Separating Myth from Fact

Mr. Chairman and members of the gaming board, I appreciate the opportunity to address you today. My name is Frank J. Fahrenkopf, Jr., and I am president and CEO of the American Gaming Association, the national trade organization representing the commercial casino segment of the gaming industry, which consists primarily of publicly held companies listed on the New York, American and NASDAQ stock exchanges. That includes most of the companies with a presence here in Illinois: Argosy Gaming Company; Boyd Gaming Corporation; Harrah’s Entertainment, Inc.; Hollywood Casinos; Horseshoe Gaming; and Mandalay Resort Group.

Separating Myth from Fact

I would like to focus today on what I’m sure you want to be the basis of all the policy decisions you make: the facts. Unfortunately, the gaming industry has long been plagued by myths and stereotypes, and we are always glad to have the opportunity to address the misinformation perpetuated by those opposed to our business.

During my five years with the AGA, I have had the opportunity, so to speak, to hear the critics of the gaming industry first-hand. Their view of gaming bears no resemblance to the industry I - and the 1 million Americans who work in the industry - know it to be. The drumbeat of distortions, half-truths and full lies has become a part of our daily lives, as it will now become a part of yours. Gaming critics count on the raw emotions that tragic anecdotal stories evoke to cover for the weakness of their case. No human endeavor is without its faults, its weaknesses. This is true of the gaming industry. But my appeal to this board is very simple. We ask only for a fair and balanced procedure where facts are prized and hyperbole is discouraged. If that is accomplished, I’m confident you will recognize the overwhelming strengths and contributions of our industry.

Overview of the Gaming Entertainment Industry

I’d like to begin by providing you with an overview of the gaming industry today, specifically the contributions made by the commercial casino industry in providing quality jobs, economic development and capital investment in the communities where we operate.

The gaming industry in this country has grown dramatically during the past few decades. There are now state-run lotteries in 37 states and the District of Columbia; some form of pari-mutuel betting in 40 states; commercial casinos in 11 states; Native American casinos in 25 states; and charitable gaming in 46 states and the District of Columbia. The entire industry employs, directly and indirectly, more than 1 million Americans, and in 1998 had gross income of just over $54 billion.

These numbers are indicative of the popularity of gaming among Americans. The National Gambling Impact Study Commission report issued last year sums it up best, noting:

It is clear that the American people want legalized gambling, and it has already sunk deep economic and other roots in many communities. Its form and extent may change; but gambling is here to stay.

(NGISC Final Report, Executive Summary and Chapter 1: Overview)

The federal commission also stated:

As it has grown, it [gambling] has become more than simply an entertainment pastime: the gambling industry has emerged as an economic mainstay in many communities and plays an increasingly prominent role in state and even regional economies. Although it could well be curtailed or restricted in some communities, it is virtually certain that legalized gambling is here to stay.

(NGISC Final Report, Chapter 3: Gambling Regulation)

The commission’s view is consistent with nationwide public opinion polls:

• A 1999 survey conducted for the AGA by Democratic pollster Peter Hart and Republican pollster Frank Luntz found that 83 percent of Americans approve of gambling for themselves or others.
• Nearly two-thirds of Americans expressed their approval of gambling in a Gallup Poll released last year.

Creating Jobs and Strengthening the Economy

The commercial casino segment of the industry directly employs more than 320,000 people, who earn $8.7 billion a year. Our employees earn an average annual salary of $26,000 with full benefits. Those figures do not include the more than 450,000 construction-related and indirect jobs generated by casinos from local purchases of goods and services. In Illinois alone, we provide approximately 10,000 direct jobs with total wages of $313 million. All told, the commercial casino industry provides jobs for more than 770,000 people who earn in excess of $21 billion a year.

The commercial casino industry contributed close to $20 billion in total revenues to the economy in 1998; $1.1 billion came from Illinois. In addition, from 1993 to 1995, we spent almost $13 billion for construction and purchases of property, furniture and equipment, including improvements and refurbishments. The investment-to-profit ratio for the major casino companies is often as high as 3-to-1. In Atlantic City alone, casino gaming has generated investment of approximately $6 billion during the past 20 years. In Mississippi, more than $7 billion has been invested in construction of casinos, hotels, retail outlets, golf courses, parking structures and other amenities. As you can see, this industry has a significant impact across the entire economic spectrum of our nation.

Generating Tax Revenue for Community Improvements

Along with creating jobs and generating capital investment in our communities, the commercial casino industry pays its fair share of taxes, which help fund education, urban renewal, infrastructure improvements, benefits for the disabled and the elderly, historical renovation and other programs.

According to a study conducted by Christiansen/Cummings Associates for the National Gambling Impact Study Commission (NGISC), the gaming industry paid $18.5 billion in gambling privilege taxes in 1997. That means 36 cents of every dollar spent playing commercial games goes to the government in the form a tax. Commercial casino companies contribute an estimated $3 billion annually in federal, state and local tax payments, and this sum does not include the billions of dollars in taxes paid by our employees. In Illinois alone, where the tax rate on casinos is the highest in the nation at 35 percent, we contributed $337 million in gaming tax revenue.

As the federal commission report indicated:

The National Gambling Impact Study Commission heard from a number of local officials in jurisdictions where casinos are located. Among those who informed the commissioners with their testimony were Elgin, Ill., Mayor Kevin Kelly, Mayor Scott King from Gary, Ind., as well as mayors from Bettendorf, Iowa, and Alton, Ill. The commission also heard from Mayors A.J. Holloway, Bobby Williams, Bob Short and Eddy Favre of Biloxi, Tunica, Gulfport and Bay St. Louis, Miss., respectively. Without exception, these elected officials expressed support for gambling and recited instances of increased revenues for their cities. They also discussed community improvements made possible since the advent of gambling in their communities and reviewed the general betterment of life for the citizenry in their cities and towns.

(NGISC Final Report, Chapter 7: Gambling’s Impact on People and Places)

Providing Social Benefits and Second Chances

Beyond creating jobs and contributing tax revenue, our industry helps improve quality of life for hundreds of thousands of employees and their families by elevating job skill levels, most of which are transferable to other types of employment. In addition, we provide special education and training, along with benefits such as top-notch health care and day care programs.

Because of historically high rates of unemployment and underemployment in many of the communities where we operate, we also have been able to give many of the people there a second chance.

The final report of the federal commission confirms what we in the commercial casino gaming industry already know: casinos have been especially effective in economically depressed communities. The commission stated in its recommendations that:

…state, local, and tribal governments that (when considering the legalization of gambling or the repeal of gambling that is already legal)…should recognize that especially in economically depressed communities, casino gambling has demonstrated the ability to generate economic development through the creation of quality jobs.

(National Gambling Impact Study Commission Final Report, Recommendation 7.1)

One of the best indicators of success in this area is the number of people on public assistance. As the research initiated by the National Gambling Impact Study Commission found, “unemployment rates, welfare outlays, and unemployment insurance decline[d] by about one-seventh” in gaming communities. And although income in those communities stayed the same, more came from paychecks and less from government checks than before.

A 1997 study by Arthur Andersen documented similar drops in the welfare rolls in the three new gaming jurisdictions it examined - Joliet, Ill.; Biloxi/Gulfport, Miss.; and Shreveport/Bossier City, La. The study found that in Joliet, Ill., after a steady increase in the first five years of the 1990s, the number of AFDC recipients has dropped by more than 14 percent since 1994, and the number of food stamp recipients in Will County has dropped 14 percent since 1993.

In Shreveport/Bossier City, Aid to Families with Dependent Children (AFDC) benefit payments decreased 14 percent in 1995 - a year after the introduction of gaming - and fell another 15 percent in 1996. In 1994, the average number of food stamp recipients was 56,000. By 1995, the number of recipients had fallen 15 percent to 48,000.

In Mississippi, the average number of AFDC recipients in the Biloxi/Gulfport area dropped steadily every year since casinos opened in 1992, as did benefit payments. And the number of people using food stamps declined from 25,000 averaging $22,000 in benefits during 1992, to 21,000 using an average of $19,000 in benefits during 1996.

In a separate study of Tunica County, Mississippi, results showed that since casinos opened in 1992, AFDC payments dropped 55 percent, food stamp distribution declined by almost 80 percent and child support payments doubled. (Gaming’s Economic Impact on Tunica County, Tunica Convention and Visitors Bureau; p. 6)

A 1997 PricewaterhouseCoopers nationwide survey of employees in the commercial casino industry also found a number of important indicators related to social impact. Among those findings:

• More than 8.5 percent of employees responding to the survey reported that they have left welfare as a result of their employment.
• Approximately 63 percent of employees surveyed indicated their jobs in the casino gaming industry provided improved access to health care benefits. Virtually all of the companies surveyed offered health care to their employees.
• Approximately 43 percent have better access to day care for their children.
• About 78 percent indicated that their employer provided them with training to perform their job.
• Gaming employees contributed more than $58 million to charitable organizations in the year prior to the survey.
• And finally, approximately 884,000 hours of volunteer time is given every month to local charitable organizations and community organizations by more than 92,000 employees.

As an industry, we are unparalleled in our ability and our determination to hire large numbers of unemployed individuals at entry-level positions, and to provide those new employees with job and life skills training to ensure that they succeed in their efforts. We accomplish this with programs like the following:

Grand Casino Tunica’s Adopt-A-Town Program

A partnership between Grand Casino and the Mississippi Employment Security Commission Office has removed barriers to employment for the towns of Marks and Jonestown in the Mississippi Delta region. With an unemployment rate in excess of 28 percent, and a history of poverty and reliance on public assistance, Grand “adopted” these communities in September 1997 and made a substantial commitment to provide job readiness training, transportation and child care. In less than two years, 271 individuals had been hired with a retention rate of 69 percent, compared to a 32 percent retention rate for the overall work force at the resort. The Adopt-A-Town program is currently providing an annual payroll of $2 million to the town of Marks and $1 million to the town of Jonestown.

MGM Grand, Inc.

MGM Grand has created the “University of Oz” program to train and educate employees to further their professional and personal growth. This onsite university includes free courses in hospitality and service standards, career advancement, management and humanities.

Our industry’s outstanding record of getting people off welfare and into the work force was recognized in 1997 at a White House ceremony launching the president’s bipartisan Welfare to Work Initiative. President Clinton also singled out the industry’s achievements at a National Governors Association meeting in Las Vegas.

And this is a good place to note that we in the gaming industry offer greater opportunities for all Americans than do most other businesses in this country. A very high percentage of jobs in gaming are held by minorities and women. In Joliet, Ill., minorities constitute 21 percent of the casino work force and 58 percent are women. In Bossier City, La., minorities constitute 56 percent of the work force at the casinos. And women comprise more than half the work force. In Biloxi, Miss., 35 percent of the casino employees are minorities and 60 percent are women, which is considerably higher than the average for this area.

Businesses owned by women and minorities also benefit greatly from procurement by casinos, which consistently exceeds minimum percentage rates set by government authorities for purchasing from this sector.

We have made a special effort to include the disabled in our work force. In Atlantic City, N.J., for example, 8.2 percent to 12.3 percent of casino employees are disabled. A study of the industry’s hiring practices reported:

… the conclusion must be that the percentage of disabled persons employed at the Atlantic City casinos compares favorably with the percentage of persons in the labor pool, no matter how that pool is determined.

(Bureau of Economic Research at Rutgers University, Limitations in the Workplace: A Survey and Study of Atlantic City Casinos, Report to the New Jersey Casino Control Commission, October 1998, p. 4)

We have a talented, diverse work force. We are proud of our employees and pleased to be able to provide them with the benefits they deserve. We are also proud of what they give back to the community.

An Engine of Economic Growth

The bottom line shows that the commercial casino gaming sector is a dynamic, growing contributor to economic growth in this country, and it provides solid, meaningful employment to hundreds of thousands of Americans. I’m not providing you with information that has been developed by an economic model. This is not a theoretical discussion concocted in an ivory tower. I’m presenting you with hard, solid, irrefutable evidence available from the many studies I’ve mentioned.

The generation of hundreds of thousands of jobs, billions of dollars in tax revenues and massive commercial development by the casino gaming sector translates into generous social benefits for many Americans … and not only those who work directly for the industry.

Weighing Benefits and Costs

Now that I have provided you with an overview of the benefits we provide to our communities, let me next address the claim that social costs from our industry exceed those benefits. Again, I will cite the federal commission’s research, copies of which have been included in the materials submitted for the record. The NRC found that “[g]ambling appears to have net economic benefits for economically depressed communities.” Adam Rose, a professor at Penn State University who also conducted research for the commission, found that “… a new casino of even limited attractiveness, placed in a market that is not already saturated, will yield positive economic benefits on net to its host economy.” And NORC determined that “[t]hose communities closest to casinos experienced a 12% to 17% drop in welfare payments, unemployment rates and unemployment insurance.”

While opponents of our industry have made outlandish claims about social costs of $200 billion annually, the commission-funded research conducted by NORC placed the annual cost to society of all forms of gambling - casinos, lotteries, pari-mutuel wagering and charitable gaming, as well as illegal gambling - at about $5 billion. While $5 billion is not an insignificant number, it is helpful to keep it in perspective with the annual cost for alcohol abuse, which is $166 billion, and the annual cost for heart disease, which is $125 billion.

As the University of Maryland found in a 1997 study of the impact of casinos on crime and other social problems, social costs on the Gulf Coast area of Mississippi and in St. Louis have seen little change due to the advent of gaming. Interviews with social service agencies indicated modest increases in the demands for their services. In fact, the principal agency providing mental health services in the Gulf Coast area reported that, “[N]o more than 1 percent of its caseload involved gambling problems; nor did the officials believe many cases had even an indirect relationship to gaming activities.” In St. Louis, the local family service agencies did not experience an increase in caseloads, as they had expected, and “expressed their surprise at how little indication they had of any effect from casinos.” (The Impact of Casinos on Crime and other Social Problems: An Analysis of Recent Experiences; by Peter Reuter; School of Public Affairs, University of Maryland, College Park; January 1997; p. V)

Addressing Problem Gambling

As the federal commission reported, “[T]he vast majority of Americans either gamble recreationally and experience no measurable side effects related to their gambling, or they choose not to gamble at all. Regrettably, some of them gamble in ways that harm themselves, their families, and their communities.” Most of our customers gamble for entertainment and set a budget. Our research tells us that. However, we recognize that a small percentage of the population cannot gamble responsibly, and we are working to address that in every way the scientific experts have told us to.

First, let me say that since our organization was founded five years ago, we have had a commitment to addressing problem gambling. This has been a commitment in words and deeds, as I will outline later in my remarks.

That said, let me address the topic of the prevalence of pathological gambling. Despite opponents’ exaggerated claims as high as 11 percent, we now have the facts before us. Research conducted for the federal commission found that the range of pathological gambling prevalence is somewhere between 0.1 percent and 0.9 percent, according to work by the National Opinion Research Center at the University of Chicago (NORC) and the National Research Council of the National Academy of Sciences (NRC). A 1997 industry-funded study by Harvard Medical School estimated that figure to be 1.29 percent.

Another oft-repeated claim by our opponents is that a high percentage of our revenue comes from pathological gamblers. While some of these unfounded claims have gone as high as 50 percent, I again point you to the commission report’s research findings. NORC estimated that 5 percent to 15 percent of the industry’s gross revenues were from pathological gamblers. Our companies have said it time and time again. We don’t want customers who bet over their heads. We have been working in every way the scientific experts tell us to promote responsible gaming, whether it’s educating our customers through posters and brochures, training employees, or posting toll-free help line phone numbers on our casino floors.

Another false charge is that our companies in some way target pathological gamblers in our marketing and that somehow we are able to detect pathological gamblers through our customer database. Ask any treatment expert, and they will tell you that it is impossible for us - or anyone else - to determine who is a pathological gambler based on a list of names and data. In fact, they’ll tell you that even in person it is a difficult disorder to diagnose. The experts have told us that our role should be one of educating our employees and customers and funding research - a role that we certainly have undertaken and will continue to do.

And now, let me take on the assumption that increased availability of gambling leads to an increase in pathological gambling. While this might seem like a logical assumption, and certainly one perpetuated by our opponents, let me ask you, again, to look at the facts. The first federal gambling commission during the 1970s found that the number of “probable compulsive gamblers” was 0.77 percent of the U.S. adult population, virtually identical to the findings of the latest federal commission, despite the growth of gambling opportunities during that time. As the 1999 federal commission research concluded: “The availability of casinos within driving distance does not appear to affect prevalence rates.” Similar government-sponsored research in Minnesota, Texas and Connecticut all showed statistically stable rates of pathological gambling in those states, despite significant increases in the availability of gaming.

If pathological gambling prevalence rates increased along with gambling availability, it would seem logical to see an increased demand for social services in communities with casinos. However, the federal commission’s community database analysis found just the opposite: spending on social services was actually lower in places closest to casinos than in places further from casinos.

Another erroneous assumption about our industry is that the more people gamble, the more likely they are to become pathological gamblers. In fact, the NORC research found that while many more people have gambled at least once in their lifetimes (68 percent in 1975, compared to 86 percent in 1999), the number of people who have gambled in the past year has remained relatively unchanged (61 percent in 1975, versus 63 percent in 1999). As the Public Sector Gaming Study Commission pointed out in its final report issued this year, “[T]hese findings mean that Americans have become much more likely to have experimented with gambling, but this experimentation has not turned them into people who gamble regularly or routinely.”

Industry Initiatives

As I indicated earlier, the commercial casino industry is committed to working for the development and implementation of education, prevention and treatment programs to address disordered gambling. Our actions have been taken in consultation with the scientific experts, who have told us that our role should be one of educating and funding research to learn more about gambling disorders in order to enhance prevention and treatment methods. Our dedication is demonstrated by our actions, which I’d like to describe for you now. (Attached is an overview of our initiatives in this area.)

One of the first initiatives undertaken by the AGA when it was founded in 1995 was to create the National Center for Responsible Gaming (NCRG), an independent organization that funds peer-reviewed research on disordered gambling. The research being conducted by NCRG investigators - at the direction of an advisory board composed of scientific researchers and treatment experts - is helping the scientific community gain a better understanding of the causal factors related to disordered gambling, improve diagnostic methods and identify empirically valid prevention and treatment programs.

Twenty-seven gaming entertainment companies, vendors and suppliers; one foundation; and one union have committed more than $7 million to the National Center. Since it was founded in 1996, the NCRG has awarded 19 grants totaling nearly $2.6 million to respected universities and medical research centers such as Harvard Medical School, Washington University School of Medicine and Massachusetts General Hospital.

I will not go into great detail about the current research being funded by the NCRG, since that will be addressed by Christine Reilly, executive director of the NCRG, and one of the NCRG’s investigators, Dr. Howard Shaffer of Harvard Medical School. I do think it’s important to mention that the National Gambling Impact Study Commission noted that, “… the largest source of funding for research on problem and pathological gambling is the casino industry.” (National Gambling Impact Study Commission Report, Executive Summary)

Beyond funding research, the AGA also has developed a comprehensive responsible gaming education program. Let me interject here that these activities are nothing new for the commercial casino industry. Our member companies have a history of encouraging and instituting responsible gaming practices. Harrah’s Entertainment, Inc., an operator here in Illinois, pioneered responsible gaming programs more than a decade ago with its two now widely used programs, Operation Bet Smart and Project 21. Since the AGA was formed in 1995, we have built on those programs, spearheading a Responsible Gaming National Education Campaign to encourage the establishment and promotion of responsible gaming practices industrywide.

As a key component of this program, our industry developed and adopted comprehensive, voluntary guidelines to address all aspects of disordered and underage gambling. The AGA also has adopted voluntary guidelines for missing and unattended children, as well as advertising and marketing. The advertising and marketing guidelines are part of an overall program we are developing to ensure appropriate advertising and marketing of casino gaming to adults and avoid content that specifically appeals to children and minors.

The AGA has spearheaded numerous events to focus employee and public attention on this issue. Every year, the first week of August is designated “Responsible Gaming Education Week.” During this annual event, companies devote activities to increasing awareness about disordered gambling and the importance of responsible gaming. In 1998, our first year, the week included an AGA-sponsored “Best Ideas” contest for industry employees promoting the education theme. The contest featured several different categories and more than 500 contest entries were received. The winning slogan was included in print materials for last year’s Responsible Gaming Education Week: “If you play with real dollars, play with real sense.” During each Responsible Gaming Education Week, we have produced and distributed educational brochures relating to this issue for all 250,000 of our casino employees.

The AGA also has conducted seminars on disordered gambling and on responsible gaming programs and practices at the annual World Gaming Congress & Expo, including one on “Understanding Gambling and Its Potential Health Consequences,” which was co-sponsored by the National Center for Responsible Gaming, the Nevada Council on Problem Gambling and Harvard Medical School. This same seminar was featured at the Southern Gaming Summit and co-sponsored by the Gulf Coast Gaming Association and the Mississippi Council on Problem Gambling.

In addition, we have conducted responsible gaming certification courses at the World Gaming Congress & Expo. These courses were moderated by experts in the field of disordered gambling and were designed to increase awareness, introduce innovative programs, and further educate casino employees and regulators. We have conducted responsible gaming workshops to provide casino employees with an overview of disordered gambling and responsible gaming programs.

The AGA has developed a variety of print materials intended to teach gaming industry employees about disordered gambling and how the problem should be addressed. These materials include a comprehensive Responsible Gaming Resource Guide, which was developed in collaboration with Carl Braunlich of Purdue University and Marvin Steinberg of the Connecticut Council on Compulsive Gambling. The resource guide, which is a collection of industry best practices, is widely used and now in its second edition.

The AGA also has produced the PROGRESS Kit, which includes sample brochures, posters and training curricula. The print materials, all of which are included on a CD-ROM in an electronic file format for customization and printing, address responsible gaming, disordered gambling, underage gambling, cash access in casinos and unattended minors. The curricula, developed for use by gaming industry employees, focus separately on disordered gambling and on underage gambling prevention. These curricula were developed jointly with the North American Training Institute, a division of the Minnesota Council on Compulsive Gambling, and have been certified by the American Academy of Health Care Providers in the Addictive Disorders.

We have collaborated with third parties, including the National Center for Missing and Exploited Children, state problem gambling councils and the Harvard Medical School Division on Addictions, on issues of mutual concern. In this regard, with technical assistance from the National Center, casino employees in Las Vegas, Atlantic City, and the Mississippi Gulf Coast received training on how to respond to cases of unattended children on or outside casino properties, in addition to training through other AGA-sponsored seminars.

I might add that our responsible gaming activities have spurred some states to adopt creative new ways to address this problem. In Missouri, for example, the casino industry has forged a diverse coalition involved in the gaming industry in that state to raise public awareness of responsible gaming. The Missouri Alliance to Curb Compulsive Gambling, whose members include the Missouri Riverboat Gaming Association, Missouri Lottery, state department of mental health, Missouri Gaming Commission and Missouri Council on Problem Gambling Concerns, should be a model for other states to follow.

State Regulations on Problem Gambling

While the casino industry itself is actively promoting responsible gaming initiatives at the corporate and property levels, several state regulatory bodies have implemented requirements related to responsible gaming practices. The Nevada Gaming Control Board and the Missouri Gaming Commission were the first regulatory authorities to implement such requirements. After a series of hearings, the Nevada Gaming Commission approved Regulation 5.170, which requires “restricted and non-restricted gaming licensees to establish programs that address problem gambling.” Specifically, Nevada’s casinos are now required to:

• Post or provide in conspicuous places in or near gaming and cage areas and cash dispensing machines located in gaming areas written materials concerning the nature and symptoms of problem gambling and the toll-free telephone number of an approved problem gambling help line;
• Implement procedures and training for all employees who directly interact with gaming patrons (work) in gaming areas, and designate appropriate personnel to maintain the program;
• Each licensee that engages in the issuance of credit, check-cashing or direct-mail marketing of gaming opportunities shall implement a self-limitation program for customers who wish to limit their access to those privileges.

Mississippi recently approved and implemented a regulation very similar to Nevada’s.

Missouri takes the concept of self-limitation a step further than Nevada and Mississippi by requiring its casinos to implement a “self-exclusion,” or “disassociated persons” program. Customers may request to be physically barred from casinos; this request is irreversible. Such a requirement is perhaps a bit extreme, though. As is the case with any entertainment venue, it is virtually impossible to monitor every individual entering or exiting a casino through every doorway. Security cannot be expected to recognize every face. Failure to comply with these regulations could result in disciplinary action. The industry encourages the remaining states with commercial casino gaming to adopt regulations based on the Nevada and Mississippi models.

Aside from making certain requirements of licensees, many states have taken measures to ensure there is adequate funding for treatment and education programs.

• Missouri Statute 313.842 establishes a “compulsive gamblers fund” within the department of mental health. The “fund” is financed by state taxes on gaming revenue.
• In Indiana, the General Assembly passed a law requiring that 10 cents of each “admissions tax” to riverboats be paid to the Indiana Family and Social Services Administration Division of Mental Health.
• The Iowa Gambling Treatment Program is funded with 0.3 percent of the gross lottery revenue and 0.3 percent of the adjusted gross receipts from the riverboat casinos and the racetracks. The money is deposited into the gambling treatment fund.
• Louisiana established a Compulsive and Problem Gaming Fund that is funded with 1 percent of tax proceeds from lottery, video poker, riverboat casinos and land-based casinos.
• In New Jersey, the first $600,000 in fines collected each fiscal year are forwarded to the Department of Health. Of this amount, $500,000 is provided to the Council on Compulsive Gambling of New Jersey and $100,000 is allocated to compulsive gambling treatment programs in the state.
• Michigan requires that casino licensees pay a total annual assessment of $25 million of which not less than $2 million shall be deposited in the compulsive gambling prevention fund.

The federal commission has recommended that each state and tribal government enact a tax, assessment, or other contribution to create a dedicated fund for the development and ongoing support of problem gambling-specific research, prevention, education and treatment programs.

Other Alleged Social Costs

Opponents of our industry link gaming with a host of other alleged social costs, none of which has been proven by independent government studies. In fact, the opposite is true, although you won’t hear gaming opponents discuss these findings. As with pathological gambling, it is important for you as regulators to learn and understand the facts about these alleged social costs.

Bankruptcy

With a concurrent growth in legalized gambling and bankruptcy filings, opponents of our industry have added bankruptcy to their list of social ills caused by gambling, despite the fact that the evidence proves them wrong.

While bankruptcy filings increased 41 percent from 1994 to 1996, the eight states having the highest percentage of increases were Hawaii, Arkansas, Maine, Vermont, North Carolina, West Virginia, Pennsylvania and New Mexico. Of these states, one of them - Hawaii - has no legalized gaming whatsoever, and four of the remaining seven have no casino gaming in the state.

The most compelling evidence to date refuting an alleged link between gambling and bankruptcy is a study issued last year by the U.S. Treasury Department, which made the following conclusions:

· There is no connection between state bankruptcy rates and either the extent of or introduction of casino gambling.

· While most available studies have pointed to a connection between gambling and bankruptcy, “none has ‘proven’ that gambling causes bankruptcy.”

These findings support research by the National Gambling Impact Study Commission (NGISC). A study conducted for the commission by the National Opinion Research Center found that “… the casino effect is not statistically significant for any of the bankruptcy … measures.” (Meaning the level of bankruptcies in cities closest to casinos is no greater than the level of bankruptcy in places further removed from casinos)

(National Opinion Research Center at the University of Chicago, Gemini Research, The Lewin Group, Gambling Impact and Behavior Study, Report to the NGISC, April 1, 1999, p. 70)

The commission also heard testimony on the subject of bankruptcy. Rudy Cerone, an active member of the American Bankruptcy Institute, told the commission that:

[T]he increase in consumer bankruptcies has little or nothing to do with gambling in the gross amount. It’s mainly credit card companies pushing their products on the consumers and the ease of the bankruptcy laws allowing consumers an easy way out.

(Rudy Cerone, Testimony before the NGISC, Sept. 11, 1998, p. 221)

In 1996, a USA Today series offered a detailed analysis of the increase of bankruptcies in the United States and listed the two most common reasons for bankruptcies as credit card bills, which account for 63 percent of bankruptcies, and job loss/pay cuts, which account for 50 percent. Only 2 percent of bankruptcy filers cited gambling debts as a major reason for their problems. Most experts agree that soaring bankruptcy rates are caused by the ease in receiving consumer credit and by relaxed bankruptcy laws.

Crime

Our opponents also are fond of claiming that the presence of gambling increases the incidence of crime. That, too, is just flat wrong. There is nothing inherent in the nature of casino gaming - or in the collective character and behavior of millions of Americans who enjoy this form of recreation - that causes crime.

When crime does go up in new gaming jurisdictions, the explanation is more often than not that any city that hosts thousands of new tourists daily is likely to experience an increase in petty and street crime. Look at Orlando, Fla., after the opening of Disney World for a graphic example. Crime went up and it certainly wasn’t due to an increase in gaming. Same story with Branson, Mo., when the attractions in this city opened.

The fact of the matter is that in the majority of new gaming jurisdictions, crime has decreased over time and dropped well below the rate it was prior to the arrival of gaming. One has to look no further than your state borders to confirm that. In East St. Louis, the crime rate plummeted an incredible 49.6 percent after gaming was introduced. In Joliet, crime dropped 18.2 percent. In Alton, crime also decreased with the advent of gaming.

The NORC study conducted for the National Gambling Impact Study Commission measured index crimes that reflect the public safety and security, such as murder/manslaughter, forcible rape, robbery, aggravated assault, burglary, larceny/theft, motor vehicle theft and arson - Part I crimes reported to the Federal Bureau of Investigation - and reported that:

[T]he casino effect is not statistically significant for any of the…crime outcome measures….
(Meaning the level of crime in cities closest to casinos is no greater than the level of crime in places further removed from casinos)

(National Opinion Research Center at the University of Chicago, Gemini Research, The Lewin Group, Gambling Impact and Behavior Study, Report to the NGISC, April 1, 1999, p. 70)

The National Gambling Impact Study Commission report included the following:

All of the evidence presented to the Commission indicates that effective state regulation, coupled with the corporate takeover of much of the industry has eliminated organized crime from the ownership and operation of casinos.

(National Gambling Impact Study Commission Report, Gambling Regulation)

Jeremy Margolis, a former director of the Illinois State Police, who also served as an assistant U.S. attorney for the Northern District of Illinois and was the Illinois inspector general, published a comprehensive review of available information on gaming and crime. In testimony before the Commission he states that he found little documentation of a causal relationship between the two. Taken as a whole, the literature shows that communities with casinos are just as safe as communities that do not have casinos.

(National Gambling Impact Study Commission Report, Gambling’s Impact on People and Places)

The commission also heard testimony from a number of community leaders indicating that crime had not increased since the introduction of gaming and, as I mentioned, appears to have decreased in some of these locations with the advent of casinos.

Suicide

While opponents of gambling use anecdotal evidence to prove a link between gambling and suicide, recent studies contradict their assumptions.

A 1997 report from the Centers for Disease Control (CDC) found that suicide rates are a regional phenomenon and do not mirror the availability of legalized gambling. The CDC study pointed out that suicide levels in the West are 70 percent higher than in the Northeast.

A study written for the AGA by Dr. Richard McCleary and a team of researchers from the University of California shows that gaming communities have “no higher risk” of suicide than non-gaming communities. In fact, the study concluded suicide levels in gaming communities “are about average” and noted, “the risk of suicide for visitors to gaming areas is no higher than the risk faced by visitors to non-gaming areas.” (Suicide and Gambling: An Analysis of Suicide Rates in U.S. Counties and Metropolitan Areas, Richard McCleary, et al, University of California-Irvine, Department of Environmental Analysis & Design, School of Social Ecology, September 1998)

Dr. Christian Marfels of Dalhousie University in Nova Scotia conducted another study on suicides, looking specifically at Las Vegas. This study found that gambling problems were not factors in the overwhelming majority of the visitor suicides reported in Las Vegas. Dr. Marfels examined eight years’ worth of actual suicide files from the Clark County coroner’s office and found:

In 163 of the total 206 adult visitor suicides during the period under review, a cause for the suicide could be established. Whenever there was an indication of a gambling problem or the potential for a gambling problem in the files, this indication was given special attention.

The suicide files indicate that in 94 percent of the cases gambling was not the determinant factor for the suicide.

(“Visitor Suicides and Problem Gambling in Las Vegas: A Phenomenon in Search of Evidence,” Christian Marfels, Ph.D.; Gaming Law Review, Volume 2, Number 5; p. 471.)

As has been demonstrated through the research on pathological gambling, individuals who are pathological gamblers often suffer from other disorders; a simplistic approach linking gambling with suicide cannot explain away a decision this complex.

The conclusions drawn by opponents of our industry have no basis in fact, as the overwhelming evidence from these recent studies has indicated. And yet they make further accusations about alleged social problems caused by pathological gambling. Take, for example, the issue of bankruptcy. A U.S. Treasury Department study released last year found “… no connection between state bankruptcy rates and either the extent of or introduction of casino gambling.” This was on the heels of federal commission research by NORC, which concluded, “… the casino effect is not statistically significant for any of the bankruptcy … measures. …”

Our opponents also are fond of claiming that pathological gamblers will contribute to an increase in crime - this despite the fact that the federal commission found no link between the two, stating in its research that “… the casino effect is not statistically significant for any of the … crime outcome measures. …” The federal commission’s final report also cited a study in which a comprehensive review of publicly available information on gaming and crime found no documentation of a causal relationship between the two.

One of the most commonly held myths perpetuated by our opponents is a purported link between gambling and suicide. As has been demonstrated through recent research by the NRC and Harvard Medical School, individuals who are pathological gamblers often suffer from other disorders; a simplistic approach linking gambling with suicide cannot explain away a decision this complex. While opponents of gambling use anecdotal evidence to attempt to prove a link, recent studies contradict their assumptions. A 1997 report from the Centers for Disease Control (CDC) found that suicide rates are a regional phenomenon and do not mirror the availability of legalized gambling. The CDC study pointed out that suicide levels in the West are 70 percent higher than in the Northeast. A study written for the AGA by a team of researchers from the University of California-Irvine compared actual suicide rates and found that gaming communities have “no higher risk” of suicide than non-gaming communities.

Rely on Facts, Not Anecdote

When I first testified before the federal commission, I asked them to follow the lead of my old boss Ronald Reagan, who often said in reference to his dealings with the Soviet Union during the Cold War, “Trust, but verify.” In most cases, the federal commission did just that. Despite the fact that the majority of commissioners, including the chairman, were personally opposed to gambling, they still concluded that the commercial casino industry provides quality jobs, promotes capital investment and generates economic development. As you move forward in your deliberations on this issue and others, we ask only one thing of you, and that is to make your decisions based on facts, not anecdotes; science, not theories.

Thank you for inviting me to present our industry’s views before the gaming board.