Gambling Studies: Math in Fantasyland

Gambling industry expert Ivan Zabilka* recently wrote a blog post about the latest gambling industry “study” about the economic impact of expanded gambling.  His post shows how the industry seeks to manipulate the economic numbers for its purposes in a kind of “math in fantasyland” fashion. Here are Ivan’s thoughts from his blog, The Gambling Notepad.

Ivan Zabilka

Ivan Zabilka

Today news was released about another worthless and inflated study done on behalf of the Chambers of Commerce, paid for by a consortium of horse interests including Churchill Downs and Keeneland, and conducted by Spectrum Gaming Group of New Jersey, a long time shill for the casino enterprise.

The study is typical of gambling interests.  All the numbers are overdrawn, especially with regard to state revenues and jobs.  This is not cost-benefit analysis, because the costs are not considered.  There is no mention of the migration of jobs from other businesses to the casinos.  There is no mention of the costs to society of the migration of money from the consumer economy to the casino interests, which will be largely out-of-state.

The study predicates that revenues will be $1.14 billion assuming that only one track in Lexington will have a casino.  Guess which one.  It also assumes that a fancy new track will be built in London or Corbin to tap out Knoxville, Tenn.  Since the “hold” for casinos is usually about 10 percent, that means that Kentuckians will have to gamble $10 billion to generate $1.14 billion in revenue.  Even with re-spending of money won (called thrashing) that will not happen.

Supposedly, the tax rate will be 40.65 percent which will generate $465 million for the state.  BUT WAIT!  The tracks will receive back $164.6 million for purses and the breeders fund.  This reduces the effective tax rate to 26.35 percent which is very low.  This trick also reduces the costs for the tracks dramatically and increases their profits exceedingly generously (read obscenely).

Kentucky’s gross gaming revenue ($1.14 billion) would exceed that of all the casino states except Illinois, Indiana, Louisiana, Michigan, Mississippi, Nevada, New Jersey and Pennsylvania.  All these states have more than nine casinos and larger populations, and many of them are wealthier.  This projection is totally unrealistic.

The nine casinos will supposedly employ 11,000 people.  This would exceed all but Indiana, Louisiana, Mississippi, Nevada, New Jersey and Pennsylvania.  The number and wages paid are both inflated.

Since every other figure is inflated, do you really believe the multiplier effect will lead to a $1.7 billion positive economic impact.

What is not addressed is where all that money comes from.  The negative economic effects are ignored.

* Ivan Zabilka, is a retired educator and historian. He was a teacher and administrator at both the secondary and collegiate levels for 44 years. He has two theological degrees (M.Div. and Th.M.) from Asbury Theological Seminary and two degrees in U. S. History (M.A. and Ph.D.) from the University of Kentucky, with a specialty in the history of science. He has been an active opponent of gambling expansion since 1992 when he personally saw in his classroom the damage caused by gambling. He has three published books and numerous published articles in both history and about gambling. He is currently president of Citizens Against Gambling Expansion (KY), a board member of The Kentucky League on Alcohol and Gambling Problems, a founding member of Citizens Against Gambling Expansion (CAGE), and a research consultant with The Family Foundation of Kentucky. He is listed in Who’s Who in American Education and in Who’s Who in America.


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