Maryland's gambling expansion is no sure bet, experts warn

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As Maryland increases its reliance on gambling revenue, questions linger about how long a budget built on slot machines, poker chips and scratch cards can be sustained.

The Free State's take from casino revenue continues to rise, from $103.1 million in fiscal 2011 to $194.5 million in fiscal 2012, and that number is expected to grow as new casinos open in Rocky Gap in 2013 and Baltimore in 2014. The state lottery, meanwhile, has hit record sales in each of the last 15 years, contributing $556 million to Maryland in fiscal 2012.

The latest expansion came with the passage of Question 7, a ballot measure that allows for a new casino in Prince George's County along with table games and 24-hour operation at existing casinos statewide. The new facility will be the state's sixth casino when it opens in 2016.

Maryland gambling analyst James Karmel called it difficult to count on contributions from gambling since casino revenue can be hard to predict, especially with three facilities not yet open.

"I think this is a big unknown right now," he said. "If nothing else, the experience between 2008 and 2012 should have shown the Maryland government leaders that you shouldn't rely on any specific amount of gambling revenue."

A University of Iowa study released earlier this month suggested that states eventually hit a saturation point -- sooner or later, new casinos begin cannibalizing older ones, which means no new revenue for states. While Maryland has not yet hit that point, Karmel said that the new casino's success will largely be based on how many out-of-state gamblers it can attract.

Prince George's County Executive Rushern Baker's office projects that a new casino -- expected to be an $800 million luxury casino operated by MGM Resorts International -- would draw about three-quarters of its visitors from out of state. Much of the casino's impact would also come from nongambling sources like restaurants, hotels and entertainment.

The impact of gambling is more than economic, however. Arthur Turner, president of the Coalition of Central Prince George's County Community Organizations, said that Maryland's legalization of slot machines at veterans' halls means little in terms of revenue, but could have a bigger effect on neighborhoods.

"You have someone going just around the corner, gambling and getting drunk, and they'll be out on the street," Turner said. "Because they're just around the corner, it'll be that much easier for them to lose their family's resources."

Another question is what impact the casinos will have on the state lottery, which is currently Maryland's fourth-largest source of revenue behind sales, income and corporate taxes. With increased opportunity to gamble, Marylanders may be less likely to spend money on lottery games.

"I don't think there's any doubt that there is some crossover," Maryland Lottery director Stephen Martino said. "We're starting to see some erosion on some of our games, particularly Keno."

While Martino said that he thinks Maryland is done pushing gambling expansion for the time being, he added that new ideas or movements within the industry could mean otherwise.

Policies in nearby states, including West Virginia, Delaware and Pennsylvania, can shape in-state policy as casinos compete to draw gamblers across borders. Virginia does not have casino gaming, although analysts say that could change if a new National Harbor facility attracts enough Virginians.

Christopher Summers, president of the Maryland Public Policy Institute, said that Maryland officials will always be tempted by gambling revenue. He added that he wishes the state had just legalized casino gambling when the debate began in 2003 and focused on job creation and tax policy since then.

"I would love to see as much time spent on those topics as they did on gambling over the past decade or so," he said. "When they say, 'We really need to put gambling behind us,' they really mean, 'Wow, we really need to ramp this up.' "

mconnolly@washingtonexaminer.com

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Matt Connolly

Examiner Staff Writer
The Washington Examiner