States continue to bet on lotteries, casinos to support schools and services
Locations of casinos and horse racing venues by county in Michigan. (Charles Crumm/Digital First Media)
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Stop in at any lottery retailer on an evening when jackpots in some of the games are reaching the stratosphere, and there’ll often be people waiting in line to buy tickets.
The Michigan Lottery – 11 draw games and dozens of instant scratch-offs and pull-tabs – generates nearly $800 million a year for the state, with part of the money earmarked for the state’s School Aid Fund.
Add in taxes and fees on money raked in by casinos and horse racing, and the total jumps to nearly $1.1 billion that schools or government takes in annually from gambling.
A report issued in April by the Rockefeller Institute looked at state revenues nationally from gambling – including state-sponsored lotteries, commercial and Indian casinos, and horse racing.
The conclusion was in the subtitle: “Short-term relief, long-term disappointment.”
Once seen as a solution to struggling state and local budgets, revenues from gambling are declining in many states, though only slightly in Michigan, according to the report.
The ups and downs of gambling has major implications for states that are heavily dependent on gambling taxes and fees for its operations and schools.
“If you are highly dependent on one source of revenue, you’re vulnerable,” said Chuck Moss, a former Republican state lawmaker from Birmingham who chaired the Appropriations Committee in the Michigan House.
The Michigan Lottery was established in 1972, with the state contributing 29 cents of each $1 to the state School Aid Fund.
Since 1972, the various state lottery games have generated $19.6 billion for the School Aid Fund. That worked out to $495 per pupil in 2015.
The explosion of casino gambling on Michigan Indian reservations and the opening of the Windsor Casino across the Detroit River in Canada in 1994 opened the doors to commercial casinos in Detroit.
Commercial casino gambling was legalized in 1996, allowing for three casinos in the city of Detroit. The state collects a 8.1 percent tax on wagering and the city collects another 10.9 percent.
Today, there are 23 Indian casinos, three commercial casinos and two horse tracks in 22 of Michigan’s 83 counties, in addition to 11,000 licensed lottery retailers across the state. There are 22,450 tribal slot machines and more than 9,300 at the three Detroit casinos.
Since 2008, Lottery revenues have decreased 4.5 percent, commercial casino revenues to governments have fallen 17.6 percent, and tribal revenues to local governments are down 45 percent, according to the Rockefeller Institute research.
The Rockefeller numbers differ from the Michigan Lottery’s annual report, which shows both an increase in revenue and ticket sales of tickets from state lottery games.
By far, state lottery sales make up the bulk of the revenues from gambling the state takes in each year.
Gambling generated $1.077 billion in taxes and fees in 2015, of which 74.2 percent was from state lottery ticket sales and 25.3 percent from casino wagers. The state took in relatively small amounts from pari-mutuel wagers at horse tracks in Hazel Park and Northville.
SCHOOL AID FUND
In Michigan, public education is the main recipient of taxes and fees from state-run and commercial gambling.
However, at $12.5 billion, gambling’s contribution to Michigan’s School Aid Fund amounts to 6-7 percent, or roughly $495 per pupil in 2015. The bulk of the School Aid Fund, slightly more than 82 percent, comes from sales taxes, income taxes and property taxes.
State Rep. Tim Greimel, an Auburn Hills Democrat and former school board member, said the contribution from the state lottery to the School Aid Fund in the coming school year is projected to rise to $850 million, from $795 million last year.
“I think it’s a good thing we have several sources of funding for the school aid fund so we’re not overly reliant on any one source of revenue,” Greimel said. “Every dollar is significant for our schools, especially in light of budget cuts that hit schools 4-5 years ago.”
Gambling revenues to support school and government budgets may be here to stay, however.
“It’s always challenging for governments to wean itself off any stream of revenue,” Greimel said. “Government has an obligation to enact fair and equitable tax policy that protects middle class families and lower income individuals.”
Lottery revenue that eventually reaches classrooms isn’t enough, a teachers union leader said.
“I believe that the public assumes all revenue from the lottery goes into public education and that is, in fact, incorrect. The government is purposely misleading in this regard,” said Paula Herbart, president of Michigan Education Association Local 1.
“Money that is not filtered down into the public schools from other sources, as the public is lead to believe, is likely supplanting other programs, perhaps offsetting tax breaks or supporting other publicly funded entities,” Herbart said.
Herbart said the $12.5 billion school aid fund is insufficient to provide a world class education that public school students deserve.
“Many of our districts have eliminated program offerings not due to a lack of interest but rather due to budget shortfalls,” she said. “Our teachers use their own income to fund the purchasing of essential items such as pencils and Kleenex. In some Macomb County districts our members are purchasing hats, gloves and coats to keep students warm in the winter. In a time when there are more and more children in need, school funding in many Macomb County districts is less or only slightly more, than it was in 2010-11.”
Editor’s note: Chuck Moss is a candidate for the Oakland County Board of Commissioners. His opponent in the Aug. 2 Republican primary is incumbent Shelley Goodman Taub. The winner faces Democrat Charles Gaba in the November general election. Greimel is unopposed in the Aug. 2 Democratic primary. His opponent in the November general election will be the winner of the Republican primary, either Pete Trzos or Garren W. Griffith.