January 13, 2009

A Bigger Gamble Than Ever

Oh, this is not good.

State-sponsored gambling, which faced long odds in past legislative sessions, might not be viewed so negatively this time around as legislators look everywhere for a few dollars to help solve the state's massive budget problems.

A cross section of state legislators are expected to introduce a wide spectrum of gaming bills in coming weeks.

I get the appeal. I really do. Voluntary revenue for the state, in a world where "tax" has become an epithet meaning "sodomy," is about as sexy as it gets, especially when the word makes our governor blink slowly and say, "But I made a promise."

The problem is that gambling isn't free--and all the calculations of how long it would take to pay off start-up costs and bring in revenue are more than a year old. Normally that wouldn't be a big deal, but what a year it's been. You've heard about Atlantic City.

"Over the last two years, about $600 million in gross gaming revenue has disappeared from Atlantic City," said Joseph Weinert, senior vice president of Spectrum Gaming Group.

Also gone during that period: 3,330 casino jobs.

Atlantic City has tried to blame the decline on growth in other gambling and, of all things, a smoking ban. But that doesn't explain Las Vegas.

Recently, the Nevada Gaming Control Board released “win,” or revenue, figures for the month of October. The results showed a significant decline in state-wide revenue from gambling, which slid 22.33% in October when compared to the same month last year. Las Vegas Strip revenue was down 25% year over year.

Clark County, Nevada reported a gambling win of $757 million, falling from just over $1 billion in October of 2007. The change represented a drop of 24.34%, among the largest declines in the state. Casinos on the famed Las Vegas Strip reported $475 million in revenue in October, down from $639 million year over year. That percent decrease amounted to 25.77%. North Las Vegas saw its revenue tumble by the largest reported percentage. October gambling revenue there dropped from $28 million in 2007 to just $18 million in 2008, a slide of 34.53%.

Nor does a casino have to be a plane flight away to be in trouble.

The Mohegan Tribal Gaming Authority announced Sunday that effective Feb. 1 it will cut pay for all employees, with salary rollbacks of 10 percent for vice presidents and above, 7.5 percent for middle managers and 4 percent for all line and hourly employees.

In addition, it will eliminate annual raises and merit-based salary increases and is scrapping its matching contribution to employee 401(k) plans.


The announcement comes a month after the casino's parent company reported a double-digit percentage decline in net earnings, primarily due to a drop in gambling revenue. For the year ending Sept. 30, Mohegan Sun reported $1.36 billion in net revenue, down about $68 million from the previous year.

Only state lotteries are seeing any increase in revenue, and not even all of them. New Jersey isn't getting any of it.

Officials say their sales slipped by 4 percent between July and the end of November compared with the same period in 2007.

The sales slump runs counter to what other states are seeing. Scientific Games, which makes scratch-off tickets, says revenue is up for scratch-off and daily games in 25 of the 42 states with lotteries.

Neither is New Hampshire.

Lottery sales were down 11 percent in 2008 over the previous year, according to Rick Wisler, executive director of the New Hampshire Lottery.

Whatever may have been the case in the past, gambling is not recession-proof, not this recession. And with all the other demands for funding, now is not the time to be gambling state money on the chance of future revenue.


Ryan said...

I think gambling can withstand the recession. It may not be recession-proof. Honestly, the people don't have the money to go spend. But like they say, a gambler will FIND a way.

Stephanie Zvan said...

I think part of the question, Ryan, is how many people who gamble these days are "gamblers." I mean, yes, there will always be gambling, but that doesn't mean that gambling will always be the same. It strikes me that we should know more about that before we treat it as an investment. I suspect I'll be looking into this a bit more.

JLK said...

It seems incredibly counterintuitive. Gambling revenues are down because people aren't gambling. Why are people not gambling? Because they're losing their jobs, having their pay cut, etc.

I mean, yes, people who are "gamblers" are still gambling. But people who do it for recreation are finding other, cheaper, less-risky ways of entertaining themselves.

And we have no idea how or when the economy is going to get better....

So why gamble on gambling when no one's gambling??

Stephanie Zvan said...

JLK, I think I should have just let you write the post. You got to the point much more quickly than I did. :)

JLK said...

LOL! That would have to be a first for me!

(I mean, you've seen my blog......I normally can't make a single point in less than 500 words!)

Juniper Shoemaker said...

When I worked in Las Vegas last year, all I heard from residents-- many of whom depended on casinos for their livelihoods-- was lamentation over the decline of gambling revenues. I also boarded with a local attorney who agreed that gambling was getting less and less profitable.

Unlike Stephanie's data, of course, these are purely anecdotal. But, given the severity of the global economic disaster, it's hard to think of any industry that's significantly recession-proof. I hope Minnesota takes care.

Stephanie Zvan said...

Juniper, I'm working on putting together even more data. I'm definitely going to do everything I can to encourage caution on this. Thanks for the information on Vegas. It gives me some ideas for additional places to look.