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Legalizing gambling can come with high social costs

Published: Saturday, Sept. 1 2012 3:39 p.m. MDT

Resorts World Casino in the Bronx is the newest of 14 casinos New York allows to operate. (Kathy Kmonicek, Associated Press) Resorts World Casino in the Bronx is the newest of 14 casinos New York allows to operate. (Kathy Kmonicek, Associated Press)

The thousands of people who pass through the Broadway-Lafayette subway station every morning on their way to work are offered an easier way to make money than the typical 9-5 job: the New York Lottery.

With phrases spelled out in letters made of cash, the ads promise New Yorkers they can win big. "Rolling in it." "Made of money." "On easy street." "Your butler has a butler." The message is clear: "Yeah, that kind of rich."

The 46-year-old New York lottery is the largest in North America and funds nearly 15 percent of the state's education budget, according to its website. And it's just one of New York's legalized gambling ventures. The state currently allows 14 casinos to operate, including the 10-month-old Resorts World in Queens, a 10-minute cab ride from the John F. Kennedy International Airport. It's an effort by the state to raise revenue and keep New Yorkers' gambling dollars in New York.

Cash-strapped states across the country are expanding legalized gambling to make easy money, but they might want to check their odds: only two of the 13 states that have legalized gambling in the past decade have met their projected revenues. And with increased competition and payouts that often fail to meet expectations, expanding legalized gambling might not be worth the social costs.

"It's an easy source of revenue," said Keith Whyte, executive director of the National Council on Problem Gambling. "As long as you don't look too close at the social cost, you can paint it to seem like money from nowhere."

But Whyte said he believes gambling as a source of revenue for states isn't sustainable.

"At some point, there's got to be saturation," he said.

Mid-Atlantic states have become a gambling hub in recent years. The Foxwoods casino in Ledyard, Conn., is larger in square feet than any casino in Las Vegas. Same with Mohegan Sun 14 miles away in Uncasville, Conn. Although Nevada remains the top state for gambling revenue, it's followed by Pennsylvania and New Jersey, and neighboring states are trying to carve out their share of revenue.

Maryland Gov. Martin O'Malley signed a bill Aug. 15 that, pending voter approval in November, would increase the number of casinos in the state from five to six and would legalize table games such as blackjack, craps and roulette. Currently, only slot machines are offered in the state.

"People were saying we were losing revenue because there were too many Maryland license plates (parked at casinos in other states)," said Maryland state Sen. Paul Pinsky, a Democrat representing Prince George's county where a new casino would be built.

Maryland's first casino opened in 2010. Since then, two more have opened, and another two are being developed.

Pinsky was one of 14 legislators who voted against the gambling expansion. While many oppose gambling for religious reasons, including the Southern Baptist Convention, which has previously called on political leaders to enact laws that would eliminate gambling, for Pinsky, it's not a moral issue but a matter of money.

"Long term, it's not a solution," he said. "Particularly if more states do it."

Maryland state Sen. Nancy Jacobs, a Republican representing Cecil County where the state's first slots facility was built, also voted against the bill.

"Here we are opening up four more casinos when we haven't had enough time under our belt to see what effect it'd have," she said. "Having a new casino open up isn't going to create new gamblers. If you look at it as a pie chart, it's finite. There's only so much to go around."

Jacobs said she has heard arguments about the social problems associated with gambling, such as increased crime, domestic violence and suicide, and she's concerned the revenue gambling is supposed to bring her state won't meet expectations.

"Maryland has spent money like it's going out of style," she said. "We're always looking for new gimmicks, and this is the latest … I'm not sure what else is out there."

Hawaii and Utah are the only states that prohibit all forms of gambling, according to the American Gaming Association.

In Tennessee, only the lottery is available, and in Georgia, South Carolina and Vermont, the lottery and "charitable gambling," or charity-sponsored gambling such as bingo nights where profits go to charitable organization, are legal.

That leaves 44 states with various combinations of stand-alone commercial casinos, racetrack casinos, Indian casinos and pari-mutuel wagering, or pooling money to bet.

Keith Whyte, the executive director of National Council on Problem Gambling, sees the expansion of gambling as a domino effect that could spread across the country.

"Right now, it's concentrated in the Mid-Atlantic, but we certainly see that changing," he said.

To sell legalized gambling to states and voters, lucrative revenues are promised that can fund programs like education. But most states have failed to meet these projections. Indiana and South Carolina are the two exceptions, according to the Pew Center on the States.

Pennsylvania has profited more than any other state that has legalized gambling in the past decade. Still, it's $348 million behind what was promised by former Pennsylvania Gov. Ed Rendell when stand-alone commercial casinos and racetrack casinos were legalized in 2006.

Holly Wetzel, communications director for the American Gaming Association, said there are many reasons states don't reach their project revenues, including the recession.

"Casinos, like a lot of other entertainment venues, are dependent on consumer discretionary spending," she said.

Wetzel said casinos are an important part of many areas' economies, bringing in jobs and increasing business for local companies and suppliers, and she said problems associated with casinos are often overblown.

Crime is among the top worries for gambling opponents, with research indicating it rises in an area with the introduction of a casino. Robbery in an area increases immediately after a casino is built, according to a study published in The Review of Economics and Statistics in 2006. After a casino has been in an area for five years, property crime increases 8.6 percent and violent crime increases 12.6 percent, according to the study. Wetzel dismissed the rise in crime as an increase in population in the area.

Opponents of legalized gambling also worry about problem gamblers, a classification by the American Psychiatric Association for people with an urge to gamble who can even experience withdrawl if they reduce their gambling. Wetzel said problem gamblers only represent about 1 percent of the adult population. An additional 2 percent to 3 percent have a gambling problem at some time in their life, but not enough to be clinically diagnosed.

Wetzel said casinos sometimes have a bad reputation, but it is a result of inaccurate preconceived notions. "There are perceptions about casinos that don't match reality," she said. According to a survey conducted by the American Gaming Association, 68 percent of people who live in a county with a casino would keep it in their county if there were a vote.

Still, opponents of legalized gambling are hoping to roll back the gaming industry's advances, arguing its legalization and expansion will eventually cost the taxpayer. Increased crime, law enforcement, and unpaid bills and debts from problem gamblers cost society, Keith Whyte of the National Council on Problem Gambling said.

A single gambling addict costs $1,215 a year, mostly in criminal justice and health care costs, according to an estimate from the National Council on Problem Gambling.

Les Bernal, national director for Stop Predatory Gambling, said he believes legalized gambling is "one of the biggest public policy failures of the past 40 years."

"Government is so desperate for new money, and it's afraid to make the hard decisions to put their house in order," he said. "The whole thing is a money for nothing campaign. Gambling is a transfer of wealth."

Bernal said he believes gambling leads to "higher taxes, citizens with deeper levels of personal debt, higher rates of gambling addictions and economies built on phony prosperity."

"It's not like going to Las Vegas once," he said. "It's like putting Las Vegas on Main Street."

Maryland state Sen. Nancy Jacobs agrees.

"If you're a gambler and suddenly you don't have to go so far to gamble, you're probably going to gamble more at home," she said.

Hunter Schwarz is a freelance writer based in New York.

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