Pennsylvania slots will aid Nevada firms, professor says

Martha Raffaele

Friday, May 2, 2003 | 9:59 a.m.

HARRISBURG, Pa. -- Opponents of proposals to legalize slot machines at the state's horse racing tracks presented both moral and economic arguments to a Senate committee Wednesday, saying the social costs of gambling expansion would far outweigh the economic benefits.

William Thompson, a University of Nevada, Las Vegas professor who has studied gambling and public policy, told members of the Senate Finance Committee that while he agrees that slot machines will boost Pennsylvania's tax revenue, they will not necessarily help improve the economy.

Gov. Ed Rendell advocates allowing as many as 3,000 slot machines at each of as many as eight racetracks, including two for which licenses have yet to be awarded, and taxing the revenue to generate an estimated $300 million next year and nearly $800 million a year in the future. He proposes using the money to help lower property taxes and increase public-school subsidies.

Thompson pointed out, however, that among the primary beneficiaries would be slot machine companies in Nevada. Assuming that the state's four existing tracks and a new track installed 3,000 machines each, they would have to spend $180 million.

"This will hurt your economy. It will be adding to economic growth in Nevada, but it will take away from economic growth in Pennsylvania," he said.

Proponents also have argued that the state needs to try to recapture and tax the more than $3 billion they say Pennsylvanians currently wager at out-of-state tracks and casinos.

But Earl Grinols, a University of Illinois economics professor, said that introducing slots could also entice new gamblers to explore out-of-state opportunities.

"You're going to be training new gamblers. After they gamble locally for a while, they're going to want to go to the big time," he said.

Michael Geer, president of the Pennsylvania Family Institute and a member of Pennsylvanians Against Gambling Expansion, shared several anecdotes about gambling addicts whose problems led to substantial debts, substance abuse and suicide.

"If we fund schools and preschool with gambling money, we'll be telling Pennsylvania school children that the way to get ahead is not by working hard and studying, but by risking everything on a get-rich quick scheme," he said. "I can imagine the advertising now: 'Your gambling helps toddler Pennsylvanians,' or more simply, 'Slots for Tots.' "

Sen. Constance H. Williams, D-Montgomery, disagreed with Geer. It only makes economic sense to provide in-state gambling opportunities for Pennsylvanians who like to gamble and can do it responsibly, Williams said.

"I think it's unrealistic to think that we cannot have responsible gambling in Pennsylvania," she said.

The House Finance Committee also had a hearing on the issue later in the day. Among those who testified was Frank J. Fahrenkopf Jr., president and CEO of the American Gaming Association, a trade group that represents the commercial casino industry. Fahrenkopf also served as the Republican Party's national chairman from 1983 to 1989.

Fahrenkopf said he did not come to Harrisburg to push Rendell's plan for what he called a "racino" -- a racetrack with slot machines -- but rather to counter "misperceptions" about the industry perpetuated by gambling opponents.

"Trust but verify," was how he summed up his message to the committee at a news briefing before he testified.

He said polling by his organization has steadily shown that 85 percent of Americans have no problem with legalized gambling, but that the 15 percent who oppose it "are very, very active."