Bad bet

November 13, 2003

REVENUE FROM gambling has been called "the crack cocaine of state governments." Once hooked, states just can't get enough of it.

So if Maryland opts to join the parade of states that over the last 15 years have tried to solve their fiscal problems with gambling - often unsuccessfully - why hand a disproportionate cut of this drug to the state's racetrack owners?

That bad bet is underscored by a study released yesterday by the Maryland Tax Education Foundation. The study, "Horseracing and Casino-Style Gambling: Facts Behind the Myths," deflates track owners' assertion that they can't survive in business if slot machine parlors are located anywhere else in the state but their tracks.

Studies earlier this year by the MTEF and others made it more than clear that the most profitable way for Maryland to introduce slots is for the state to legalize independently located casinos, instead of handing racing interests a gambling monopoly with an inordinate cut of the take.

In that case, track owners have threatened, they might have to fold. But the new study - based on analyzing the co-existence of slots and tracks in Indiana, Illinois and Michigan - finds that hardly the case: Pari-mutuel betting likely would decline less than 10 percent, if at all, and that trend could be reversed by using some slots revenue to subsidize racing purses.

Horses and racing obviously are an integral part of Maryland's history and culture and, to a more limited extent, its economy. The questions here are whether a gambling-provided subsidy is needed to bring greater health to the racing industry, and the possible size of such a subsidy.

Betting by Maryland bettors on live Maryland races is off about 40 percent since 1998, but total race betting (including Maryland races exported by simulcast and imported races viewed here) has grown by about 5 percent. The new study concludes that betting would grow significantly if purses were at least doubled, which would involve a state subsidy of about $50 million a year, or an estimated 3 percent of slots revenue.

This is not a small subsidy; it translates to more than $6,000 annually for each of the estimated more than 8,000 racing-related jobs in Maryland. But it's a whole lot less than the track owners' annual profits - estimated at as much as $500 million - from the slots monopoly that Gov. Robert L. Ehrlich Jr. originally proposed giving the tracks.

With the next legislative session opening in less than two months - and slots heading the agenda - this new study is a useful reminder that the House was wise last session to kill the plan to give tracks a monopoly. It should also provide even more reason for legislators to fully separate efforts to aid the tracks and those to raise state revenues via slots. The needs of tracks and those of citizens quite often diverge - and that shouldn't be forgotten.

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