Gaming industry, critics argue over jump in political activity

David Strow

Wednesday, July 28, 1999 | 11:04 a.m.

The gaming industry made $5.7 million in federal campaign contributions in 1998, a 400 percent increase since 1992, the General Accounting Office reported Tuesday.

Most of that money, the report found, has landed in the pockets of Republicans, as gaming campaign contributions to the national GOP have increased more than eight times since 1992. About 270 candidates took money from gaming interests in the 1998 election cycle, up from 146 in 1992.

The report is the first in a series requested by Rep. Frank Wolf, R-Va., one of Congress' most outspoken gaming critics. The GAO intends to release a report on campaign contributions in "selected state elections" in the near future.

Since 1992, overall federal campaign contributions have risen 40 percent, to $851 million.

Frank Fahrenkopf, president and chief executive of the American Gaming Association in Washington, D.C., said the industry has nothing to apologize for.

"We have millions of shareholders, hundreds of thousands of employees, and we're going to participate in the political process," Fahrenkopf said. "That apparently upsets Congressman Wolf that we do that, but that's the law of the land, and we'll continue to participate.

"It's not like we're a great threat to the Republic."

But Tom Grey, executive director of the National Coalition Against Gaming Expansion, said the industry had "blown its cover" by getting so heavily involved in federal politics.

"I have a hunch that these guys have drawn too much attention to themselves, and they've been flushed," Grey said. "Gambling was best left with a low profile. A 400 percent increase ... people will start to notice who's coming out to get it."

The $5.7 million in contributions made the gaming industry the 37th highest contributor out of 92 industry groups. Since 1992, the portion of all campaign contributions made by "gambling interests" has increased from 0.17 percent to 0.7 percent. When adjusted for inflation, gaming contributions rose 340 percent from 1992 to 1998.

Critics and proponents of gaming agreed on one thing -- the increase was the direct result of increasing federal attacks on the industry. That began in 1994, when the Clinton administration proposed a 4 percent gross receipts tax on the industry. That proposal was quickly shelved, but it heightened awareness in the industry.

"There are the vociferous critics of the industry that would federalize gaming policy, who seem totally devoid of any interest in the fate of Nevada ... who get upset when we react to that," said Jim Mulhall, vice president of government relations at the Nevada Resort Association. "We have to deal with that environment with a legislative agenda that wouldn't exist if Mr. Wolf didn't generate it."

But James Hulse, director of Common Cause of Nevada, sees the increasing funding as an attempt to do at the federal level what gaming has done at the state level in Nevada.

"I don't think (the increase) is unique to gambling but clearly, when a report is contemplated by Congress, then the interest of the gamblers is to shape the results of that report," Hulse said. "It is very difficult to make an objective study on the effect of gambling on society when the gamblers are paying so much money to the politicians. That's been true in Nevada for a long time, and now it's true nationally."

Gaming contributions spiked in 1996, the last presidential election, when they hit $6.2 million, a 444 percent rise from 1992. More than 375 federal candidates received gaming contributions in 1996, including eight presidential candidates.

Gaming industry contributions were defined as contributions from individuals employed in the industry, political action committees (PACs) funded by industry sources and companies whose primary source of income is gaming.

"Data we obtained on contributions from the gambling industry ... are likely to be conservative," the GAO noted, because the study didn't account for donations below $200, contributions from companies who derived a smaller portion of revenues from gaming or contributions to state and local party committees.

Republicans have benefited far more from the increase than Democrats, the study found. Gaming contributions to the Republican National Committee and National Republican Congressional Committee were $1.37 million in 1998, up from $181,000 in 1992.

Campaign contributions by the industry to the Democratic National Committee and the National Democratic Congressional Committee were $850,000 in 1998, up 190 percent from 1992. Gaming contributions to the Democrats were twice as high as to the Republicans in 1992; in 1998, the GOP took in twice as much as the Democrats from gaming interests. Democrats took in more contributions than Republicans until the 1998 election cycle.

Fahrenkopf said that change was merely a reflection of who controls Congress, rather than a shift in partisan loyalties.

"That's true of any industry in the country," Fahrenkopf said. "Up until 1994, you would've found (funding) overwhelming in favor of the Democrats, because they controlled Congress."

The largest jump in campaign contributions came in so-called "soft money," which skyrocketed from $458,000 in 1992 to $3.83 million in 1998. The 1998 soft money was down just $100,000 from the soft money contributions of the 1996 presidential election cycle.

Soft money refers to contributions made to a state or national party committee, rather than directly to a candidate. By comparison, hard money is given directly to the campaign committee of a candidate.

Individuals, PACs and companies are limited to $1,000 in hard money contributions to any candidate in one year. By contrast, individuals are limited to $25,000 in soft money contributions, while there aren't any caps for PACs.

Hard money contributions were $1.9 million in 1998, up from $829,000 in 1992. In 1996, $2.4 million in hard money contributions were reported, triple the 1992 total.

Copies of the GAO study were delivered to Sen. Fred Thompson, R-Tenn., and Sen. Joseph Lieberman, D-Conn., senior members of the Senate Committee on Governmental Affairs, as well as Rep. Dan Burton, R-Ind., and Rep. Henry Waxman, D-Calif., ranking members of the House Committee on Government Reform.

The GAO used data provided by the Center for Responsive Politics in Washington, D.C., which takes Federal Election Commission reports and categorizes donations by industry. CRP tracks contributions by 92 industries.

The GAO intends to release a series of "case studies" into the economic and social impact of gaming on at least four American cities, including Las Vegas. GAO auditors are expected to arrive in Las Vegas this fall.