response to chamber study on gambling

The Greater Boston Chamber of Commerce released an independent study of Gov. Patrick's casino proposal. The study pretty much mimicked his revenue and permanent job projections. I like the two consultants that did the study but was unimpressed by the actual study. They looked at 200 studies, articles or papers on gambling and used 10 for their study. These were disproportionately from the casino industry themselves. They used mostly the same studies that the Governor used, so it is no surprise that the numbers are very close. However, I believe these numbers are flawed. (What is the definition of insanity? To do the same thing over and over again and expect a different outcome?) The attached is the email that I sent to members on this.

The Greater Boston Chamber of Commerce has released an independent report that on face value affirms the Governor’s revenue and permanent job creation figures. I believe this is an independent evaluation done by consultants with no ties to the gambling industry. However, this is also their first attempt to look at the casino issue. As such, they used studies that have been called into question in the past. I am not surprised that their numbers are close to the Governor’s own figures. They used the same underlying numbers used by the Governor’s staff from such resources as the Center For Policy Analysis at UMass Dartmouth. If we were to use these same studies to base our deliberations on, we would reach the same conclusions. However, I, and others have called these figures into question in the past and continue to question their validity. So while I believe that this is an honest attempt to reach an answer on revenue figures, I believe it is flawed and contradicts other studies available.

Second, while I question their conclusions, there has never been a question over the creation of a revenue stream from casinos. If you build them, people will spend money. However, there is a vast difference between economic development and revenue and the administration fails to realize this. Concerning revenues, one has to ask two questions:

Where does this revenue come from?

How much does it cost to get it?

On the first question, the chamber study uses their questionable data to look at recapture rates from outside of Massachusetts. These figures are not supported by studies done in other states. There is a University of Rhode Island study that indicates they are wrong on this recapture rate, and a Federal Reserve Bank study that indicates that much of the money (perhaps as much as 75%) spent at a casino is already spent in our economy. This economic redirection cannot be counted as “new” revenue as the administration has stated time and again.

On the second question, the Committee has looked at cost centers that cost the state more money in order to bring casinos into Massachusetts. These cost centers are, to name a few, costs of a gaming commission, of increased public safety, of socio-economic impact from the growth of compulsive gambling, of loss to the bottom line of the lottery, and the loss of jobs through economic shift. We will examine these more over the next few weeks.

This chamber study is silent on the loss of jobs elsewhere in our economy as money is shifted towards casinos. We have information and testimony from numerous cities and states that indicate that this shift is dramatic. The administration not only ignores this, but has stated on several occasions that casinos will grow other businesses. Sadly, this is not the case. Not only are jobs lost, we get less economic activity from our spending.

The chamber study expressed frustration at the lack of information concerning the social costs of gambling. We agree. However, we do note that regardless of the lack of studies, this number is big and we need to factor this into any deliberations on the subject.

The chamber study falls into the same trap as the administration of looking to substitute casino profits for lottery losses. The problem here is that we make more from every dollar played on lottery products than we would from casino profits. That means that far more dollars need to be played in a casino simply to run in place with losses from the lottery. This factor alone calls into question the revenue figures from casinos.

Finally, the chamber study is a static analysis of the revenue impact should we enact casino legislation. We have to look at other factors. If we go from two to five casinos in New England, what is the saturation point? If Connecticut decides to expand or increase competition in order to keep market share, what goes that do to casino success in Massachusetts? These are just a few issues, there are far more. These issues are difficult and nuanced and need to be studied.

Casino legislation is very complex. One of my frustrations is that each time we question the assumptions of the administration’s bill; we get the same sales pitch repackaged instead of backup data. Some people think that if you say something enough times, it becomes the truth. We need to be the arbiters of what is sound public policy. We need to take that seriously and we need to do so with intelligent and with information with which to back up our conclusions. Sadly, this has not happened. We cannot ignore these questions in an eagerness to rush towards increased revenues that may not be there.