Brian Frosh

For more than a decade, the lure of slot machines as a way to generate state revenue and help the racing industry has tied the General Assembly in knots. Having resisted temptation for many years without entirely renouncing it, the General Assembly last winter voted to turn the decision over to Maryland voters. Thus, you will get to decide in November if the state constitution should be amended to allow 15,000 machines at five locations in Maryland. The amendment proposes to use the returns from slot machines mostly to fund K-12 education.

People of good will differ about this issue. But for me, the decision is simple: the amendment should be defeated.

From 2001 to 2003, I served as co-chair of the Senate Special Committee on Gaming. The experience convinced me that the burdens that gambling imposes on state and local government and the community make slots a very shaky undertaking. These burdens will add to the expense of building new infrastructure to accommodate the crowds, the potential for higher crime rates, bigger crime prevention budgets and beefed up social services programs to address the problems attendant to gambling addiction.

On top of that, we must consider the likely blow to the state’s business economy. Every entertainment dollar that goes to gambling is an entertainment dollar taken away from a local establishment. “There’s only so much disposable income people have,” Ocean City Mayor Richard Meehan said last year as he considered the prospect of 2,500 slots at Ocean Downs competing with the boardwalk.

What’s more, the argument that the slots amendment will raise money for schools is seriously flawed. By 2013, when the system is up and running, the state is estimated to receive returns of $660 million—less than 60 percent of the total take.

It’s true that all the state’s portion is earmarked for education. But the nonpartisan Maryland Budget and Tax Policy Institute calls that an accounting gimmick. The state’s education budget—currently $5.5 billion—is set according to formulas based on enrollment and other factors. The budget won’t go up because another $660 million is available. Instead, the slots money will shift existing education dollars to be spent in other areas.

The money that does not go to state government will be divided mainly among local governments, licensees, the state lottery and minority business investment. The racing industry will receive more than $130 million a year.

Close to $100 million of that money earmarked for racing interests will go to increase purses. Most of that money will leave the state.  In 2007, 58 percent of Maryland’s purse money went to out-of-state owners, according to the Maryland Tax Education Foundation. A scant 100 recipients got three-fifths of the part stayed in Maryland. 

I question the strategic importance of subsidizing the horse racing industry. It is a dying business that accounts for only 0.2 percent of Maryland’s economy and 0.33 percent of our jobs. If we are going to subsidize any kind of business, we ought to focus on an area like biotechnology, which will give our citizens a chance at 21st century jobs with a future.

I am doubly disturbed by the prospect of sending tens of millions of dollars outside the state and distributing millions more to a handful of Maryland horse owners—all in the name of helping the racing industry.

Thanks to the current national economic mess, the General Assembly will face a deficit estimated at $1 billion when legislators set to work on next year’s budget.  There is no way around the problem because the state’s constitution requires a balanced budget. Even if the constitutional amendment passes, the only slot revenues anticipated in 2010 will come from licensing fees.

The bottom line is that we’re going to have to balance the budget and pay for our schools the old fashioned way: by finding economies and making hard choices. Slots aren’t the answer.