Casino Gaming in Kentucky: Revenues in the Modern Competitive Era - Research Paper Example

? and Number Casino Gaming in Kentucky: Revenues in the Modern Competitive Era Like many s, Kentucky in the 1990s, seeking to fund programs falling victim to fewer and fewer budget resources, wished to consider expanded casino gaming as a means of increasing revenues. As in most states, both support and opposition was equally avid, with supporters citing economic benefits and those opposed countering with arguments that casino gambling would encourage negative social consequences. Despite the latter charges, gambling will produce in a state struggling with a weak economy considerable financial benefits when weighed against predicted negative social consequences. The Kentucky Gambling Study, 1999 sums up the basic situation and proposal: …the state’s residents spent about $1 billion on gambling trips outside the state in 1998. Most of that amount was for food, lodging, and transportation. Gambling losses were $433 million, nearly half of which was dropped at riverboat casinos just over the Kentucky state line…Kentucky could capture a big chunk of that money by expanding its own gambling, especially with casinos or with racetrack “wagering parlors” equipped with slot machines and video lottery terminals. (Von Herrmann, 2002: 95) Regarding the many concerns that legalizing casino gambling would bring about a social catastrophe of unequaled proportions, the same report dismissed such predictions as increases in divorce and family problems related to gambling as purely speculative and inappropriate for consideration in any final decision. However, it should be noted that the report was commissioned from “Price Waterhouse Coopers, a national accounting and consulting firm…after Kentucky’s governor floated the idea of creating casinos to raise money for the horse industry, for cities, and for the preservation of farmland and natural areas” (Von Herrmann, 2002: 95). Thus it could be charged, or at least legitimately suggested that the result would not only favor legalization but would dismiss other concerns not directly related to improving the economy. This is especially true given the support for expanded casino activities by the race horse industry, a powerful influence in the state, which stands to gain significantly from an increase in legalized betting. Proposals in 2008 made by Governor Beshear had serious implications for the horse racing industry, since up to seven licenses for horse-racing tracks and up to five free-standing casinos were suggested. If state lawmakers and voters approved his plan, Kentucky would be the last of the five states that border Ohio to adopt casino gambling.The free-standing casinos in Kentucky would require a voter referendum in the cities or counties where they would be situated. The track casinos could be either at raceways or on other land within the county where the track operates. The enticement was also clear with financial projections estimated at $600 million in revenues—all slated for education, health and a variety of social, cultural and economic programs suffering under budget cuts. (Bordering Kentucky’s Governor…par. 4) There is little doubt that liberal casino gambling laws in surrounding states have had their effect, particularly on horse race gambling in Kentucky, where betting on horses is somewhat of a tradition if not especially supportive of its economy. Statistics suggest that when it has been introduced into existing pari-mutuel horse racing markets, casino gambling has resulted in a significant decline in wagering in that state. A decline has been observed in other areas where casino gaming has been introduced into an existing horse-racing market without expanding betting options at or near tracks. The industry, as might be imagined, is promoting the expansion to include casinos nearby tracks as well as onsite electronic betting options to attract more betting on the ponies. In short, the move for combining casino gambling with horse betting has been seriously encourage and promoted by the industry. Evidence suggests that casino gaming is a strong substitute for wagering on horse races when it is made available. “To put the size of the two gambling markets in perspective, consider that Indiana riverboats generated $958 million in revenues in 1997. This was almost eight times the approximately $120 million in revenues resulting from horse race wagering in Kentucky” (Lawrence and Thalheimer par. 7) Arguments for expansion in Kentucky suggested that Ohio, in the process of expanding casino gambling, would virtually cripple wagering in the racing industry in Kentucky and seriously diminish funds currently going to the state. Casino gambling as suggested would couple residents desire to not only play other wagering games, but encourage an increase in horse race betting that would ultimately benefit not only the industry but increase revenues going to fund programs. For a state proud of and reliant upon the horse racing industry, the argument for casino expansion at or near track sites certainly makes sense. By 2009, the issue of expanded gambling at race tracks had gotten nasty and political. Beshear was in the forefront, urging lawmakers to preserve an estimated 100,000 jobs in a 4 billion dollar industry he suggested would fall victim to more liberal gambling laws in other states if Kentucky lagged behind in casino betting activities. Lawrence and Thalheimer, both professors in the Equine Industry Program at the University of Louisiana agree that some form of expanded casino gambling will benefit the industry: None of these alternatives is exclusionary, and the revenue-generating potential of each should be considered when determining which options to pursue. But we must move quickly. Given the rapid growth of riverboat gambling competition in neighboring states, it is imperative that Kentucky's leaders begin framing a policy now to preserve the future of our horse racing industry and stabilize this vital sector of our economy. (par. 11) It must be noted that a large part of the argument both for and against expanded betting has more to do with keeping the industry solvent than any direct financial benefit to the state. One can argue that keeping the industry of which Kentucky is undoubtedly proud going financially is a worthy goal in itself. However, to suggest that moves to expand casino gambling as a means of increasing state budget revenues via the horse racing industry would be an exaggeration, other than taxes paid by winners. Aside from arguments basically made from the perspective of keeping Kentucky gamblers “at home,” along with increased revenues from casino gambling in general, others suggest the benefits may not be as significant as proposed, and the detriments simply not as serious as suggested. On the opposite side of the moral spectrum, since the early 90s church and community leaders had been railing on against the immorality of gambling itself despite possible revenues. Charges flew wildly, as did statistics “proving” the increase in gambling in states that had adopted casino gambling, along with the obvious social costs in terms of criminal activity the encouragement of compulsive gambling behavior. Charges alleged clear indications of social cost from a practice “inherently evil” (Henderson par. 2) Economic rationales that support casino gambling expansion have also been challenged, for instance the notion of what calls, “The Cannibal Effect:” gambling facilities that fail to draw outside money into local communities while conversely draining local resources. “They [casinos] can …end up doing more harm than good…By competing for, and often winning much of a limited market, gambling operations can hurt local firms, ultimately driving them out of business” (, The Cannibal Effect: 1) While this all sounds at first a bit vague, it can perhaps be better understood by assessing casinos as all-inclusive recreational areas that may do serious economic harm to local eateries and cultural activities. In many places businesses, seeking to compete, turn from being local shops to part time casinos themselves, or go out of business entirely, leaving local residents without basic services. As a local Sheriff in one town overtaken by a casino said, “"I have to drive 60 miles to buy a pair of socks!" (, The Cannibal Effect: 1) In short, casinos tend to “become” the towns. Perhaps a more serious social concern is obviously the element of crime that has been attached to gambling in general and its association with criminal elements. The general consensus is that gamblers tend to “integrate their enterprises with local law enforcement and politicians, creating atmospheres of corruption that itself encourages an influx of a lower element that destroys communities…Urban casinos [in the past] harbored prostitutes, smugglers of various commodities, and were places where the gamut of criminal enterprises were both planned and celebrated” (Von Hermann, 2006: p. 144). Other perspectives, including those of politicians, have differing views on the benefits of casino gambling. Some see, some see the expansion as a diversion, a “quick fix,” so to speak, from the real economic problems in Kentucky, that of stagnant economic growth due to lack of diversity and opportunity in local economies. Sporting events, such as the World Equestrian Games of 2009 in Lexington is an example of the kinds of alternative ways the state can improve revenues. Beshear, however, has consistently countered this claim, citing [unspecifically] figures that indicate tourism numbers are best in states that have gaming. In retrospect, the charge that the easy money way fixing budgetary shortfalls through expanding casino revenues does have validity as does the notion that such quick fixes may put programs for economic development “on the back burner” so to speak. Despite a myriad of self serving statistics and hypotheticals to back up or oppose the issue, the hard economic facts remain. Kentucky is, like many other places, faced with pension shortages, Medicare shortages, and all other sorts of budget shortfalls, causing many to contend that if casino gambling is not expanded, millions in revenue will continue to leave the state, flowing over to Indiana and Ohio. Regarding the moral objections, such positions have a degree of validity but are just as often products of moral beliefs that oppose all gambling. As such, one must ask: Is it fair in the interests of the general good to deny revenues to the state that will help fund needed programs? Numerous studies around the country have been conducted on casino gambling which compare criminal activity before and after the advent of casinos. The results are inconclusive and scattered. Suspicions also abound about investigations into Indiana’s support for anti-gambling measures in Kentucky that actually contradict statements that Kentuckians do not want expanded casino gambling. The assumption by a group that gambling is bad for Kentuckians is certainly anti-Constitutional. To deny revenues and jobs to a struggling economy on the basis of moral predictions is unconscionable. Consciously allowing revenue to migrate to other states is unquestionably bad governance in the face of weak and unproven moral objections posed. asks the $64,000 question: Does gambling pay off? His conclusion is as clouded as the discussion itself. Studies are usually paid for and thus tainted with partisan conclusions. So conclusions as to whether it is financially wise to expand it becomes a matter of governmental common sense in how revenues are collected and distributed. Decisions must be carefully measured based on successful gambling models elsewhere, as well as comprehension of makeup and issues indigenous to Kentucky communities. As it stands, and with no other figures to go by other than those collected, it is wise for the state to expand casino gambling, but on a slow and steady pace, monitoring carefully the social and economic ramifications. To jump headlong into to much expansion to quickly may present situations which may later on prove unwise and detrimental. Regarding moral and social arguments, it is probably true that more gambling options will present compulsive gamblers with greater opportunity to feed their obsession. However, one is never sure in a free society if the restriction of an activity necessarily exacerbates it. If a person is a gambler, they will find a way to satisfy their thirst for betting. Yet, the case can be made that a younger generation, exposed to more gambling options, might raise a new generation of compulsive gamblers. That is always a danger. I would say that for now, and by all realistic figures and predictions, Kentucky needs revenues. Should it be avidly seeking to improve its economy through attracting promoting job creation and businesses? Yes. However, such development takes time, and the revenues lost that might be spent on needed programs can not be recouped. But perhaps the best argument for expanded gambling in a state proud of its horse racing tradition would be the benefits of casino gambling for that industry In a country that thrives on capitalism, it is naive to dismiss the fact that casino expansion related to the sport is simply good business. Kentucky can not live isolated within some vague moralistic conclusion that gambling is simply “bad,” and that its presence will destroy its values. If people can not work and earn [it seems clear that expansion will create jobs] moral stances will mean little. Works Cited “Bordering Kentucky’s Governor Talking Casino Gambling.” Available on: Business First Website, posted February 14, 2008. (Accessed June 3, 2011). Henderson, Trennis. “Casino Gambling in Kentucky: Just Say ‘No’” Available on The Ethics and Religious Liberty Commission Website, posted October 15, 2007 (Accessed June 3, 2011) on: Read More