Gambling

The state of Illinois is into gambling in a big way and still wants to expand its  reach into more Illinois pocketbooks. I think it’s time to say “enough,” as state sponsored gambling is the only activity I know of where citizens have to lose overall for  the state to generate revenue. 

Gambling is big business for Illinois, which generated more than $1 billion in  revenue from seven forms of legal gambling in the state—the lottery, riverboat casinos,  horseracing, video gaming (not yet open for business), bingo, pull-tabs and jar games,  and charitable games. The last three generated only $8 million in revenue for the state in  2009, so let’s focus on the big ones. 

The lottery was to solve the education funding problem, and all net revenues do  go into the Common School Fund, about $600 million a year, which is but a small  fraction of the $7-8 billion the state spends on public schools. The lottery generates  about $2 billion in annual sales, of which 55-58 percent goes for prizes and 30-33 percent  is net profit to the state, which is good for the state and bad for the lottery players. 

The average family of three persons in Illinois spends about $500 a year in lottery  tickets. Don’t believe me? The math is simple: 4 million families of three persons each  divided into $2 billion.

But not enough of us are playing the lottery, thinks the state, so the state recently  turned over operations to a private concern, which promises creative marketing to  increase the number of players and also to take the lottery online. 

The riverboat casinos have been the “success story” of Illinois gambling, with up  to $699 million (in 2005) returned to the state coffers, more than from the lottery that  year. But with the statewide smoking ban a couple of years ago has come a dramatic  fall-off in riverboat “gaming hold” (revenues minus winnings), from a high of almost $2  billion in 2007 to only $1.5 billion in 2009. State net revenue has also fallen, to $430  million in 2009. 

I have only been on a gambling boat once, in days before the smoking ban, and  the air was a thick blue with smoke. Smokers can go to Indiana casinos to enjoy both  vices simultaneously. 

Horse racing used to be “the sport of kings,” and it may well still be in the Middle  East, but no longer in Illinois. The casino boats and maybe the lottery have just about  killed racing. Certainly horse racing is in a downward spiral. The total “handle” (amount  bet) in 2009 was just $819 million, the lowest total in 30 years. As wagering goes down,  the purses for horsemen and women decline as well, reducing the quality of the horses  and the number of racing days. 

The economics are clear. Let’s say a slot machine on a casino boat and a racing  horse both cost $10,000. The machine does not need hay and oats, nor a barn in which to  stay. The machine can be played incessantly, with instant gratification, while the horse  runs only every week or so.

Video gaming is the latest legalized form of wagering. There are 15,000  establishments in Illinois that pour alcohol. If each location had five video machines, that  would be 75,000 “stations.” If each machine generated $100 a day in revenue, that would  total more than $2.7 billion, if I have my math right. But a number of cities and counties  have voted to prohibit the devices, so it’s not clear how much would be generated. The  state is hoping to net from $288 million to $534 million in annual revenues from the  video machines, which will be able to play poker, blackjack and other games.  

Video gaming won’t be available until some time next year, as rules have to be  promulgated. The software and hardware also have to be set up to record play from the  machines at a state government headquarters. 

“Illinois has not reached the saturation point (for gambling),” said one recent  report on Illinois gaming. Gaming will never solve the state’s financial mess, no matter  how much more can be squeezed from gamblers. The $1 billion in net revenue to the  state from gambling represents only about 2 percent of total state spending. As an old  civil libertarian who thinks people should be able to gamble if they wish, I think  nevertheless we have indeed reached the saturation point for legal gambling in Illinois.