Ducey’s gamble has a major flaw

Gov. Doug Ducey has worked hard and long to get more gambling revenue into state coffers, including opening up gambling opportunities off Indian reservations, to which they have been largely confined.

He apparently has struck the necessary deals with the tribes and a bill (House Bill 2772) to set the legal structure in place for off-reservation gambling is working its way through the Legislature.

There are serious questions about what more legal gambling means for the social fabric of the state. And about the prudence, and morality, of making state programs more dependent on gambling revenues.

Put those aside for now. If the deed is to be done, there is a serious flaw in the structure Ducey has crafted. Ducey would have the state create off-reservation gambling oligopolies, a limited number of licenses for limited purposes.

There is only one way for taxpayers to get, and know that they are getting, the maximum price for these oligopolistic licenses: Put them up for auction and award them to the qualified bidders offering the highest return to the state.

Instead, the Ducey proposal gives these oligopolistic licenses to politically preferred organizations, for a price to be determined later by the Department of Gaming.

This is most egregious, and indefensible, regarding the bookie licenses, euphemistically called an “event wagering operator” in the legislation.

The Department of Gaming could issue only 10 off-reservation bookie licenses. But they can only be given to professional sports teams. The sports team could set up a bookie operation near its arena, golf course or racetrack.

There would be no upfront payment to the state for the license, only what was necessary to cover the expense of processing the application. The state’s share of the take would be determined later by the department. A minimum is set at the highest percentage the tribes are paying, which historically hasn’t been very high.

Now, there is nothing about owning a particular professional sports team that would logically constitute an entitlement to a bookie license for bets not only on that team, but the whole panoply of sporting events eligible for the placing of bets.

The only way to ascertain the true value of these licenses, and maximize the return to taxpayers for shielding licensees from additional competition, is to put them up for auction. Instead, Ducey proposes to give them away for a return to be determined later.

A comparable, but less offensive, flaw exists with respect to Keno, a game in which punters bet on the random selection of numbers. Ducey would have the lottery expand into running Keno games and allow a limited number of Keno establishments to be created.

Capturing a Keno-playing crowd would be attractive to a wide range of businesses and organizations. Again, the only way to capture the true value of the licenses would be to put them out to bid.

Instead, the Ducey proposal gives them away to fraternal and veterans’ organizations. Think the Elks and VFW.

Giving away oligopolistic gambling licenses to social clubs such as these isn’t nearly as objectionable as giving them away to highly valuable professional sports franchises. But it still shortchanges taxpayers.

The structure of the third type of offreservation gambling Ducey wants to legalize, fantasy sports, is more defensible. There is no artificial limit on the number of fantasy sports licenses, as there is for bookie and Keno operations. Without such a limit, an auction wouldn’t really work.

But there is still a bothersome lack of certainty in what Ducey is proposing. Again, there is no upfront payment to the state for fantasy sports licenses beyond covering the cost of processing the applications. Again, the state’s share of the take is to be decided later by the department. And again, subject to the minimum being the highest percentage offered by the tribes.

To get the tribes to accept the expansion of gambling off-reservation, Ducey is negotiating new compacts to expand it on-reservation as well. These compact details remain under wraps.

Which occasions a circling back to the questions set aside. Ducey is asking the Legislature to set up the structure of a major expansion of legal gambling without any real knowledge of what it will produce in terms of state revenue.

In other words, Ducey is asking the Legislature to place the first bet.

Regarding House Speaker Nancy Pelosi’s independent investigation of the capitol riot:

Would someone, anyone, throw a net over Pelosi. She is a crazed and vindictive. Whether you’re a Democrat or Republican, enough money thrown away scratching her itches.

George Brown, Goodyear