States Wager on Gambling to Help Budgets

NEW YORK – As state budgets shrink in the economic slowdown, government officials across the United States are wagering that legalized gambling will be the winning ace needed to help shore up treasury coffers.

Forty-four states reported that revenues were below forecast levels in the opening months of fiscal 2002 and gambling could bring in billions of dollars to plug the hole.

At least six states are considering relaxing gambling rules, or adding new games and New York is planning to open six new full-fledged casinos.

The propensity to wager in the United States is high and the amount of money spent on bookmakers and betting illegally on sporting events is bigger than the entire legalized industry, according to Jason Ader, a gaming industry analyst at Bear Stearns & Co.

New York legislators, worried about a $9 billion loss in tax revenues following the Sept. 11 attacks, last month agreed to allow Indian tribes to open new casinos in the Catskills, Buffalo and Niagara Falls, a move which could bring in $1 billion in three years.

During the last economic slowdown in the early 1990s, gaming proved to be an excellent economic stimulator for many states, starting with Iowa.

Fear of losing revenues to neighboring states that already allowed gambling prompted Illinois, Missouri, Indiana and Michigan to also allow gaming at that time.

Governors and legislators who are mulling gaming now are also concerned about the same competitive pressures.

``It makes good economic sense for states to at least look to keep some of that business within their own borders,'' Ader said.

Even in a climate of massive job layoffs and grim company earnings reports, states are still likely to reap benefits from gambling revenues, he said.

``In economic slowdowns, people like to do three things,'' Ader said. ``They like to drink, they like to smoke and they like to gamble.''

But don't put money on new casinos opening up anytime soon in New York or other states, said Bill Newby, managing director of the gaming and leisure industries group for the Bank of America in Los Angeles.

``The complexities of getting gambling spread throughout New York or just in the Catskills is going to be a time-consuming process,'' Newby said.

The proposal needs approval from two concurrent legislatures, followed by agreements from the Indian tribes to put their land into trusts.

Moreover, anti-gambling groups, as well as other dissenters, may go to court to stop or stall the process. Business magnate Donald Trump, who owns three Atlantic City casinos, has said he will consider suing New York State if it follows through with its plans.

It could take from three to five years before the state saw any benefit from the casinos, if at all, analysts said.

NY CASINOS WON'T BE DEATH KNELL FOR ATLANTIC CITY, CONN.

Even if New York is successful in bringing new casinos into play, it still will not mean the death knell for casinos in Eastern Connecticut or Atlantic City, New Jersey, experts said.

Connecticut's Foxwoods and Mohegan Sun casinos will be less impacted than Atlantic City, Newby said, because they depend heavily on customers from New England and less so from New York.

But competition will not devastate Atlantic City's business and concerns are overblown, said Lawrence Klatzkin, a gaming analyst at Jefferies & Co.

``By the time Native American casinos open in the Catskills, Atlantic City will have added significant amounts of new rooms and other amenities, which should drive Atlantic City's growth rate sizably,'' he said. ``Hence, Atlantic City will still grow if and when the Catskills open.''

SMALLER GAMING VENUES MORE LIKELY THAN CASINOS

Full casino gaming may not be in the cards for most states, but a number are contemplating smaller gaming operations, such as slot machines at horse racing tracks.

Bills to allow slots in Pennsylvania have been proposed for four years, but have never gotten out of committee. But slower tax revenues may help to get such bills passed now, analysts said.

Other states considering relaxed gambling restrictions or new forms of games include Indiana, Missouri, Maryland, North Carolina and Tennessee. Iowans will decide in November 2002 whether legalized riverboat gambling should continue.

But officials in some other states are saying ``no dice'' to expanded gambling.

Wisconsin Gov. Scott McCallum has nixed the idea of adding to the 17 tribal casinos already in the state as a way for Wisconsin to help cope with a $300 million to $1.3 billion revenue shortfall in the current biennium.

``It's not the way for Wisconsin to grow its economy,'' said Debbie Monterrey-Millett, McCallum's spokeswoman.

In Ohio, Gov. Bob Taft's proposal to have the state join a multi-state lottery to raise $41 million in fiscal 2003 was dumped last week by state lawmakers in the House, who came up with other ways to help patch a $1.5 billion hole in the state's two-year budget.