State revenues from authorized gambling fell 2.8 percent in fiscal 2009

Americans aren’t gambling as much as they were before the recession, creating potential issues for states already hurting from record budget gaps due to the weak economy.

State revenues from all sources of authorized gambling fell 2.8 percent in fiscal 2009, according to a report from the Rockefeller Institute of Government released Monday. “It's not a huge decline, but it's sobering,” said Mark Marchand, director of communications for the Rockefeller Institute, told CNN Money.

Authors of the study - For the First Time, a Smaller Jackpot: Trends in State Revenues From Gambling - said new gambling activities often provide a quick boost to state revenues, but generally do not keep pace with traditional tax revenues and government expenditures over time.

“The historical tendency for revenues from existing gambling operations to grow at a significantly slower pace than other state revenues may hold important lessons for states as policymakers consider further expansion of casinos, racinos, and other gambling activities,” Institute Deputy Director Robert B. Ward and Institute Senior Policy Analyst Lucy Dadayan wrote in the report. “Expenditures on education and other programs will generally grow more rapidly than gambling revenue over time. Thus, new gambling operations that are intended to pay for normal increases in general state spending may add to, rather than ease, long-term budget imbalances.”

Lottery income, the largest source of state gambling revenues, fell 2.6 percent. It was the first annual drop in lottery revenue going back to 1970, according to the group.

Income from casinos fell 8.5 percent, while revenue from pari-mutuel wagering, which includes dog and horse racing, sank nearly 15 percent.

However, revenue from race tracks that also offer electronic gaming machines increased by 6.7 percent, mainly because of new racinos in Indiana and Pennsylvania, the report said.

Twenty-five states have proposed or considered expanding gambling activities, said the report, which noted the drop in gambling revenue was “likely influenced by the current economic downturn.”

Of the 41 states with major gambling revenue, 28 states reported declines over the year, with 14 states reporting decreases of more than 5 percent, according to the report.

However, the study did not include income from Native American casinos, which are active in 32 states, because comprehensive data were not available.

Twelve states showed growth in revenue collections from the major sources of gambling. While the report said gambling revenue plays a “relatively small” role in state budgets, 2009’s decline comes after several years of sustained growth.

Overall gambling revenues increase by 60 percent over the previous decade, from $15 billion in fiscal year 1998 to $24 billion in fiscal year 2008, according to the report. During that same period, state revenues from gambling activities amounted to no less than 2.1 percent and no more than 2.5 percent of state-generated general revenues.