DiNapoli: Gaming Revenue Plays Increasing Role In State Budget

Projected gains from new casinos may be offset by some losses, report finds

FROM COMPTROLLER’S OFFICE

New York state’s dependence on gaming revenues has grown over the past two decades, according to a report released last week by State Comptroller Thomas P. DiNapoli. Yet the share of state aid to school districts, which includes lottery revenues, is smaller now than in the year the New York State Lottery was created.

In State Fiscal Year (SFY) 2013-14, total gambling revenues were $3.2 billion, or an average of $161 per resident. New York’s net gambling revenues were the highest in the nation – more than California and Florida combined in SFY 2012-13. The state’s reliance on lottery revenues has grown, rising to the equivalent of 4.6 percent of state tax revenues in SFY 2013-14, compared to 3.8 percent ($1.2 billion), in SFY 1994-95. In total, New Yorkers wagered more than $36 billion in SFY 2012-13, including the amount spent at video lottery terminals (VLT), racetracks and off-track betting centers (OTB), as well as what was spent on Lottery games such as scratch-off or Quick Draw tickets.

“Every day, New Yorkers scratch off tickets or play the odds in hopes of hitting a big winner. The payoff for the state is significant – billions are coming into state coffers. In fact, New York collects more in gambling revenues than any other state in the nation,” DiNapoli said. “Now with a new expansion underway, more casinos will mean more gaming revenue and new jobs, but the long-term impact for the state remains unclear. It will inevitably create both winners and losers in the years ahead.”

State aid represented 39 percent of school district revenues, including 5 percent from the Lottery, in the 2012-13 school year. In 1967-68, the first year of the Lottery, the state provided 43 percent of total school revenues.

Since its inception in 1967, the Lottery has undergone 21 major expansions, including authorization of VLTs. In November 2013, New York voters approved a constitutional amendment authorizing seven new commercial casinos to be located in the state. Under the Upstate New York Gaming Economic Development Act (Gaming Act), approved by the Legislature in June 2013, four casinos are authorized to be built in upstate regions of the state with decisions on the remaining three to come later. Combined marketing resources for the Lottery and the racinos that operate VLTs totaled more than $250 million in SFY 2013-14, the report found.

DiNapoli’s report concludes that the introduction of casinos will likely produce new revenue for the state, partly because gaming is taxed at a higher rate than other consumer expenditures. However, while new casinos will attract people from out-of-state, much of the betting and revenue will come from New York residents. Such activity primarily represents substitution of spending on casino gambling for other consumer purchases or spending at other existing gaming venues, such as OTB centers.

Because of this substitution effect, estimates of employment and revenue gains from new casinos must reflect potential losses and transfers of existing consumer spending. The report found that while some net employment gain is expected, some existing jobs are likely to be lost as well. The state Division of the Budget’s (DOB) estimate of 2,900 permanent new jobs and 6,700 temporary construction jobs is a net figure that assumes certain losses of existing jobs. Although DOB has released broad estimates associated with the Gaming Act, specific projections for revenues from the new casinos and new VLTs are not yet available.

DiNapoli’s report notes that an estimated 5 percent of New Yorkers over age 18 – roughly 670,000 individuals – experienced problem gambling, according to a 2007 report by the state Office of Alcoholism and Substance Abuse Services. The state Gaming Commission has expressed a commitment to address problem gambling more aggressively. DiNapoli’s report recommends that the commission’s plan should also consider potential problem gamblers among those who purchase Lottery tickets, use VLTs or take part in other gaming activities.

The report also noted that New York’s array of legal gaming options has arisen in a piecemeal fashion, as the state has sought additional revenues to balance annual budgets. With this latest addition of casino gambling, the Gaming Commission needs to assess the impact expanded gambling will have on individuals, local communities, and the state as a whole on a continuing basis, DiNapoli’s report stated.