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    Casinos no death knell for lotteries

    October 20, 2014

    Casino opponents are forecasting a doomsday for the Massachusetts State Lottery if casinos are allowed to open in the state, but their predictions are not supported by the results in other large states that have introduced casinos into mature lottery markets, according to specialists and a Globe analysis.

    Citing a study written by a Massachusetts lawmaker in 2008, casino opponents issued a news release Oct. 8 predicting that lottery revenue would plummet by more than 20 percent, leading to massive cuts in state payments to cities and towns.

    But comparable states where casino gambling has been legalized — such as Ohio and Pennsylvania — have seen only modest effects on lotteries, with flat sales or small drops that tend to reverse within a few years.

    The successful Pennsylvania state lottery, for instance, had grown to about $3.1 billion in total annual sales before the state’s first casino opened in late 2006. That first casino was followed by an explosion of eight more gambling parlors opening during the next three years, which helped Pennsylvania’s casino market become the second richest in the United States, behind only Nevada.

    Traditional lottery sales in Pennsylvania held flat for five straight years through the state’s casino eruption, before lottery sales started growing again in 2011, according to the Pennsylvania Lottery.

    Sales reached a record $3.8 billion in the most recent fiscal year.

    Casino specialist Clyde Barrow, chairman of the political science department at the University of Texas-Rio Grande Valley, and formerly of the University of Massachusetts system, said in some states, such as Connecticut and New Jersey, lottery revenue “continued to grow as if nothing happened” after casinos opened.

    In states that do experience a decline, the effect has generally been small and begins to reverse within three years, he said.

    The Ohio lottery saw a 1.5 percent drop in traditional lottery sales, from about $2.73 billion to $2.69 billion, after casinos opened in 2012, according to figures compiled by the University of Nevada Las Vegas Center for Gaming Research. That downward slide reversed in fiscal 2014, when sales bounced back to $2.74 billion, according to an Ohio Lottery spokesperson.

    Maryland’s $1.7 billion lottery fell 2.2 percent in 2013, the year after the state’s largest casino opened outside Baltimore, according to UNLV figures. Lottery sales were down another 1.7 percent in the most recent fiscal year. A consulting study published in July found the declines greatest in areas immediately around Maryland’s casinos.

    Casino opponents, who are campaigning in favor of a casino repeal measure on the November ballot — Question 3 — have claimed that the Massachusetts lottery “can expect to see a 21.9 percent” decline, if as many as three resort casinos and a slot parlor open in the state as called for in the 2011 casino law.

    The dire prediction is based largely on a 2008 legislative study, which cites an even older forecast about Pennsylvania lottery sales that has since proved to be wrong.

    State Representative Tom Conroy, a casino opponent, wrote the 19-page legislative study three years before casinos were legalized in Massachusetts. The study presents an array of arguments against opening the state to the casino industry, including the notion that Massachusetts would be better off supporting more expandable industries such as life sciences and renewable energy. He only briefly touches on the potential effects on the lottery, quoting several existing studies.

    One of the papers he cited is a 2006 school assignment by a Duquesne University undergraduate, which is posted on the Internet. Written at the dawn of Pennsylvania’s casino explosion, the paper predicted a massive 25 percent loss in Pennsylvania lottery revenue — which did not occur.

    Conroy, a Wayland Democrat who ran this year for state treasurer, stands by the overall conclusions of his nearly seven-year-old study.

    “What I do know is you’re going to have a very serious negative effect on the lottery,” he said in an interview. “I still have the same doubts; I still see the same risks I saw seven years ago.”

    Massachusetts has one of the nation’s most successful lotteries, with $4.8 billion in sales last fiscal year.

    Casino opponents have suggested the lottery could be more sensitive to casino competition because of the vast amounts of money state residents already spend on government-sanctioned gambling.

    “Common sense seems to dictate there is only so much disposable income out there” among gamblers, said former state treasurer Joe Malone, who supports casino repeal. “I think the dollars will be moved around.”

    Casino specialist Patrick T. Kelly, chairman of the Department of Accountancy at Providence College School of Business, agrees the lottery could face some risk from competition from glitzy gambling palaces.

    “It would not be unreasonable to see the lottery take a hit because so many people in Massachusetts buy lottery tickets,” he said.

    The current Massachusetts treasurer, Steve Grossman, is confident “the impact to the lottery would be far less” than what opponents have forecast, and attributes claims of massive losses to election-season politics.

    “Anyone who has numbers on [potential lottery losses] is to some extent making them up,” Grossman said. “I believe rolling this study out, which is such an outlier, is a scare tactic designed to create doubt and hysteria.”

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