Increased gaming could gain momentum as budget hole widens
By W. Gardner Selby
Monday, March 21, 2005
Nearly a year after legislators soundly spurned video lottery terminals as a way to pay for education, expanded gambling appears close to winning a fresh look as new forces work opposite sides of the perennial fight at the Capitol.
Key lawmakers in both houses say momentum for gaming could swell once legislators get a fix on funding gaps for public schools, health care, criminal justice and higher education in the 2006-07 state budget.
"Gambling has a chance of resurrecting itself," said Sen. Steve Ogden, R-Bryan, chairman of the Senate Finance Committee, "just because it's going to be hard to make everything balance."
And while conservative opponents of gaming say they still have enough clout to thwart the efforts in the GOP-controlled Legislature, their political rivals also like their chances.
Bill Stinson, a lobbyist for the pro-casino group Let the People Decide, said legislators will realize their choice boils down to legalizing casinos or implementing a big tax increase on top of $5.4 billion a year in taxes the House approved Monday to pay for reduced local school property taxes.
"I'll bet you a cup of coffee they're going to be $3 billion to $5 billion short" in the budget, Stinson said.
Let the People Decide, backed by real estate developers who see opportunities in the legalization of casinos, is encouraging a public vote on the issue. The group touts a study projecting up to $1.2 billion a year in state revenue from 40,000 video lottery terminals, which are similar to slot machines, and more than $2.1 billion if voters permit 12 casinos and 22 related restaurants, hotels and businesses statewide.
On the other side of the issue this year, amateur lobbyists Rob Kohler and David Bales of Austin have joined the typically outspent anti-gambling lobby, delivering breakfast tacos to legislators on behalf of a nonprofit think tank they've created. Along with the tacos, they deliver a warning against buying into rosy forecasts on gambling, and they put an economic spin on an argument often framed in moral terms.
"There's a whole lot of Texans who don't buy into the idea that it's free money falling from the sky and there's really nobody out there looking at it with knowledge making sure that when people make decisions about it a spade is called a spade," said Kohler, a former Texas Lottery Commission employee who also runs a private consulting company. "This isn't a moral issue for me. This is business and economics."
Expanding gambling in Texas would probably require a change in the state constitution, which requires two-thirds support in both houses of the Legislature as well as voter approval.
Lawmakers have been exploring different ways to make that happen:
* State Reps. Vilma Luna, D-Corpus Christi, and Jim Pitts, R-Waxahachie, who heads the appropriations panel, are among 10 to 20 House members who have privately ruminated since last summer about writing a gambling proposal likely to draw House support
* Pitts and Rep. Kino Flores, D-Mission, each filed proposed constitutional amendments last week that could lead to voter action on video lottery terminals at race tracks and on Indian-owned lands, an idea pitched unsuccessfully by Gov. Rick Perry last spring.
* Another proposal by Flores includes language authorizing up to 12 casino developments statewide. Rep. Charlie Geren, R-Fort Worth, and Sen. Rodney Ellis, D-Houston, have filed similar proposals.
Pitts said last week he sees gambling as the only way legislators can afford more aid for schools, including money for a teacher pay raise, beyond the $3 billion the House already wants to commit by taking money from yet-to-be-finalized changes elsewhere in the budget.
The study updated for Let the People Decide by Waco economist Ray Perryman suggests the state could take in $1.2 billion a year in profits from the machines.
Last May, House members rejected 119-26 a proposed constitutional amendment that would have sought voter approval of video lottery terminals. The action contributed to the collapse of a special session on school finance and taxes.
Momentum for gambling seemed to drain in the GOP-majority Legislature, with House Speaker Tom Craddick, R-Midland, telling reporters at the time that the House can't pass video gaming.
After the session, the Republican Party of Texas inserted anti-gambling language in the party platform, saying any expanded gambling would have devastating effects on Texas families.
"We strongly oppose gambling, in any form, as a means to fund education," the platform says
Allen Blakemore of Houston, who advises conservative candidates, all but rules out a gambling measure winning this year, though he said he admires the "pluck" of those who could attempt to win the two-thirds margins in each body needed to propose constitutional changes to voters.
"There's no way the conservative grass roots will allow the Legislature to do that," Blakemore said. "The elected officials who want to stay, who want to keep their jobs, understand and won't vote for that."
Blakemore said Perry, a Republican poised to seek re-election next year, would "certainly" veto any gambling legislation that reaches his desk .
Perry has said he doesn't see video lottery having much of a chance this year. A spokeswoman said he will leave gaming issues up to legislators.
Betting on the ballot
Against that opposition, most advocates now echo an argument that worked to send the state lottery to the ballot in 1991: Let voters decide.
"A lot of people are questioning why they can't vote on gambling," said Rep. Allan Ritter, D-Nederland, who watches buses routinely hauling Texans past his hometown to gambling houses in nearby Louisiana. "Society has changed. A lot of people view it as entertainment, no different than going to a picture show."
Rep. Charlie Geren, R-Fort Worth, likened the economic effect of casinos to 20 new truck plants like the Toyota factory under construction in San Antonio.
Among gambling foes, Rep. Charlie Howard, R-Sugar Land, took issue with turning to voters. "Why don't we do that with everything we do up here? Then we don't need to be here," he said. "We are elected representatives. Some (members) don't have the guts to take a position."
Sen. Ken Armbrister, D-Victoria, said he's found a way to make it easier to approve gaming at the Capitol.
He suggested that lawmakers authorize county gaming districts to oversee video lottery terminals, a step he said would avoid the need to amend the constitution. The untested strategy would reduce to a majority of each body the margin needed to expand gambling.
As the debate plays out, nearly 200 lobbyists list gambling as an interest in reports to the Texas Ethics Commission, though fewer than 20 lobbyists appear to be representing big-dollar clients.
Big City Capital, a Nevada-incorporated business headed by former Fort Worth nightclub owner Billy Bob Barnett, has enlisted six lobbyists, including Mike Toomey, who stepped down as Perry's chief of staff last fall. The lobbyists estimate their "prospective" fees total $600,000 to nearly $1 million. The company was founded in 2002 and, so far, has applied for permits to stage concerts in Galveston, according to a report by the watchdog group Texans for Public Justice.
Kohler and Bales, the newcomers to the anti-gambling cause, represent the Common Sense & Sound Public Policy Think Tank. They base their opposition on analyses of Lottery Commission data.
Kohler and Bales, a real estate businessman whose late father, Larry, owned the Scholz Garten restaurant in downtown Austin and was a state representative from Travis County, said they have paired up drawing from Kohler's money to make a case that slot-style machines and other gaming amount to gimmicks likely to cost people more than they help government. They say their motivation is simple: avoid bad public policy that will rely too heavily on low-income Texans and provide a bad return for the state.
Kohler said other state governments that draw money from slot-style machines generally receive only about 4 cents from every dollar spent on the machines, far lower than the traditional return on lottery sales of about 30 cents on the dollar.
He said Texans would have to spend $37 billion on gambling in a single year, equal to the money they've spent on the lottery since September 2002, for the state to net the $1.2 billion proponents promise.
Rep. Mark Strama, D-Austin, fielded a taco from Kohler and a document stating that low-income people disproportionately play the lottery and estimating the costs to local government of treating people who become gambling addicts.
Strama, undecided on gambling before the visit, said later: "I can't see a way that I can stomach gambling. His argument is persuasive."
Playing the numbers
Lobbyists on both sides of the issue point to statistics to show how Texas will be affected by video lottery terminals at racetracks or a broader proposal to build a network of casinos across the state.
* 15,000 from video lottery terminals
* 200,000 from casinos
Government revenue generated:
* $1.2 billion a year from video terminals
* $2.8 billion from casinos
Costs to society:
* $1.5 billion to $3 billion a year because of pathological gambling
* $250 by nearby businesses for every $1,000 gambled
Sources: The Perryman Group, Texas Comptroller of Public Accounts, Legislative Budget Board, Texas Public Policy Foundation, Common Sense and Sound Policy Think Tank, Center for Public Policy Priorities drawing on historic participation in Texas lottery