News Release: Once a “Bonanza” for States, Gambling Revenues Are Slowing, New Study Finds

For Immediate Release –

June 19, 2008

Media contact: Mark Marchand – (518) 443-5283 / marchanm@rockinst.org

Once a “Bonanza” for States, Gambling Revenues Are Slowing, New Study Finds

States Vary Dramatically in Reliance on Revenues From Lotteries, Casinos, and Other Gambling

Albany, N.Y. — A new Rockefeller Institute of Government study tracking states’ revenues from gambling shows that lotteries, casinos, racinos, and pari-mutuel betting now generate over $23 billion annually for states

According to the new analysis, however, revenue growth has slowed considerably in the past three years. State revenue growth from all gambling activities fell by almost half in 2006 and 2007, compared to the previous two years, and was well below the long-term annual growth rate of 5.1 percent. During the first three quarters of the current fiscal year, revenue growth from casinos was only 0.7 percent compared to a year earlier, according to the report, From a Bonanza to a Blue Chip? Gambling Revenues to the States.

“For more than two decades, states saw lotteries and casinos as a bonanza of new dollars for education and other programs,” the authors of the study noted in the report. “Gambling revenue is now at an all-time high, but growth is slowing due to objections about social impacts and broader economic trends. From a fiscal perspective, state-sponsored gambling now resembles a blue-chip stock — reliably generating large amounts of cash, but no longer promising dramatic growth in revenue.”

The independent Rockefeller Institute study is the first of its kind to track state revenues from all gambling sources over the past decade. The new study included revenues from racinos, a relatively new source of revenue where slot machines, table games, or video lottery terminals are placed in existing racetracks.

As recently as 1992, states’ gambling-related revenues were below $10 billion annually. Since then, gambling revenues have climbed steadily to $23.3 billion in fiscal year 2007, following the introduction of new sources of revenue along with expansion of existing sources. States’ revenues from all gambling sources were $14.9 billion in fiscal year 1998, the first year for which comparable data from all such sources are available. Since then, the revenues have grown overall by over 56 percent, or 26 percent when adjusted for inflation.

The slowing trend in growth began about three years ago. Between fiscal years 2005 and 2007, tax revenues from gambling grew 8.7 percent. In the two previous years, the growth rate was nearly twice that.

“Many states have turned to gambling revenue as a means of balancing budgets in recent years,” said the study’s co-author and Rockefeller Institute Deputy Director Robert B. Ward. “Gambling has been a fiscal winner for state governments, but the bonanza years may be ending. Continued resistance to gambling and softness in the industry mean that most states have to look elsewhere to solve this year’s budget problems.”

In recent years, revenues from gambling have made up a consistent 2.1 to 2.5 percent of states’ overall “own-source” (nonfederal) revenues annually. During fiscal year 2006, Nevada and West Virginia had the highest percentage of revenues generated from gambling activities, at 13.4 and 8.9 percent, respectively. Alabama, Arkansas, and Wyoming relied the least on gambling-related revenues. New York collects the most revenue, at $2.4 billion in 2007, followed by Illinois, Florida, and New Jersey. Currently, only two states — Hawaii and Utah — have no state-sanctioned gambling.

For the most recent fiscal year, 2007, the $23.3 billion in states’ gambling revenues was broken out as follows: $17.4 billion from state lotteries, $5 billion from casinos, and about $900 million from racinos and pari-mutuel wagering facilities.

The study does not track revenues from casinos operated by Native American tribes. Generally, states collect little revenues from those facilities, and comprehensive data on revenue from Native American casinos are not available.

For a complete copy of the new report, visit: www.rockinst.org

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About the Rockefeller Institute of Government

The Nelson A. Rockefeller Institute of Government, at the University at Albany, is the public policy research arm of the State University of New York. The Institute conducts fiscal and programmatic research on American state and local governments. Journalists can find useful information on the Newsroom page of the Web site, www.rockinst.org.

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