that money is being reinvested in the local community.

Casinos and slots won't help locally-owned tourism businesses. Casinos will divert tourists and residents away from local historic, cultural, and natural attractions from Cape Cod to the Berkshires, hurting businesses that rely on those visitors. To the extent that people do travel to Massachusetts for a resort-style casino, they'll stay at a casino hotel, eat at casino restaurants, and go to casino-sponsored entertainment events. Casinos drain money from the local economy.

When discretionary income is spent on gambling, local businesses suffer. Consumers have less money to spend on clothing, electronics, furniture, automobiles, or any other locally sold product. A study on the costs and benefits of casinos found that for every $1000 in increased casino revenue, businesses up to 30 miles away lost $243.7

Job growth in the casino industry will lead to job cuts elsewhere. As the Boston Business Journal notes, the claim that casinos will create 20,000 new jobs "is bogus because the diversion of billions of dollars into one sector is destined to cause job losses in other sectors".8

Expanded gambling hurts worker productivity. Local businesses can anticipate increased personnel costs due to increased job absenteeism and declining productivity of workers.9

Expanding gambling is not an effective economic development strategy. It drains money from local economies, hurting local businesses. As the Wall Street Journal notes, "a growing body of research and experience suggests the odds are not stacked in the state's favor"10 when it comes to economic development. There are better strategies for creating jobs and promoting economic growth in the Commonwealth that don't come with the significant down sides that casinos bring.

Predatory Slots Hurt Families and Local Communities

Casinos are simply one huge transfer of money from the pockets of working families to the bank accounts of multi-millionaires.

Expanded gambling causes increases in crime. One of the most comprehensive studies on casinos and crime reported that casinos increased rates of rape, robbery, aggravated assault, burglary, larceny, and auto theft. 11

More "convenience gambling", closer to home, creates more problem gamblers. Even proponents of expanded gambling admit that the number of problem gamblers grows as people have easier access to government-promoted slots. That could translate into as many as 300,000 people in Massachusetts, not including the family members and friends of these addicts who will also experience the consequences.12 That's also 10 times the number of the most optimistic job creation figures.

Problem gambling leads to distressed families, child neglect, suicide and bankruptcy. Domestic violence rates go up, as do foreclosures.13 Families break apart, and thousands of people become addicted. Why would the Commonwealth, whose mission is "to promote the common good" partner and promote a product that leads to these outcomes for thousands of its citizens?

Legislation can't "fix" the addiction problem. Predatory slots make their profits off players who play until they are broke. If we "fix" the addiction problem, we also ruin the business model. If we ruin the business model, there is no profit to tax for state revenue.

Our communities need jobs that actually pay well. Despite what casino executives promote, many of the jobs in casinos pay very little.14 The wage data they cite is skewed by high executive pay.

Casino workers often can't afford to live in the communities where they work. Card dealers earn on average $15,810 per year -not nearly enough to support a family in most Massachusetts communities.15 A family of two with an income of $15,810 is income eligible for Food Stamps, WIC, Fuel Assistance, Utility Shutoff Protection, MassHealth, Section 8, Massachusetts Rental Voucher Program, Public Housing, and the Earned Income Credit -all of which costs Massachusetts taxpayers money.

The Hidden Costs of Expanded Gambling

Proponents of casinos often talk about "all the revenue casinos could bring Massachusetts." What they fail to do is subtract from those revenue numbers the enormous, hidden costs to government and taxpayers. That's why Connecticut and New Jersey have higher taxes and worse fiscal problems than Massachusetts.

The Costs of Crime

When casinos come to town, crime goes up. Crime, including embezzlement, robbery, DUIs, aggravated assaults and domestic violence rates, increases 8 -10% right after casino is built, and continues to increase after that -- and local communities have to pick up the tab.16 Local governments also bear the costs of significant increases in emergency service calls and casino-related traffic problems requiring police oversight.17

The Costs of Regulation

Creating a whole new bureaucracy isn't cheap. A brand new government bureaucracy will be necessary to audit, regulate, inspect and oversee casinos -to the tune of $20 million, or higher.18 Hundreds of government employees will be necessary to ensure compliance with regulations regarding money laundering, wiretapping and loan sharking.19

The Costs of Problem Gambling

Problem gamblers are expensive. Due to the predatory, addictive nature of the new slots, Massachusetts can expect a 50% increase in the number of problem gamblers in Massachusetts if we expanded gambling in the state.20 According to the California Attorney General's office, problem and pathological gamblers cost California $1 billion per year,21 while officials in Indiana, after an exhaustive review, estimated the cost of serving each problem gambler at $2,500 per year22. This would add up to well over $750 million in costs for Massachusetts.23 Even half of that number would be an enormous fiscal burden to add to the already dwindling appropriations for the Commonwealth's mental health and substance abuse services.

The Costs of Missed Opportunities

There are more effective ways we could be spending our money. Top economists, including a Nobel Prize winner24, agree -- money spent in casinos does not have nearly as much of a positive effect on the rest of the economy as spending and investment in other industries. That's why the most pro-businesses papers, including the Boston Business Journal and the Wall Street Journal, oppose casinos.

Expanded Gambling: Short Term Revenue, Long Term Problems

"There are two simple questions: Where does the money come from, and where does the money go? If the customers live in the local area, there's no way you can have economic development."
- Professor William Thomson, University of Nevada, Las Vegas25

Proponents of bringing predatory slots to our state would like you to think that casinos will solve all our budgetary woes -but we can't gamble our way to fiscal sanity.

A budget can't be balanced on one-time revenue. Licensing fees are single payments -not stable, recurring revenue -so we can't responsibly use this money to lower taxes or restore government services. And, licensing fees will likely be much less than anticipated. In Pennsylvania, licenses originally valued over $500 million were sold for $50 million, leading to a cumulative loss of over $2 billion in anticipated state revenue.26

Much of the new revenue will simply be transferred from other sectors, not created. The estimated revenue numbers from slots sound enticing, until you realize how much revenue we'll lose from other businesses that see a downturn in profits once the casinos come to town. Expanded gambling will drain millions of consumer dollars from our economy. Gambling transfers consumer dollars into gambling facilities, resulting in a net decrease in jobs in the overall economy.27

Lottery revenue will also take a steep hit. It's estimated that casinos will reduce state lottery revenues transferred as state aid to towns and cities by about $90 million.28 It's a shell game -- taking money from one account and putting it into another.

Casino revenue is not stable. It's been in decline across the country, and many are going bankrupt. A recent report by the Rockefeller Institute concludes that casinos have contributed to, not helped, states' fiscal meltdowns.29

All that "lost revenue to other states?" It's a myth. It's simply untrue that Massachusetts is losing billions of dollars to Connecticut. It's estimated that Massachusetts residents contributed approximately $93 million to the Connecticut treasury in CY 2009 as a result of gambling.30 This is close to amount as we would lose with a 10% hit to the lottery.31

1 Schull, Natasha. Oral Testimony before Committee on Economic Development, March 18, 2008.
2 Binkley, Christina. Winner Takes All. 2008. page 184.
3 Breiter, Dr. Hans. Director, Massachusetts General Hospital Motivational and Emotional Neuroscience Center. Testimony before Massachusetts Senate Committee on Economic Development and Emerging Technologies. June 2009.
4 Schull, Natasha Dow. "Written Version of Testimony Delivered at the Hearing on Gambling Addiction." October 31, 2007. Boston State House.
5 Binkley, Christina. Winner Takes All. 2008. Page 184.
6 Tita, Bob. "Casino fined $800k for marketing to banned gamblers." Chicago Business. May 19, 2008.
7 Grinols, Earl L. Gambling in America Costs & Benefits. Cambridge University Press, 2004. Pg. 77.
8 "It's allabout the money." Boston Business Journal. December 21, 2007
9 Grinols, Earl L. and David B. Mustard. "Business Profitability versus Social Profitability: Evaluating Industries with Externalities, the Case of Casinos." Managerial and Decision Economics. 2001. Pg. 151.
10 Whitehouse, Mark. "Bad Odds." Wall Street Journal. June 11, 2007.
11 Grinols, Earl L., Mustard, David B. and Dilley, Cynthia Hunt, "Casinos, Crime and Community Costs." June 2000.
12 Utilizing proposed casino locations (3) and extending a 50 mile radius around each, this area includes 319 cities and towns (approximately 6,327,100 people or 97% of the population). If you accept that 5% in the 50 mile radius will be problem gamblers, this totals 316,355 residents. (6,327,100 x .05 = 316,355)
13 National Gambling Impact Study Commission Report, commissioned by the United States Congress.1999
14 Kneale, Klause. "America's Best and Worst Paying Jobs." Forbes. May 4, 2009.
15 US Department of Labor. "May 2008 National Industry-Specific Occupational Employment and Wage Estimates -Casino Hotels."
16 Grinols, Earl L., Mustard, David B. and Dilley, Cynthia Hunt, "Casinos, Crime and Community Costs." June 2000.
17 Baxandall, Phineas and Bruce Sacerdote. "Betting on the Future: The Economic Impact of Legalized Gambling. "
Rappaport Institute for Greater Boston, Dartmouth College. Policy Briefs, January 13, 2005
18 Based on budget figures from other states with casino gambling (NY, IL, PA, NJ).
19 Testimony of Attorney General Martha Coakley. Senate Information Hearing on Gambling. June 29, 2009.
20 National Gambling Impact Study Commission. 1999.
21 Simmons, Charlene Wear, Ph.D: "Gambling in the Golden State 1998 Forward". Requested by Attorney General Lockyear, 2006.
22 Spectrum Gaming Group, "Comprehensive Analysis: Projecting and Preparing for Potential Impact of Expanded Gaming on Commonwealth of Massachusetts.", p. 27.August 1, 2008.
23 Assuming 300,000 problem gamblers, see below
24 Paul Samuelson, Economics 245 (10th ed, 1976).
25 Whitehouse, Mark. "Bad Odds". The Wall Street Journal. June 11, 2007
26 Rogol, Natalie. "Pennsylvania's Gambling Addiction". Commonwealth Foundation. July 9, 2009.
27 Kindt, John W. Diminishing or Negating the Multiplier Effect: The Transfer of Consumer Dollars to Legalized Gambling: Should a Negative Socioeconomic "Crime Multiplier" be Included in Gambling Cost/Benefit Analyses?. 2003. Pgs. 281-313.
28 Based on a 10% hit to the lottery. "Casino Gaming in Massachusetts: An Economic, Fiscal, & Social Analysis." Commissioned by the Greater Boston Chamber of Commerce. March 2008.
29 Dadayan, Lucy and Robert B. Ward. "For the First Time, a Smaller Jackpot. Trends in State Revenues from Gambling".The Nelson A. Rockefeller Institute of Government. September 21, 2009
30 Barrow, Clyde. "New England Casino Gaming Update 2009." p.viii.
31 In FY10, the MA lottery distributed $936 million back to the state. If we lost 10% of lottery revenue transfers, that would amount to about $93 million loss in aid to the Commonwealth.