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By now, you understand just how important some key pieces of the fiscal puzzle will be to the state budget: the mid-April revenue collection forecast, the Medicaid forecast and how the General Assembly and governor tackle Medicaid expansion under the Affordable Care Act, and the amount by which state policymakers increase spending on public education.
Yet another critical element is how the Legislature decides to boost revenue from the 11 casinos and two racinos in light of new competition across the Ohio and Michigan borders (and the more aggressive Hoosier Lottery), and the likelihood of major new challenges to that revenue from potential expansion in Illinois and Kentucky.
Sen. Phil Boots, R-Crawfordsville, is authoring legislation aimed at offering casinos some tax relief. What began as a measure loaded with gambling-industry goodies left the Senate in much more moderate form, and a House committee then stripped most of the major remaining assistance elements.
You’ve no doubt heard all kinds of dire news recently about Indiana’s gambling revenue and attendant wagering and admissions tax collections. Forget everything you’ve heard about that: It’s actually considerably worse.
Gambling revenue for 2012 was down more than $110 million from 2010, and year-over-year revenue has tumbled in three consecutive years. Those declines precede a $400 million-plus land-based casino with all the attendant amenities opened in Cincinnati at the beginning of March, a facility that is expected to suck as much as 30 percent of revenue away from our second-most-lucrative gambling market.
The first two months of 2013—before the Queen City category-killer casino opened—saw revenue at our 13 properties dip more than $40 million (almost 9 percent), with January and February Indiana admissions down almost 630,000 visits (more than 15 percent). With average win per admission hovering at $100, anyone can do the math.
What does this mean for the state?
For the 2013 fiscal year to date through February, riverboat wagering taxes are down $9.3 million (3.5 percent) versus the same eight months in fiscal year 2012. Compared to the same point last year, the eight-month racino wagering taxes for the state are off $8.2 million (10.8 percent). Negative double-digit percentage differences in state gambling taxes from 2012 levels have been the norm in recent months.
If nothing is done to boost Indiana’s gambling industry, Boots told a House committee in late March, new gambling options in Ohio will siphon $60 million to $100 million in tax revenue in the next year alone.
Gambling taxes have amounted to almost $11 billion since 1996, and The New York Times recently observed, “Gambling contributes about 5 percent of total revenue to the state’s general fund, the third-biggest revenue source after income and sales taxes,” so any significant diminution of this revenue can prove devastating.
Boots also reminded lawmakers why riverboat casinos were authorized 20 years ago: to provide economic development opportunities for fiscally distressed communities.
Yet, according to the Department of Workforce Development, direct gambling employment in Indiana plunged to 12,000 jobs in January from one-time highs of some 17,000 jobs. Direct gambling employment had not been this low in any other January since 1998—when five current Hoosier gambling properties didn’t exist. Jobs in economically problematic counties are thus at risk.
There’s not much that can be done. The Boots bill offers minimal tax help to casinos by giving them a small tax deduction for complimentary play vouchers, some tax relief for economic development investments, and a slight restructuring of the tax rubric to convert the admissions tax to a supplemental wagering tax.
Stripped from earlier versions (over cost and intrastate competitive reasons) are some important provisions allowing uncapped tax relief for promotional play, land-based gambling, use of mobile gambling devices on-site, and live table games for the racinos.
Since the first casino debuted in 1995, the gambling properties have enjoyed a symbiotic relationship with the state and their host communities. When the state has needed to exact a toll from the properties, casinos have typically been offered something in return.
But the unwritten quid pro quo arrangement might end up in dry dock this year as both sides need the same thing—more cash—that neither can afford to give.•
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Feigenbaum publishes Indiana Legislative Insight. His column appears weekly while the General Assembly is in session. He can be reached at edf@ingrouponline.com.
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