The Sacred Cash Cow May Be Drying Up

December 20, 1992|By SUZANNE WOOTON

Tucked away in one of the state's most thoughtful, yet remarkably untimely reports, is a two-paragraph admonishment about the inherent dangers of the state's sacred cash cow -- the Maryland lottery.

''Its role as a state revenue source should be allowed to diminish, and its social impacts should be studied,'' warned the Maryland Commission on State Taxes and Tax Structure two years ago in its sweeping recommendations about reforming the way the state raises its money.

Predictably, that advice was ignored along with most of the commission's other recommendations. Instead, new games have sprung up again and again, with the lottery remaining the third largest source of revenue after income and sales taxes. Over the past 19 years, it has produced $3.8 billion in revenues.

Indeed, from the minute Maryland voters approved the lottery in 1972, it became the classic genie that couldn't be put back in the bottle. Nothing underscores that fact more dramatically than the state's current efforts to introduce keno, a fast-paced, casino-like game that once was the province of Reno and Las Vegas bars.

But times are tough, with the state facing a $450 million budget shortfall. And judging from flat state lotteries revenues here and nationwide, the public is bored with the traditional numbers game. Even El Gordo, Maryland's new, $10 million grand prize game, is not generating anticipated interest, proving that there may be a lottery saturation point.

Enter keno, the exciting, seven-day-week, almost round-the-clock game, with different set of winning numbers appearing every five minutes on a TV monitor in hundreds of bars and restaurants. Maximum bet on a single, multi-game slip: $100.

Much of the controversy over keno has focused on the $49 million contract that was extended without competitive bidding to GTECH of Rhode Island, the company which already runs the lottery. The U.S. attorney's office has launched an investigation into that contract.

But there has also been an outcry over the ease with which Maryland might slip into a form of legalized gambling that once would have been considered unthinkable even by the most ardent lottery supporters.

Can slot machines and roulette wheels be far behind? opponents ask.

Ocean City Mayor Roland E. ''Fish'' Powell says it will tarnish the resort's image; horse racers say they can't stand any more competition, the state attorney general has serious doubts and legislators say they may try to abolish it in the 1993 session.

Politicians are even talking about social costs -- an issue rarely ever mentioned by lawmakers who for years have balanced the state budget with money from gambling, despite evidence that it affects poor people disproportionately and that it can be addictive. Keno, they say, is even worse and will attract hard-core gamblers who thrive on instant gratification.

''It's bad public policy,'' cried Lt. Gov. Melvin A. Steinberg, a former Senate president and likely Democratic gubernatorial candidate.

But what are the choices?

After cutting vital state programs dramatically, ''there wasn't any other place to go,'' said Mr. Schaefer, who challenges critics to come up with a alternative plan.

The governor proposed the game in September as part of his plan to eliminate a $450 million budget deficit. Legislators, he said, essentially signed off on the plan, which clearly indicated $50 million would be raised with keno games.

Until late November, lawmakers apparently didn't have a clue that the new game would deviate so far from the typical lottery games. But they might have suspected this was no ordinary numbers game, given the fact it is expected to raise a whopping $50 million in just six months.

Maryland is not alone in turning to gambling in these trouble economic times. As the economy began to falter in the mid 1980s -- while the public became ever more resistant to tax increases -- legalized gambling became an attractive way of raising money. Eighteen new states -- including some traditional Bible-belt areas -- have established lotteries since 1985, bringing the total to 37.

''There's no doubt that as times get tough states have turned to lottery and other gambling as a source of money,'' said Terri LaFleur, head of Gaming and Waging magazine in Washington which tracks gambling trends.

In fiscal 1991, gross revenues from legal gambling totaled $26.7 billion, according to Gaming and Waging. States received some $7.5 billion in net revenues from lotteries alone.

At least a half dozen states have started keno, with similar versions being played in Oregon, Rhode Island, Kansas and California. Casinos are legal in a number of small towns nationwide and on riverboats in Iowa, Illinois, Mississippi and Louisiana.

Gambling is clearly here to stay; states are hooked. Even Maryland's tax commission did not consider eliminating this important revenue source altogether. For Maryland and other states, the question is not whether gambling should be legal, but whether new forms should be allowed and how they should be regulated.

To decide, they must weigh the risks of both ignoring lucrative revenue sources that can save critical state programs -- and unleashing games that venture too far into the gambling world.

Suzanne Wooten is a Sun business reporter who has covered state government and the lottery.

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