Where Should New Gaming Revenues Go?

Where Should New Gaming Revenues Go?

As full-fledged casino gambling moves closer to becoming a reality in Rhode Island, the race is on to figure out how to distribute the expected additional revenue the state will earn.

Two pieces of legislation introduced this week call for new gaming revenue to be allocated to elementary and secondary education or to paying down debt on state bonds.

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The bills, proposed by State Senator Harold Metts (in photo at left) and State Representative James McLaughlin, are aimed at changing a system that currently allows all revenue to be placed in the general fund. Metts and McLaughlin say committing the money to direct initiatives will stop the state from constantly using it to plug holes every year.

Honor The Promise

This isn’t the first time Rhode Islanders have debated the allocation of money earned from gambling or lotteries.  When the state first formed its lottery system, the idea was to ensure that all revenue would go to directly supporting education.  But Metts says that never happened.

Metts’ bill would require 100 percent of the money generated from any new or expanded forms of gaming be allocated solely to education. While he doesn’t support casinos and has only voted in favor of one gambling bill during his time in the General Assembly, Metts says funding education should be a primary focus if the state is going to move forward with a full-fledged casino.

“They sold us on the lottery because it was supposed to go to education,” Metts said. “That never happened. Why not honor the promise that we made years ago.”

Thinking Long-term

Meanwhile, McLaughlin says his focus is primarily on paying down the state’s debt. He wants to commit 10 percent of the gambling revenue to a restricted receipt account that would be used only to pay debt on state bonds.

McLaughlin says the state needs to focus on its unfunded liability and making sure that a certain percentage of the state’s third largest source of revenue is an efficient way of paying down the state’s debt.

He did, however, say his proposal will likely be a tough sell to his colleagues in the State House.

“What I’m afraid of are the finance people,” McLaughlin said. “They’re looking for anything to plug a $300 million deficit, but we go on like this year after year. Every year it’s a scramble at the eleventh hour. We need to find a long-term solution.”

Relying On Gaming Revenue

Rhode Island takes 61 percent of the revenue from the state’s two slot parlors. In 2010, the state earned just under $290 million. Because gaming is such a vital source of income for the state, McLaughlin and Metts acknowledge table games and dealers are coming sooner rather than later.

The question is whether the state should rely on revenue generated from gambling to fund direct initiatives like education or state bonds when it can be difficult to project revenue in the long-term.

In 2010, for example, the state of Missouri found itself scrambling to make up for a $24 million shortfall in education funding after tax revenue from the casinos came in far below what was projected.  In 2009, the projections were off over $50 million.

Scenarios like the one that has played out in Missouri are sure to be a topic of discussion as Governor Chafee moves forward with hiring a consultant to study the risks and rewards of expanded gaming in Rhode Island. During his campaign, the governor said he did not see allowing table games as that much of a bigger step, but he has said he would like to study the issue more.

Chafee’s Communications Director Michael Trainor said the governor would like to wait for the consultant’s study before commenting further on how allocate additional gaming revenue.

“With both pieces of legislation under review, the governor is going to wait and watch the progress,” Trainor said.

The Extra Money Helps

First-term Representative Dan Reilly, a member of the House Finance Committee, said he would also like to take a wait-and-see approach on where to allocate gaming revenue. Reilly co-sponsored McLaughlin’s bill, but said he would need to review the full figures before agreeing to commit money outside of the general fund.

Still, he said simply dropping revenue in the general fund isn’t the ideal solution either.

“We have a tendency to pool all the cash and figure out what to do with it later,” Reilly said. “I’d like to see the numbers, but yeah, that extra $20 million [for state bonds] would definitely help.”