Chair James and members of the Commission, thank you for the opportunity to address you this morning as you continue your work on this important Commission.
In many ways, I know what lies ahead for you in the next 22 months, as I have just completed my first two years as the President and CEO of the American Gaming Association (AGA), and during that two years I have learned a great deal about this industry and its social and economic impacts. The gambling industry in this country has grown dramatically over the last few decades—there are now state-run lotteries in 37 states and the District of Columbia; some form of pari-mutuel betting in 41 states; commercial casinos in 10 states, Native American Class III casinos in 22 states and charitable gaming in 42 states. The entire industry employs, directly and indirectly, over 1 million Americans, and in 1996 had gross income of $47.7 billion.
The AGA represents only the commercial hotel casino entertainment industry, which consists primarily of publicly-held companies listed on the New York, American and NASDAQ Stock Exchanges and which are closely regulated, not only by state and local governments, but by the Securities and Exchange Commission. Our segment of the industry employs, directly and indirectly, more than 700,000 people, who earned over $21 billion in 1995. Our casino employees earn an average annual salary of $26,000 with full benefits. Our gaming companies paid $12.9 billion in federal, state and local taxes in 1995, with over 80 percent of that amount allocated to state and local taxes. From 1993 through 1995, we spent almost $13 billion on construction and purchases of property, furniture and equipment, including improvements and refurbishments. All told, the casino gaming industry contributed $22 billion to $25 billion in total revenues to the economy in 1995. So as you can see, this industry has a significant impact across the entire economic spectrum of our nation.
During my two years I have also had the opportunity, as you will, to hear the critics of the gaming industry first-hand. Their view of gaming bears no resemblance to the industry I and a million men and women 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 of yours. Gaming critics count on the raw emotions tragic anecdotal stories evoke to cover for the weakness of their factual case. My appeal to this Commission is very simple. The livelihood of more than a million hardworking men and women and their families can be affected by not only the findings of this Commission, but by how these hearings are conducted. We ask only for a fair and balanced procedure where facts are prized and hyperbole is discouraged.
Anti-gaming advocates will appear before this Commission and will make three fundamental arguments: first, that gaming is immoral; second, that it is a predator industry in an economic sense; and, third, that the social costs of gaming exceed any economic benefit.
As for the morality argument, we live in a wonderful country where a divergence of opinion is not only tolerated but is encouraged, and there are some who find gaming immoral. So be it. Nothing we can say or do will change their minds. While we respect their right to maintain their opinion as to morality, the fact is that their views are not shared by the vast majority of Americans. According to a recent study, 176 million visits to casinos occurred in 1996. That figure does not, of course, include those millions wagering with state lotteries or with the pari-mutuel industry and does not count the thousands of office and workplace betting pools, private wagers, those who regularly gamble on the stock market or those who bet on the first tee of golf courses across the country every Saturday morning.
I have also learned over the last two years that there are numerous myths and stereotypes about the industry in the public domain. Many of these myths and stereotypes are perpetuated by those who are opposed to gaming and whose ultimate goal is to outlaw all forms of gaming in this country. In many cases, opponents have attempted to manufacture facts to support their views. While I clearly respect the right of every American to express their moral views, Senator Pat Moynihan of New York perhaps said it best that ‘’Everyone is entitled to their own opinion, but not to their own set of facts.” To prepare a complete and accurate report to the President, the Congress and the nation’s governors, it is critical that you weigh all of the evidence presented to you over the next two years and weigh it carefully. You must attempt to distinguish between myth and fact.
As I stated, gaming critics also will claim that gaming is a predatory industry and that the social costs of gaming far exceed the economic benefits it produces. They will allege such things as gaming increases street crime, that it is responsible for an increase in U.S. bankruptcies and that gaming causes an increase in government payments for welfare programs. Most of these allegations are based on so-called economic models that cannot withstand critical analysis. We believe the vast majority of the alleged economic and social cost deficiencies of the gaming industry are, in fact, false and not supported by the facts. These economic models or theories can now be evaluated through the prism of experience. The social and economic impacts of gaming on state and local communities can now be examined, not by theory, but by actual results reflected in independently-derived statistical data of state and local governments across the country.
For example, gaming opponents attempt to prove their “predatory” allegations by ascribing to the so-called “substitution theory.” They claim we feed off other goods and services. In other words, they say that $1 spent in a casino is $1 not spent in a restaurant or shoe store. According to this argument, gaming simply takes from other established businesses without creating true growth of its own within the economy.
Two recent studies conducted for the AGA by Arthur Andersen on the economic impact of gaming in the United States concluded that the “substitution theory” is invalid for a number of reasons. The Arthur Andersen macro economic study establishes that this argument works only if an economy is static and real personal incomes do not grow over time. In fact, the size of the U.S. economy has not been fixed; rather, it has expanded over time as new jobs have been created. Per capita disposable income has also increased, leading to substantial increases in personal consumption expenditures. Spending on recreational activities increased from 5 percent in 1970 to 9 percent in 1993. Of this 80 percent increase in recreational spending, a very small portion (less than 5 percent) is due to incremental spending on casino gaming; therefore, since other recreational industries are growing as well, gaming is not merely replacing other industries.
If the “substitution theory” economic model were correct, we would not see increases in retail sales or business growth. Arthur Andersen’s micro study, which examined three new gaming jurisdictions—Biloxi/Gulfport, Mississippi; Shreveport/Bossier City, Louisiana; and Joliet, Illinois—found that there have been significant positive economic impacts as a direct result of gaming. The introduction of casinos has led to growth in employment, retail sales, commercial and new housing construction and restaurants and a decline in public assistance programs and unemployment rates. As I discuss these important economic indicators, I will show you a series of charts to demonstrate the positive impact gaming has had on the three communities examined in the micro study.
For example, prior to the arrival of gaming in Biloxi/Gulfport, Mississippi, the average annual increase in retail sales stood at 3 percent. After gaming arrived in 1992, that growth jumped to 12 percent. The $2.2 billion in retail sales during 1996 was an all-time high for the area.
Similarly, in 1994—the year casinos opened—Shreveport and Bossier City, Louisiana, experienced its highest retail sales growth in 11 years. In fact, the percentage of retail sales growth was higher in both cities during 1994 and 1995 than the percentage growth of retail sales on the national level. In 1996, retail sales growth of 5 percent continued the upward trend. And, according to the Bossier City/Parish Sales and Use Tax Division, taxable restaurant sales increased 5 percent in 1994 and another 7 percent in 1995—increases that do not include sales at casino restaurants. Furthermore, 11 new restaurants opened in Bossier City in 1995.
In Joliet, Illinois, retail sales were $3.2 billion in 1995, up from $2.4 billion in 1992, the year casinos opened. A separate study of gaming in Tunica, Mississippi, found that since casinos opened in 1992, retail sales have increased by 600 percent [Gaming’s Economic Impact on Tunica County; Tunica Convention and Visitors Bureau; pg. 2]. In all three areas studied by Arthur Andersen, similar growth was seen in commercial and residential construction, auto sales and hotel and motel revenues, including revenues from non-casino hotel rooms.
A recent report conducted by two professors at the University of New Orleans School of Hotel, Restaurant, and Tourism Administration further debunks this “predator theory.” Their research of how local restaurants fared in five different gaming jurisdictions in the United States found that, “When casinos are developed, all aspects of the local food and beverage business increase: the number of establishments increases, the number of people employed increases, and payroll increases at an even greater rate than the first two. This growth occurs in rural and urban communities alike…”[The Effect of Casinos on Local Restaurant Business; by George G. Fenich, Ph.D., and Kathryn Hashimoto, Ph.D.; School of Hotel, Restaurant, and Tourism Administration; University of New Orleans; pg. 13]. The facts tell the story—the predator theory has no validity.
Gaming opponents also argue that social costs wrought by gaming exceed the benefits. Their argument is that people go into casinos, lose their money, lose their jobs, end up on welfare or commit crimes, and the public has to pay the price. That reasoning is unsound and is not supported by the facts.
One of the ways we have always judged growth and progress in this country is by examining the numbers of those who must resort to public assistance. The lower these numbers, the better a community and its residents are faring.
Arthur Andersen’s micro study also examined the public assistance framework in areas where gaming has been introduced in the last several years, enabling a solid rebuttal to the anti-gaming argument. The study found that in Shreveport/Bossier City, 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 the Biloxi/Gulfport area, the average number of AFDC recipients has dropped steadily every year since casinos opened in 1992, as have the benefit payments. And the number of people using food stamps has 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 Joliet, Illinois, after a steady increase in the first five years of the decade, 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 a separate study of Tunica County in Mississippi, results showed that since casinos opened in 1992, AFDC payments have dropped by 55 percent, food stamp distribution has declined by almost 80 percent and child support payments have doubled [Gaming’s Economic Impact on Tunica County; Tunica Convention and Visitors Bureau; pg. 6].
According to a recent University of Maryland report, [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; pg. V] social costs on the Gulf Coast area of Mississippi and in St. Louis, Missouri, 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 “no 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 services 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.”
And this is a good place to note that we in the gaming industry offer greater opportunities than do most other businesses in this country. As these charts reflect, a very high percentage of jobs in gaming are held by minorities and women. In Bossier City, minorities constitute 56 percent of the workforce at the casinos. And women comprise more than half the workforce. In Biloxi, 35 percent of the casino employees are minorities and 60 percent are women, which is considerably higher than the average for this area. In Joliet, minorities constitute 21 percent of the casino workforce and 58 percent are women. In fact, our industry’s outstanding record for getting people off of welfare and into the workforce was recently recognized at a White House ceremony launching the President’s new bipartisan Welfare-to-Work Initiative. President Clinton also singled out the industry’s achievements at last month’s annual National Governors Association meeting in Las Vegas.
Opponents also point to increased bankruptcies in the United States and incorrectly blame them on the gaming industry. There is no proven correlation between bankruptcies and casinos, although this claim has been widely propagated by anti-gaming advocates and some in the media. A recent USA Today series that offered a detailed analysis of the increase of bankruptcies in the United States 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 bankruptcy. Most experts agree that soaring bankruptcy rates are caused by the ease in receiving consumer credit and by relaxed bankruptcy laws.
From 1994 to 1996, U.S. bankruptcy filing rates increased by 41 percent. The eight states having the highest percentage of increases were: Hawaii, Arkansas, Maine, Vermont, North Carolina, West Virginia, Pennsylvania and New Mexico. Out 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.
On the issue of crime, although gaming opponents try to tell you differently, 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. Just look at Orlando, Florida, after the opening of Disney World for a graphic example. In the majority of new gaming jurisdictions, crime has decreased over time and dropped well below the rate it was prior to gaming’s arrival. One has to look no further than East St. Louis, where the crime rate plummeted an incredible 49.6 percent after gaming was introduced, or Joliet, Illinois, where crime dropped 18.2 percent, or Alton, Illinois, where crime decreased by 2.6 percent, or Dubuque, Iowa, where crime went down 2.5 percent with the advent of gaming. In Mississippi, statistics show that between 1990 and 1994, crime rates were largely static in areas where there is gaming, while crime rates in other parts of the state climbed.
The issue of problem and underage gambling is a subject that is difficult to quantify, but one that gaming opponents continually point to, however, using flawed statistics. In fact, the most respected researchers in the field acknowledge that there is no single, reliable test for determining what percentage of the public has a gambling problem and that improved methods for prevention, education and treatment are badly needed. This is why the Congress and the President, in their wisdom, statutorally required this Commission to have the issue of problem and underage gambling researched and studied by the National Research Council of the National Academy of Sciences, where trained physicians, psychiatrists, counselors and other experts can, with appropriate peer review, professionally examine this disorder and report back to this Commission.
Although the industry believes the number of problem gamblers in this country is small, we believe that one problem gambler is one too many. Because of this concern, the gaming industry has stepped up its efforts to help address the issues of problem and underage gambling, identify the extent of the problem and then help find solutions that include not only treatment, but education and prevention. In 1996, the National Center for Responsible Gaming was formed to fund outside independent research by leading universities and research centers on problem and underage gambling. Housed on the campus of the University of Missouri-Kansas City, it is the first ever nationwide funding source devoted solely to the study of problem and underage gambling.
The Center will support the finest peer-reviewed basic and applied research on problem gambling, encourage the application of new research findings to improve prevention, education and treatment strategies and enhance public awareness of problem and underage gambling. Funding for the Center is provided by casino companies, and overall support currently totals $4.485 million over the next ten years, with more than $800,000 in funding available each year for the next three years.
The challenge that lays before you is to find these things out for yourself. Do not rely on anecdotal evidence, which I am sure will be presented to you by gaming opponents, as heart-rendering as it might be. You must go to the towns where gambling exists and talk to the people who work and live in casino communities, particularly casino employees, local law enforcement officials and the mayors. You should also get the perspectives of some of the millions of typical, responsible adults across the country who enjoy casino gaming as a form of entertainment and recreation, and whose occasional playing of slot machines or blackjack brings no ill-effects on themselves or others.
Gaming may not be right for every community—it is not a magic economic silver bullet; however, if made part of a carefully-crafted economic development plan, gaming can provide jobs, economic opportunity, infrastructure development and help revitalize communities and allow them to prosper.
During the Cold War, former President Ronald Reagan often said with reference to his dealings with the Soviet Union, “Trust, but verify.” And that is exactly what this Commission must do. Don’t take our word for it, and don’t take gaming opponents’ word. Verify the facts for yourself so that you can objectively report to the American people what they so rightly deserve to know.