The American king and queen of gambling destinations are Las Vegas and Atlantic City, which rake in nearly $10 billion a year in gross gaming revenue, according to the American Gaming Association.
But gambling wealth does not necessarily translate into prosperity for all.
Gambling activities and public education funding are often linked — an ideal way to use gaming and lottery revenues for schools in states including Florida, which is set to gain billions if a gambling pact with the Seminole Tribe of Florida is approved by the federal government.
But the reality is that gambling revenue can be spent however lawmakers want to spend it, unless it’s tightly tethered to commitments in statute or in a state’s Constitution.
Legislators can budget gambling revenues for education, or infrastructure such as road and sewer improvements, or environmental protection, or tax cuts, or to pad state savings, to name a few options.
Republican leaders who control the Florida Legislature have not announced how they expect Florida’s new gambling revenue to be allocated.
But Democrats have been clear that they want the money to broadly benefit Florida citizens through better services such as improved health care, more access to mental health treatment, higher wages, and assistance to small businesses.
The House Democratic Caucus compiled a list of priorities for allocating the revenue at the start of the legislative special session on gambling in mid-May. At the top is expansion of Medicaid, to provide health-care coverage for low-income people who don’t qualify for Medicaid as currently configured in Florida.
Broward-Dade Democratic Rep. Joe Geller told the Phoenix he thinks Republicans are disinclined to spend the money in those ways. He pointed to what he considers a relevant missed opportunity in the regular legislative session this spring to broadly invest $1 billion in new revenue from internet sales taxes.
Collecting those taxes for the first time generates a windfall that could have been used for many purposes. Geller was disappointed that Republican leaders chose to use it exclusively to prevent an automatic increase in payroll taxes paid, mainly, by large corporations.
Geller doesn’t want to see that done again, with Florida’s new gambling revenue.
“What we don’t need is more tax breaks for rich guys and the big corporations that they own,” Geller said in a June interview.
Rep. Randy Fine, a Brevard County Republican who helped broker the gambling compact, told the Phoenix that revenue derived from the gambling compact and related legislation would simply go into Florida’s general fund, where the majority of lawmakers will allocate it as they see fit at the time.
“These are all political questions”
A Nevada Republican senator who heads the National Council of Legislators from Gaming States said various states use their gambling revenue in a variety of ways, for better or for worse, mostly depending on the state’s prevailing politics.
There is no other pattern to it, said Nevada state Sen. Keith Pickard in an interview Friday.
“The states are all over the map on this,” Pickard said. “These are all political questions.”
For example, while many people associate gambling tax revenue with enhancements in public education funding, it doesn’t necessarily pan out that way.
From the wealth generated in America’s top two gambling cities, funding for public education in Pickard’s home state — Nevada — is near the bottom and in the other — New Jersey — is near the top, according to an April report by the National Education Association, a nationwide teacher union. Based on estimates in 2020-21, New Jersey spent $22,337 per student in its public schools. Nevada spent $10,237.
Nevada does not earmark how gambling revenue is to be used.
State Sen. Pickard represents part of Clark County, which includes Las Vegas. He believes Clark County schools are woefully underfunded, despite the billions of dollars wagered and spent in nearby casinos and resorts. Critics such as the local teachers union say the gambling operations pay too little in taxes.
“Florida Education Champions”
In addition to Florida’s gambling pact involving the Seminole Tribe, big-money organizations are looking to expand gambling in the state through Constitutional amendments, which, if approved by voters, could bring billions more into the state’s coffers.
In June alone, out-of-state gambling corporations donated $52 million to bankroll proposed constitutional amendments to legalize their operations in Florida. And the Seminole Tribe of Florida donated $10 million to a political action committee to fight those amendments. If the efforts gain the requisite signatures, nearly 1 million, they can appear on the 2022 ballot.
One of the amendments, to legalize mobile sports betting statewide, is titled Florida Education Champions because it purports to dedicate the sports-betting tax revenue to educational enhancements.
Nevada Sen. Pickard said a common problem with ballot initiatives and legislation is that while it sounds good to voters to earmark funding for particular causes, it is harder to make the revenue impervious to being raided or supplanted (reducing traditional funding sources, knowing that mandated funds can replace them).
He cited recent Nevada legislation to tie taxes on legalized marijuana to increases in school funding. Good idea, maybe, but only a fraction of the revenue is actually landing in education programs, Pickard said.
“It was all to go to education, but the drafters didn’t really understand the budget process,” he explained.
Meanwhile, he said, the Clark County Education Association, a teachers union, proposed two citizen initiatives to amend the Nevada Constitution in support of K-12 funding: one to increase sales taxes by 1.5 percent and another to raise tax rates on gaming by 3 percent.
Ultimately, the union helped broker a state-approved increase in mining taxes instead, leaving the gambling tax rate in the nation’s richest gambling mecca unchanged.
What lies ahead?
No matter how you look at it, new revenue is coming to Florida tax coffers from gambling, for the first time since the Seminole Tribe halted revenue-sharing payments in 2019 due to a dispute over terms of its 2010 compact with the state.
Florida Republicans including Senate President Wilton Simpson, House Speaker Chris Sprowls, House Appropriations Chair Jay Trumbull, and Senate Appropriations Chair Kelli Stargel did not provide comments about how they want to see the new gambling revenue spent, though the Phoenix made multiple requests.
In Nevada, Sen. Pickard said his role in the National Council of Legislators of Gaming States has shown him the best course in developing a gambling economy is a slow, deliberative one.
He urged state governments to study and learn from the models and mistakes of old gambling veterans such as Nevada and New Jersey. He also cautioned that sufficient funds need to be set aside for enforcing gambling laws and for helping compulsive gamblers avoid financial ruin.
“Take it slow. Have a good regulatory structure,” Pickard said. “Otherwise, it really depends on the political process … the political process is disingenuous by definition.”