Lottery Dwarfs Racing Revenue to States

Pari-mutuel wagering provides just over 1% of gambling's contribution to government.

Gambling sources provide more than $25.4 billion to state and local governments, according to most recent figures, but taxes on pari-mutuel wagering provided just a little more than 1% of that total.

That’s the surprise finding for horseracing found in an economic report on gambling’s contribution to government finances produced by Eugene Christiansen, chairman of Christiansen Capital Advisors of New York City. 

That all-source total for gambling is almost as much revenue as states and municipalities receive from alcohol, public utilities and tobacco taxes combined. “It would buy 186 million barrels of oil,” he said.
Christiansen, the June 13 keynote speaker to the National Council of Legislators from Gaming States in Napa, Calif., noted that pari-mutuel wagering was once the major source of gambling revenue for government. But state lotteries, which now account for more than $17.1 billion annually, dwarf racing's contribution. His study was conducted with figures from the fiscal year ending in June 2006, the most current data available.

“Fifty years ago, horse racing was the largest source of state gambling revenue,” he said. “Now, it’s just a small fraction.”

Casinos are now the other major source of gambling revenue for government, Christiansen said, providing more than $5.4 billion. Tribal gaming accounts for slightly more than $1.2 billion annually. Pari-mutuel sources were next at just under $291 million, while racinos -- which includes slot machine and video lottery terminal revenue, but not racing dollars in this study -- totaled $286.1 million. 
Christiansen noted he expects to see a huge increase in racino revenue in 2008. “Florida alone will realize $1 billion from slot machines at its pari-mutuel facilities this year,” he said.

Increasingly, Christiansen said, state legislatures are looking to gambling as a needed source of revenue. He noted that government in six states now derive more than 10% of their income from gambling: Nevada (31.9%), West Virginia (14%), South Dakota (13.6%), Michigan (12.3%), Louisiana (11.1%) and Rhode Island (10.4%).
“These are deliberate policy decisions made by legislators of these states,” Christianson said. It raises a “legitimate question,” he added, of whether states should be encouraging gambling.
“Gambling is not a candy store,” Christiansen said. But he added a moment later: “Of course, I’m not in the position of having to balance a budget.”

Only two states – Hawaii and Utah – receive no gambling revenue.

Christiansen also noted that gambling also provides more than tax revenue. It means jobs and other economic benefits. Lower tax rates encourage high-end gambling resorts with many amenities while higher tax rates tend to attract storefront slot machine complexes with few non-gaming extras.

“You decide what type of animal that you’re inviting into your state,” he told the lawmakers.