Gambling ties to bankruptcy found limited

Friday, Sept. 10, 1999 | 10:51 a.m.

Bankruptcy

Sen. Richard Bryan says a Treasury Department report that finds a weak link between gambling and high bankruptcy rates vindicates the gaming industry.

"What this report means is that any attempts to focus the fire on gaming as the culprit for higher bankruptcy rates is misdirected," said Bryan, D-Nev.

Bryan recently received an executive summary of the Treasury Department report, "A Study of the Interaction of Gambling and Bankruptcy." The study, which cites data developed by the National Opinion Research Center of the University of Chicago, finds "a weak relationship between frequent high-risk gambling and the probability of declaring bankruptcy."

The study also says the tax revenues generated from gambling activity may offset any losses or expenditures associated with gambling. It also recommends further study of the issue by the government.

The report is in its draft stage and has not been released to the public.

The National Opinion Research Center is the same organization that was commissioned by the National Gaming Impact Study Commission to study links between gambling and bankruptcy, but the NORC developed new data specifically for the Treasury study.

Michele Johnson, chief executive officer of Consumer Credit Counseling Services in Las Vegas, said the Treasury report is contrary to others she has read that attribute increases in bankruptcy rates to the proximity of casinos. She noted that Nevada consistently ranks first or second in the United States in per-capita bankruptcy rates.

Critics say the high bankruptcy rate in Nevada is more attributable to the state's rapid growth and not the preponderance of gaming.

Johnson remains unconvinced.

"While gaming may not be a primary cause, it is certainly one of the factors that has to be considered along with a number of other economic considerations," she said.

The report acknowledges Johnson's viewpoint.

"The recent rise in consumer bankruptcies is the result of a number of factors, the relative importance of which is a matter of sharp and unresolved debate," the report's draft executive summary says.

"Much of the earlier increase in the national bankruptcy rate has been attributed to the changes in the bankruptcy law of 1978," the report says. "Other economic and social factors cited by researchers as contributing to more recent increases include higher levels of debt relative to income, increasing availability of consumer credit through general purpose credit cards and the reduced social stigma of declaring bankruptcy."

Bryan said bankruptcy law reforms are being proposed because "the pendulum has swung too far in favor of the debtor."

"The fact is not everybody is cut out to be an entrepreneur," Bryan said. "The harsh facts of life are that even though the economy is growing, competition is tougher today than ever before. There's more money being made today, but the competition out there is savage and not everybody survives in that environment."

Johnson said she is interested in seeing the entire report, since she questions some of the assumptions it makes.

"It says, 'Frequent high-risk gambling and declarations of bankruptcy are both relatively unusual behaviors,' " Johnson said. "I'd really like to know what a 'frequent high-risk gambler' is and I also question the statement about bankruptcy being a relatively unusual behavior. It actually seems a lot more commonplace here."

The Treasury report suggests further study of the issue among three recommendations at the conclusion of the executive summary. The recommendations:

* "Given the limited number of studies on the relationship between gambling and bankruptcy, a research agenda should be established and supported by competitive grant awards administered by the National Science Foundation."

* "In order to provide data for further study, studies should investigate effective methods for data collection and analysis on the sources of unsecured debts. Such studies should consider issues regarding methods to minimize the burden to the courts and to debtors for providing information on the causes of bankruptcy while protecting individual privacy with respect to sensitive information about debts that is not presently required in bankruptcy filings."

* "Public education regarding bankruptcy and gambling should be considered as a part of our efforts to inform and educate the public on financial security and public health issues."