Gambling Revenues in U.S Fall for First Time in 30 Years

A new report by the Rockefeller Institute of Government examining the four major types of legalised gambling across the U.S has shown that revenues for the 2009 fiscal year have fallen by 2.8% to $21.9 billion compared to the previous year, marking the first time revenues from these sources have declined in over three decades.

The report, 'For the First Time, a Smaller Jackpot: Trends in State Revenues From Gambling', examines the four major types of legalised gambling from which all states across the U.S, except Hawaii and Utah, earn significant tax revenue; lotteries, casinos, racinos, and pari-mutuel betting.

According to the report, state revenues from gambling have been rising continuously from $15 billion in 1998 to $24 billion in fiscal year 2008, at an average annual increase of 4.9%, with an estimated $2.3 billion of 2008 gambling revenues attributable to lottery, casinos, and racino operations brought online after 1998.

Gambling revenues in fiscal year 2009 however declined by 2.8% to $21.9 billion versus the previous year, the first such decline in at least three decades, influenced by the current economic slowdown. Of the 41 states with major gambling revenue and for which information is available, 28 states reported declines over the year, with 14 states reporting decreases of more than 5%. Only 12 states showed growth in revenue.

The largest source of state gambling revenues is lottery income, which experienced an overall decline of $398 million or 2.6% to $14.6 billion between fiscal years 2008 and 2009. Rockefeller Institute staff surveyed the states and obtained state lottery revenue data for fiscal years 2008 and 2009 for 39 of the 42 states that have lottery operations. Of these, 26 states reported decreases over the year, with three seeing double-digit declines. Only 13 states showed increases in lottery revenues.

The second-largest source of revenues is casinos, which saw revenues drop by 8.5% to $4.5 billion during the year, while revenues from racinos, or race track-based casinos, increased by 6.7% to $2.9 billion, largely due to new racinos opening in Indiana and Pennsylvania.

Pari-mutuel wagering makes up a small percentage of revenues from gambling, even though it is the longest established form of legalised gambling in many states. Revenues for the nine month period ended March 31st fell by 14.8% to $138.8 million, with results for Q4 not yet available.

Data on the decline comes as states continue to examine casinos, video-lottery terminals and other gambling operations as potential sources of new revenue, with more than 25 states considering such proposals as part of budget-balancing efforts in the past year.

Authors of the study said new gambling activities often provide a quick boost to state revenues, but generally do not keep pace with traditional tax revenues and government expenditures over time.

"The historical tendency for revenues from existing gambling operations to grow at a significantly slower pace than other state revenues may hold important lessons for states as policymakers consider further expansion of casinos, racinos, and other gambling activities," Institute Deputy Director Robert B. Ward and Institute Senior Policy Analyst Lucy Dadayan wrote in the report.

"Expenditures on education and other programs will generally grow more rapidly than gambling revenue over time. Thus, new gambling operations that are intended to pay for normal increases in general state spending may add to, rather than ease, long-term budget imbalances."

The new report also examined the extent to which states rely on gambling revenues. Overall, gambling revenues make up about 2.3% of states' "own-source" revenues, with the percentage for individual states ranging from as high as 13.6% for Nevada and 9.2% for West Virginia to less than 0.1% in Alabama and Wyoming.

The Nelson A Rockefeller Institute of Government is the public policy research arm of the State University of New York and conducts independent research on American state and local programmes and finances.

The report 'For the First Time, a Smaller Jackpot: Trends in State Revenues From Gambling' can be downloaded in full here.