2008 Election (Maryland): Proposed Constitutional Amendment (Question 2) for Slot Machine Gambling on Ballot

Maryland is enduring rough economic times, but promoting gambling with video lottery terminals (VLT or slot machines) is an improper way to ease its fiscal pain.

Some Maryland politicians seek to avoid having to cut many programs is support a ballot question that will amend the Maryland constitution to allow slot machines to operate in the state.

Proponents state that the amendment, if approved by voters, could generate $1.36 billion in revenues in Fiscal year 2013, which would allow the State to dedicate $660 million in an Educational Trust Fund. According to a report from the Maryland legislature’s Department of Legislative Services (the Maryland General Assembly’s research arm), the $660 million figure is an estimate for fiscal year 2013.

The $1.36 billion revenue figure is based on a number of assumptions.

These estimates assume that (1) five licenses will be awarded; (2) facilities will initially
operate at 50% capacity and reach full capacity one year later; and (3) all 15,000 VLTs
are awarded. It is assumed that the locations with existing facilities are awarded licenses
and begin operations in February 2011, two years after bid submission, and locations
without facilities begin operations six months later in August 2011. Revenues will be
potentially higher (lower) than estimated to the extent that facilities begin operations
earlier (later) than estimated in temporary or permanent facilities.

The slot machines will also have an effect on the Maryland Lottery.

DLS [Department of Legislative Services] estimates that VLTs, when fully implemented, will cause a permanent reduction in lottery revenues of 10% annually versus what is currently forecasted. This estimate is based on the experience of other states that have authorized additional gambling and experienced substantial decreases in lottery sales. In addition, for those states where data are available, Maryland has substantially greater lottery operations, measured on both a gross volume and per capita basis. Therefore, it is possible that lottery sales might decrease more sharply than these other states. Exhibit 6 details the estimated decline in general fund revenue in each fiscal year as a result of decreased lottery sales. The impact on lottery revenues incorporates current lottery revenue forecasts and increases with increased VLT implementation.

Upon closer analysis, Question 2 is based upon too many assumptions. Also, Maryland already has a lottery, from which the state receives a little over $500 million in revenues in fiscal year 2007. [A thought for voters to consider: How is it possible to generate another billion in gambling revenue? Recall that the Department of legislative Services stated that the Maryland Lottery officials predict lower revenues if the slots are established as assumed.]

Indeed, Question 2 could generate the money contemplated. However, it is also possible that Question 2 will not generate sufficient money to fund the huge Education Trust Fund contributions. Also, the planned locations may be seen as inconvenient, which would lead to proposals to move the gaming areas to places which are more convenient for potential users.

In addition, basing state revenue policy on gambling is not a good move.