Indiana Gaming - How the Lottery is the Worst Bet

It amuses me how much hand wringing Indiana legislators can do about the evils of casino gaming, when the government-run lottery is the worst bet offered by legal gaming in the state.

All it takes to see the disparity is to review the 2012 annual reports of the State Lottery Commission of Indiana and the Indiana Gaming Commission.

Combining both the scratch off tickets and lottery drawings, 62% of the money wagered was returned by the Lottery to players in the form of wins.

Compare that to 80% of table game wagers and 91% of electronic game wagers returned by Indiana's casinos to players.

The State got $205 million in "distributions" from the Lottery and $809 million in taxes from the Casinos.

There is much consternation in many quarters lately is about the Gtech ads for the Lottery that emphasize the hope of winning despite the high probability of losing.  Meanwhile, the Legislature is looking to reverse the erosion of Casino-paid taxes by dinging the local government's take and easing up on the taxation of free play awarded by casinos to their players and the requirement of being boat-based.  Governor Pence has indicated that he is deeply troubled about any changes at all.

The sin quotient for gaming is quite high in this state, as are the taxes paid.  In any other industry, Indiana's legislators would be all about cutting those tax rates in order to encourage investment by the industry.  They also would not block expansion.

The Indiana Gaming Commission annual report has an interesting look at gaming in other states - the 'competition'.  Only Illinois and Pennsylvania have higher tax rates for gaming - while Pennsylvania has no admissions tax on top of the gaming tax.  The emerging gaming competition from Ohio, where the tax is considered onerous at 33%, will bring pressure on the Ohio River casinos in Indiana, where the gaming tax is upwards of 40% in addition to the $3-4 per person admissions tax.

As of the 2012 annual report, no admissions numbers were available for Pennsylvania.  Given that caveat, of the 8 other states Indiana competes with, 4 had higher admissions numbers and 4 had more floor space than Indiana casinos.  Only two, including the mighty Nevada, had higher taxes paid.

Indiana's casinos (excluding nearby Indiana Grand and Hoosier Park who don't report those numbers) had nearly 25 million admissions in 2012.  Some of those sinners are probably Hoosiers, who in 2010 numbered 6.5 million.

I'm not going to hold my breath for the State of Indiana to treat gaming like any other industry and create conditions that are ripe for jobs growth.  But, I do have to at least laugh at the State, when it appears to be comfortable with simultaneously gouging the sinners who buy the State's product while wringing its hands about the sinners who buy the casinos' product.

Gambling Revenue - Its Ups and Downs

I fully realize that my opinion on gambling is not universally held and I might even find that less than half of those who live in Marion County agree. Certainly, the vast majority of those with a bully pulpit in Central Indiana are opposed to gambling. I like to visit casinos and I like the idea that states and municipalities can generate funds from a sort of self-determined taxation.

Indiana has taken the approach that it wants to gain as much revenue as possible from a sinful practice that it somehow wants to discourage. So, instead of designing gaming laws to create tourist attractions and thereby maximize revenues, they have designed laws that create distal gaming locations to maximize attendance by sinners from abutting states.

Indiana initially located the casinos in the far edges of the state so as to attract the maximum number of sinners from Ohio, Illinois and Kentucky while minimizing the lure to sinners within our state. To make matters less unwholesome yet, they positioned it on boats that originally had to ship off the dock, if only to linger within spitting distance anyway. They then altered the rules to allow dockside gambling, but the boats still needed to have a seaworthy crew. Then came the French Lick casino legislation where they were able to build the tiniest of ponds around what was really a land casino. Come on, if you've visited French Lick you know how much that casino looks like a 400 pound adult sitting in a kiddie pool. But, the spirit of the law was followed. Then they allowed two Central Indiana racinos to operate, but without live table games. The overall aim would appear to be : minimize the Indiana sinning while maximizing the sinning by residents of other mid-west states.

So, little wonder that with the movement of Ohio into the casino business and the threat of Kentucky to get into the business, Indiana is becoming worried about how much revenue it can still get from its gaming licensees.

I would suggest, not that anyone listens to me on these matters, that the Governor and Legislature talk with experts in other states on issues like - clustering casinos to create tourist destinations, how tax rates affect revenues generated, and to what extent gaming taxes are a dependable source of revenue that could conceivably be used for operating expenses.

It might surprise you to know that Indiana ranked 2nd of all States just behind Nevada in total tax revenues from casino operations in 2008, pulling in a total of $838 million. State gaming revenues for fiscal year 2009 (which ended on June 30) were $621 million. In contrast, the state of Nevada pulled in $841 million in gaming and casino taxes for its fiscal year 2009. Our gaming revenue accounted for only 5% of all State revenue in fiscal year 2009, so we are not in a situation where we really need to worry about gambing taxes being necessary for ongoing operational expenses.

I have to admit that Indiana has done surprisingly well in securing these kinds of revenues with the approach it has taken. But, I do think it is time to abandon some of the more silly constraints on gaming and to move to land based casinos. Multiple licenses in a single municipality so as to create tourist destinations near airports would be my choice as well. Perhaps the best way would be to allow these decisions to be made by referenda in each County. Then it would be the wishes of all the voters of a locale and not just those who have a bully pulpit. I could live with that.