State’s video-gambling bust a cautionary tale for Chicago
How will Chicago meet its monstrous unfunded pension obligations? Without a twinge of real pain, if you believe some of the folks running for mayor.
They talk about a casino, a tax on legalized pot, a tax on commuters from the suburbs, a city-owned bank and all the rest.
Trust us, they say, the easy money is there.
Except, it’s not.
Not one of those ideas has been dependably priced out. Not one can be counted on to deliver.
How do we know this? Look no further than a powerful report about video gambling by ProPublica Illinois and WBEZ that shows how we’ve been down this road before. Instead of “helping pull the state out of its financial tailspin,” as lawmakers had promised, “the legalization of video gambling accelerated it and saddled Illinois with new, unfunded regulatory and social costs,” the report concludes.
The report is timely because it’s that time of the election cycle when candidates are tossing out solutions to fix the city’s budget problems. And we just can’t go down that rabbit hole again.
Illinois lawmakers approved video gambling with much fanfare in 2009, but in the first eight years, revenues came up short by $1.3 billion. That’s despite the fact that Illinois has 30,000 video slot and poker machines outside of casinos — more than any other state.
Meanwhile, as existing casinos lost business to video gambling, the state’s cut from casinos dropped from $462 million to $393 million between 2013 and 2017.
The promised golden goose now looks more like an ugly duckling.
Chicago can’t afford that kind of experience as it tries to come up with roughly a billion dollars of new revenue in the next three to four years just to keep providing the services it does now — and keep up its pension funding. The city needs a reliable plan for getting its finances in order.
Unfortunately, many ideas for new tax bonanzas never deliver the promised sums unless they are carefully researched and realistically constructed. Our city can’t just rely on easy, no-pain solutions like a new casino, a tax on legalized pot or a commuter tax to solve our financial problems. The next mayor of Chicago and the next City Council have to be honest about that.
The premise that there’s a tax out there that will make someone else pay for the city’s past mistakes is unrealistic, said Laurence Msall, president of the Civic Federation, a nonpartisan not-for-profit that relentlessly analyzes state and local government finances.
“Off-track betting, video poker and increases in sin taxes all have failed to keep pace with the demand [for government services],” Msall said.
Mayoral candidates Dorothy Brown, Gery Chico, Bob Fioretti, La Shawn K. Ford, Jerry Joyce, John Kozlar, Lori Lightfoot, Garry McCarthy, Susana Mendoza and Paul Vallas all favor bringing video gambling to Chicago, which has never legalized it. Candidate William M. Daley says he is open to it, “but we must take a close look at the share of revenue that goes to the state. Unless Chicago gets a greater share of the revenue, this option is not viable.”
The ProPublica-WBEZ story illustrates how untested assumptions, lack of financial transparency and decisions at key stages on legalizing video gambling worked in favor of the industry left taxpayers of Illinois holding the bag. Only communities that approved local ordinances allowing video gambling have machines at bars, restaurants and large gas stations within their borders. Many, like Chicago, continue to ban them.
State Rep. Robert Martwick, DChicago, said legislators are intent in the upcoming session on rewriting video gambling laws to bring more money to the state.
“There is a sense that money is being left on the table,” said Martwick, who favors using additional revenue that would come through a rewrite to shore up local pension systems. “The operators are just raking in money hand over fist.”
The lesson is not only that the laws on video gambling should be rewritten, but also that as lawmakers and mayoral candidates cast around for new revenues, they shouldn’t believe that easy money really exists.
It’s a gamble that none of us can afford to lose again.