Casinos Funding Maryland Education
Good news! Casinos had a record breaking fiscal 2018, earning revenues in the billions and contributing nearly $500 million to the Maryland Education Trust Fund (see CBS 8/18). Or is it good news?
Maryland
voters were duped into believing that casino revenues would add money to education budgets, but the
legislation included no requirement that the funds would be supplemental. So
while the education budget received $500 million in funding from casinos, that
simply allowed the state to redirect $500 million it otherwise would have had
to use for education and use it for other budgetary shortfalls. Casino money
does not change funding formulas or the overall pile of money schools receive.
So much for the good news story, though as I explain below, lawmakers are
working to fix this problem.
But there
is more bad news when you consider the economics involved here. First, from
whose pockets is this $500 million really flowing? I suspect the clientele of
Maryland casinos is more tourist-driven than, say, Midwest riverboat gambling,
but a general truth is that lower and middle class people spend more on
gambling than the wealthy do. This has been shown about Maryland and other lotteries
(Carpenter, Perlman, & Norris, 2010; Wisman, 2006). A 2011 baseline study prior
to slot machine expansion (https://bha.health.maryland.gov/POPULATION_BASED
BEHAVIORAL HEALTH/Documents/SpecProjsVetsGambling/gambling201_0610.pdf)
shows that Marylander gambling frequency (includes lottery and other forms) is
negatively correlated with education and income, and that a weekly gambler
spends an average of about $550 per month, a multiple of what is spent by less
frequent gamblers. So, while specific Maryland casino patron analysis is
lacking here, it is reasonable to assume that much of the state’s gambling
revenue is coming from lower socioeconomic groups, which then have less money
in their pockets to spend on students’ food, care, and educational needs.
Second,
who benefits from the $500 million? I argue that the state is making a choice
between funding budget shortfalls with casino revenue and funding them by
raising revenues from income, sales, and real estate taxes. If this is the
trade off, then clearly the wealthy benefit more from this casino-driven funding
structure. In essence, casino revenue becomes a wealth redistribution scheme
from the poorest to the wealthiest.
The
August CBS report fails to mention the constitutional amendment upon which
Marylanders will vote next month, supposedly solidifying a transition to
casino-based revenues as supplemental education funds “in addition to the state funding provided through the funding formulas
established in the bridge to excellence in public schools act of 2002…”.
See the ballot wording here: https://ballotpedia.org/Maryland_Question_1,_Gambling_Revenue_Dedicated_to_Education_Lockbox_Amendment_(2018).
Will passage of this amendment rectify the original legislation to be as the
voters intended? Or are minimum funding formulas still alterable enough to
allow creative budget maneuvers that would take away education funds in the
future? Even if funds do eventually provide a windfall for needed capital
expenditures in the school systems, there is still the issue that this funding
comes out of the pockets of poorer residents. What will be the ongoing ramifications
of gambling as a wealth redistribution mechanism in Maryland?
Links:
References
Carpenter, R. E., Perlman, E. L.,
& Norris, D. F. (2010). Who pays for the Maryland lottery?: Evidence from
point of sale data. Journal of Gambling Business &
Economics, 4(1), 31.
Wisman, J. D. (2006). State
lotteries: Using state power to fleece the poor. Journal of Economic
Issues (Association for Evolutionary Economics), 40(4), 955.
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