More Hoodoo Economics

Just below I touched a bit on what I believe to be either rank dishonesty or the most outrageous case of wishful thinking to ever masquerade as public policy. On further reading this morning it occurs to me that a metaphor for the O’Malley budget scheme is slots.

From Secretary of Labor, Licensing, and Regulation Tom Perez’s magnus opus Slot Machines and the Racing Industry: A Review of Existing Data in Maryland andNeighboring States

The money grafs:

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With or without slots in Maryland, it is indisputable that many Marylanders enjoy gambling, whether it is spending $1.6 billion on the lottery in Maryland, playing slots in West Virginia and Delaware to the tune of roughly $350 million to $400 million in 2006, betting nearly $108 million on “tip jars” in Washington and Frederick Counties, or playing bingo at a local firehouse.

While officials in Maryland grapple with a $1.5 billion budget challenge, Marylanders
playing slots in West Virginia and Delaware are contributing roughly $150 million annually to the tax coffers of these states, subsidizing the horse racing industries,
education and other priorities. That’s not to mention the money that is traveling over our northern border into Pennsylvania’s slot machines and state bank account.

Keep those numbers in mind. $400 million gross revenues with $150 million eventually attaching itself to the grubby paws of state bureaucrats.

Now from today’s Washington Post a story entitled O’Malley Plan Would Not Limit Slots to Racetracks:

Under O’Malley’s plan, when fully phased in, the state-owned machines would generate $425 million a year for education and other state programs, O’Malley said. An additional $125 million a year in slots proceeds would go toward construction of education facilities, and $100 million a year would be used to supplement horse racing purses — a practice in place in neighboring states.

Here the governor is promising a net revenue to the state of $550 million after payments are made for purses, machine payouts, etc.

So how does this compare with neighboring states? Again we rely on the estimable Mr. Perez.

Delaware: “48 percent to licensees, 36 percent to Delaware’s general fund, 11 percent to supplement racing purses, and 5 percent to servicing and monitoring the games.”

West Virginia: “34 percent goes to government, two percent goes to the county or municipality hosting the track, and 46 percent is reserved for the licensee. The remaining money subsidizes the racing industry…”

Pennsylvania: “42 percent will go to government (34 percent to state property tax relief, four percent to local government and five percent to economic development) and 12 percent to subsidize racing’s economics.”

In short, to get where the governor says slots will get us Maryland slots have to net between $1.14 billion (assuming the state take is like West Virginia’s) and $1.54 billion (assuming the state take is like Pennsylvania’s) while we know, again according to Mr. Perez, that Charles Town Races grosses $976 million, Delaware Downs grosses $652 million, and Pennsylvania grosses $5 billion. Is it reasonable to assume that with limited betting parlors like the proposal the governor is floating that Maryland will be able net the equivalent of gross revenues from Delaware and West Virginia?

Are our bureaucrats really financial savants of this degree or are our citizens so much more addicted to gambling that the average West Virginian?

Not at all. This is hokum.

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