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Published: 11/11/2012

Budgeting blind

Ohio’s economy appears to be on the road to recovery, and thousands of new casino jobs have played their part. But taxes generated by gambling are unlikely ever to make up for state cuts in aid to local governments and schools.

The third of Ohio’s four planned casinos opened last month in Columbus. The final piece of the gambling puzzle is set to begin operations next spring. Still, gambling revenues have not lived up to expectations.

Nearly $1 billion was cut from the 2010-2011 state budget. Policy Matters Ohio, a nonpartisan economic policy research organization, says that after the Cincinnati casino opens in 2013, the four will generate some $227 million a year for local governments.

Casino backers promised $600 million a year in additional tax revenue when they campaigned in 2009 for a state constitutional amendment to allow casino gambling in four cities. Slightly more than half of that would be split among Ohio’s 88 counties. A third was to go to local schools. And the rest was to be split among the State Racing Commission, the Casino Control Commission, gambling addiction programs, law enforcement training, and the four host cities.

Last summer, the County Commissioners Association of Ohio revised that estimate to $460 million a year. Policy Matters now says it will be closer to $400 million.

The new estimates are based on disappointing — and declining — revenue numbers from the Hollywood Casino Toledo and Cleveland’s Horseshoe Casino since they opened earlier this year. Revenue from the two casinos was more than $46.5 million in June. By September, it had dropped to a little more than $37 million.

It’s hard to gauge how much casino revenues are hurt by Internet gambling, including the so-called sweepstakes at Internet cafes. It is also unclear how much business slot machines at horse race tracks will draw from casinos. The state’s first racino opened in June at Scioto Downs, south of Columbus.

Still, summer is supposed to be the peak season for casinos, which suggests the revenue decline may not be over.

Gambling industry experts say it’s too early to draw conclusions from the declining month-to-month revenues. Much fairer, they say, is to wait and compare year-to-year revenue in the same month. It seems clear, however, that taxes from gambling won’t replace the money lost in state cuts to local governments and local school districts, even after all four casinos are up and running.

Despite rosy revenue projections, casino developers aren’t at fault. They described a best-case scenario that recession-weary voters were eager to grasp. Fault for unmet expectations rests mostly with elected officials who could have struck a more favorable tax-and-licensing deal with casino owners.

Even then, it was unrealistic to expect gambling taxes to balance local budgets. The City of Toledo and Toledo Public Schools have avoided that trap. But the downward trajectory of casino revenues means that planning budgets around casinos is a real gamble.



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