Wednesday, October 31, 2012

Ballot Measures - Lazy Legislation or True Democracy? Part 2: Gambling on Gaming

As I mentioned in the last post, a great deal of media attention in the Washington and Baltimore markets has focused on Maryland's Question 7- a Maryland ballot question that would extend gaming (aka gambling) in the state. Over the past few weeks, I have had dozens of discussions with Marylanders about Question 7 - it is far and away the most asked-about local issue for me. Is it harmless, a great opportunity, or a scam?  Let's discuss these questions and then ask ourselves what this campaign tells us about the validity of ballot measures as a way to decide on this kind of issue.

Mailers from Question 7 proponents

 Question 7:

"Do you favor the expansion of commercial gaming in the State of Maryland for the primary purpose of raising revenue for education to authorize video lottery operation licensees to operate “table games” as defined by law; to increase from 15,000 to 16,500 the maximum number of video lottery terminals that may be operated in the State; and to increase from 5 to 6 the maximum number of video lottery operation licenses that may be awarded in the State and allow a video lottery facility to operate in Prince George’s County?"


This complex question refers to a referendum that was required to expand gaming (gambling) in Maryland, a state with a long history of legal gambling in various forms. The state has had organized horse racing since the formation of the Maryland Jockey Club in 1743, and Pimlico (home to the Preakness) is the nation's second oldest racetrack. In 1972, Maryland voters approved the creation of a state lottery which began operating in 1973. Beginning in 2003, gubernatorial administrations introduced bills to bring video lottery terminals (slot machines) to the state. Over the years, the justifications included competition with racetracks in other states that were offering slots, the need to preserve the horse racing industry in Maryland, economic development and money for Maryland schools. In 2007, the legislature passed a bill to approve slots, and after voter referendum, the first slots casino opened in 2010.  This partial history could be of use to proponents who would be able to argue that gambling has a long history and is therefore part of Maryland's character, while opponents could use the same history to argue that the"slippery slope" of gambling may have advanced too far.

Mailer from Question7 Opponents
As of the last disclosure statements, "FOR Maryland Jobs and Schools" spent over $34.2 million in support, and "Get the Facts - Vote No on Seven" spent over $33.5 million to oppose.  This is an astounding amount of money for a ballot question in Maryland. Half of the commercials give the impression that Question 7 will single-handedly lead to the moral downfall of Marylanders, and others give the impression that Question 7 is the only way to pay for the education of future generations. I'll forgive those who have tuned out this debate entirely -it's easy to become cynical as  Question 7 opponents are funded by a $34 million dollar donation Penn National Gaming (presumably trying to squash the competition) and Question 7 proponents have been funded by a $21.8 million contribution from MGM (prospective operators of an $800 Million Prince George's casino) and a range of other interested parties in the state.

A lineup of local and state politicians lined up in in favor of Question 7, including Governor Martin O'Malley, Prince George's County Executive Rushern Baker and others.  The lone elected voice who has expressed opposition to the Question is Representative Donna Edwards, whose 4th District includes the likely site of the new casino.  She is paraphrased in the Washington Post as saying "Gaming is not the answer for a county that has struggled to overcome political corruption, low student achievement and a dearth of high-paying jobs."  While she is in disagreement with state-level elected officials who negotiated the compromise bill, she expresses the sentiment of many of the opponents with whom I have discussed the bill.

Reread the question's text at the top of the post and you will see that  it has several elements: an expansion of the total number of slot machines, the addition of table games such as blackjack, poker or roulette (instead of only allowing slot machines), and adding one more casino in Prince George's.  The question doesn't reference the other parts of the compromise in Senate Bill 1, including a provision to allow casinos to operate 24 hours and a change in the formula for distribution of proceeds.  Not all of that bill is up for public referendum, and a good summary of the question is in this article.

The place where things get tricky is in the detail behind the question, and the occasionally misleading and manipulative advertising on both sides.  For example, the change in distribution of proceeds from casinos mean that existing casinos would pay a lower percentage of their profits to the state in exchange for the increased competition of adding a casino in Prince George's - it's an attempt to compensate existing owners for the increased competition, and opponents mailers have described this as a "permanent tax break" for existing owners. The official legislative analysis shows that with the expansion, more money will be collected and contributed to the education trust fund.

On a related note, opponents argue that a "loophole" in the law means no new money for education and that state legislators can "raid" the trust fund for money to use on other spending.  Again, the answer here is nuanced - although money from existing slots-only casinos is going to the education trust fund currently and more is expected to go if this bill is passed, there is no Maryland education equivalent of the Al Gore Lock Box discussed in presidential debates 12 years ago.   In FY 2011, the legislature authorized $350 million from the "Education Trust Fund to be added to the appropriation for the State Department of Education, Aid to Education via budget amendment, to replace a General Fund reduction of the same amount made to the Governor’s allowance." In simple terms, this means that the state moved around some money from the trust fund to pay some other bills. The funds from the gambling expansion are dedicated to the trust fund, but that money can be used to replace other funds that the state would have dedicated to education.  Voters have a right to be suspicious of the Maryland General Assembly, as that legislative body has a history of taking money from any and every available source when needed to solve a looming budget deficit in any given year.  Funds were recaptured from a small revitalization program that I managed over a decade ago during another year with a budget shortfall.  I think of the money from expanded gambling as increased revenue for the state that could help fund the education plan known as Thornton, but may be used for other state needs if necessary. Unfortunately, there are no guarantees - one's political philosophy will determine whether that "could" is good enough.

Finally, the local impact question, particularly related to the Prince George's County expansion: Are casinos good or bad for the communities that house them?  This is the question that determines the importance of many of the other issues: if casinos are a net positive or even neutral, then concerns over how much money will be generated and how the money is spent wouldn't matter.  If casinos are a net negative, then the question is how much in profits and education funding would it take to make the state, county and neighborhood whole.  I have heard Atlantic City used several times as a negative example of a place where casino development failed to improve the local community.  Some feel that Atlantic City was promised revitalization from casinos and that never came to the low income neighborhoods just blocks away from the multi-million dollar buildings. Less often mentioned are cities such as Detroit which integrated casinos into a multifaceted downtown economic development plan, and has met with some success.  Unlike a typical sports stadium or convention center development, the expansion of table games and addition of a new casino doesn't cost the public anything (with one possible exception that I'll discuss below.)  Casinos are revenue generators by design.

The possible exception to the "no costs from casinos" logic is that some view them as negatives for moral or religious reasons. Others mention the social ills associated with gambling addiction, and their view that gambling is a "tax on the poor." Proponents argue that this would be balanced by funding support programs for the gambling-addicted from the casino revenues.  They also may point to the  long history of gambling in Maryland and the success of casinos and gambling in nearby states as a reminder that many find the activity to be entertaining.  Other opponents offer what I refer to as the  "Biff Tannen argument" - that casinos are a signal of moral downfall and decay.  (In case you were wondering, Back to the Future Part II was on the other day, and the opening of "Biff Tannen's Pleasure Paradise Casino & Hotel" was a sign that things had gone very bad in alternate 1985.)   The counterargument with this logic is that Maryland already has slots casinos, and moral depravity seems to have remained roughly level. Frankly, expanding to allow table games and an $800 million casino/hotel near the upscale National Harbor entertainment district (as currently proposed) seems likely to attract more higher income gamblers, lessening the disproportionate social impact, and adding some new jobs. The question facing every voter is which side of these arguments seem stronger.
 
The real issue, however is whether or not voters should be voting about this kind of complex deal in the first place. I left out one last opponent argument.  Some argue that some part of the deal is not good enough for taxpayers, and they desire to vote no to send the issue back to the General Assembly to revisit during future legislative sessions. That argument makes me pause, because the same argument can be made about any piece of legislation that is not unanimously supported. There is always a way to improve the compromise for someone.  I heard this argument so often that I wondered, Why should voters have to take into account the expanded number of slots or the best tradeoffs in the portion of profits that casino operators pay?  Isn't that what we pay legislators for? The Maryland Constitution, Article XIX, § 1(e) says that the "General Assembly may only authorize additional forms or expansion of commercial gaming if approval is granted through a referendum, authorized by an act of the General Assembly, in a general election by a majority of the qualified voters in the State." Due to this insertion, an expansion must go to the people for a vote.

I'll make the argument that the best strategy is a simple vote on expanding gambling, with the deal-making on specifics left to legislators who can deal with the wrath (or praise) of their constituents at the next election. The average voter can't be in the room for every debate on the issue, can't know how crucial any particular tradeoff was to the deal, or have all of the facts on the issue.  The manipulative advertising by both sides makes me cringe - part of the reason for this post is to provide a balanced viewpoint. Unlike most of the public voices on this issue, I am not being paid by casinos on either side of the question or trying to set myself up for the next election.  I've presented my summary and analysis of the arguments here, and will leave it up to each Marylander to decide how to vote.

As the Question 7 experience shows, on a ballot issue with passion on both sides and a great deal of money  at stake, the amount and quality of information can be problematic.  I have issues with the presentation of the facts on each of the twelve different pieces of mail that I've gotten on the issue from both sides. Because they are busy raising families and going to work, voters cannot be experts at taking in a great deal of policy information on complicated issues and sorting out the best outcomes before they vote.  That's why we have a legislature in the first place - to sit in the State House and hammer out deals on issues that are too complicated or nuanced for the average voter to follow.  Some of these decisions have implications for decades - I want someone to be responsible for reviewing the facts and making the right call.  It's surprising that I find myself in a position where I feel the need to  argue for representative democracy.

I'm now thinking back to other ballot measures in the past in Maryland and elsewhere (e.g. Prince George's TRIM, California's Proposition 13) that have long-lasting implications that voters may not have considered originally.  Voters have been known to pass tax caps that limit revenue and then support additional program spending that can cause fiscal crises years later.  I'd rather have an elected official make those calls - the person who made a bad decision can always be voted out.  Some might argue that incumbents are too powerful, and need the check on their power.  Some decisions can be made by the people, but instead of putting more weight on their shoulders, an alternate strategy would be to keep legislators in check and reduce the power of incumbents (beginning with fair redistricting policies).

For Question 7 and the other Maryland ballot questions, I ask that the Maryland voters look carefully at the questions, the arguments on both sides, the facts, and then make a decision.  It sounds like a lot of work, but hopefully I have given you a head start in these last two posts.  Once you've made your decision on Question 7, please note your answer on my facebook poll (open to readers from all states). Then, consider whether it is possible to have too much direct democracy - do you want to make these kinds of decisions, or would you rather have an elected official do it? Please leave a comment below with your thoughts.

Which is more likely from gambling expansion in Prince George's County: Biff's Pleasure Paradise or James Bond's Monte Carlo? Should regular Marylanders be voting on this issue? Comment below welcome below and share your reaction on twitter and facebook.

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