No Slots for ME!

Help Restore the Ban on Slot Machine Gambling in Maine

In 1980 and again in 2000, the voters of Maine voted by similar 60-40 margins against slot machine gambling in this state. The voters were wise to reject this highly addictive form of gambling.  Just how addictive are slot machines?  This question was answered in a study conducted recently in Rhode Island by clinical psychologist Robert Breen.

Dr. Breen found that slot machine players in treatment for gambling addiction had progressed from "social gambling" into full addiction in about 13 months, more than three times faster than those engaged in more traditional forms of gambling.  In discussing this "rapid onset" phenomenon, he characterizes slots machines as "addiction delivery devices."  Gambling addiction is a serious mental disorder that often leads to huge debts, crime, family abuse and suicide.  Addiction rates are highest among the most vulnerable segments of society - the poor, the undereducated, members of minorities, the young and the elderly.

This finding of a close connection between slot machines and gambling addiction should come as no surprise.  In his article "The Tug of the Newfangled Slot Machines" in the May 9, 2004, New York Times Magazine, writer Gary Rivlin paints a chilling portrait of the game designers at International Game Technology of Reno, which recently received a slots distributor license to supply slot machines in Bangor.  Rivlin's article describes Mr. Anthony Baerlocher as one of a "cadre of people inside I.G.T.'s giant slots factory who study addiction -- though unlike their counterparts in academia, of course, he and his colleagues work on the promotion side of things."  Studies referenced by Dr. Breen indicate that the money lost by gambling addicts accounts for 40 to 50 percent of slot machine revenues.

If at First You Don't Succeed ...

In spite of their earlier defeats, the advocates of slot machine gambling in Maine tried again in November 2003, when an initiative to authorize slot machine gambling at the harness racing track in Bangor was placed on the same ballot as an initiative to authorize a huge Tribal casino in southern Maine. The Tribal casino initiative was defeated, but this time around the voters narrowly approved slot machines. As incentives to different blocs of voters, the measure allocated specified small amounts of slot machine revenues to a wide variety of causes, including prescription drug assistance for the elderly and new subsidies for the state's harness racing industry.

There were dramatic variations of voter sentiment over the eight month period prior to the 2003 election. An analysis of these opinion shifts strongly suggests that, in the end, many voters supported the slots facility only because they feared that the Tribal casino initiative would pass and felt that harness racing needed to be defended in some way from this tough new competition.

The voters of Maine deserve a chance to vote again on the legalization of slot machines, this time as a stand-alone proposition, after a fair, open and thorough discussion. As a contribution to that discussion, let's take a look at some of the events that have taken place since the 2003 election.

The Legislation Gets a Facelift

The law approved through the 2003 citizens' initiative (IB 2, LD 1371) suffered from major problems.  At that time, Gov. Baldacci said "We must protect the public interest and welfare of our state, and the racino law enacted by the voters has too many holes in it to fulfill that goal. If we don't get our arms around this at the beginning, we never will." In April 2004, the initiated law was repealed by the Legislature and replaced with new slots authorization legislation (HP 1342 - LD 1820). With the passage of LD 1820, we at least have a clearer idea of what it will cost the state to regulate and administer slot machine gambling, namely, about $10 million per year. The bulk of this money is to be spent in guarding against fraud or mishandling of the gambling revenues, the conduct of criminal background checks of employees, and other activities aimed at maintaining government control this new form of gambling.

The Pre-Election Agreement

However, governmental control was not the only thing on the mind of legislators and lobbyists in the 2004 session. Groups involved in the breeding and racing of racehorses and the operators of off-track betting parlors lobbied aggressively for a bigger share of the gambling revenues than what the voters had approved at the polls.

This lobbying effort in 2004 was part of a joint strategy agreed to among the state's gambling interests prior to the 2003 election. In that pre-election agreement, the commercial racetracks, the horsemen and the operators of off-track betting parlors agreed to cooperate politically, first to get the slots initiative passed and then to lobby the Legislature after the vote to change the legislation to increase their financial benefits.

The pre-election agreement was not disclosed to the Governor's office until the day after the election. The Governor's spokesman Lee Umphrey reacted by saying "The sense is this kind of agreement should've been seen by the public before the election, so that people voting on Election Day would have all the information necessary to make the right decision."

Under intense lobbying pressure, the Maine Legislature agreed to many of the changes put forward by these special interests.  These changes authorize more than $7.6 million a year in additional payments to gambling interests and, at the same time, reduce by $1.2 million a year the benefits to the general public. The complete set of funding modifications made by the 2004 Legislature are shown below, with legislatively approved percentages converted to dollar amounts using an estimated gross revenue of $82.5 million per year for both cases.  The "winners" are shown in red,

Changes to the 2003 Citizens' Initiative by the 2004 Maine Legislature

Under the category "benefit to general public," we include payments to programs that offer a benefit to those members of the public who neither own gambling related businesses nor are employed by gambling related businesses or boards. For this group of people, which includes the vast majority of Maine's residents, the passage of LD 1820 means a loss of benefits, dropping from an already low 16% of gross gambling revenue down to 14.5%.

Faced now with the final form of the distribution of funds, it is informative to return to the referendum question that was actually printed on the ballot in 2003. "Do you want to allow slot machines at certain commercial horse racing tracks if part of the proceeds are used to lower prescription drug costs for the elderly and disabled, and for scholarships to the state universities and technical colleges?"  The sad truth is that as much of the revenues will be spent augmenting harness racing purses as assisting seniors with their drug costs. Worse yet, as much will be handed out to the operators of off-track betting parlors as will be spent on university scholarships.

The 2004 Legislature added more stringent government controls, and that was a good thing. However, the Legislature also:

• substantially changed the distribution of funds approved by the voters, and
  

• reduced the percentage of gambling revenue returned in benefits to the general public.

These are two compelling reasons to send the slot machine issue back to the voters.

Mainers are Losing Big Time in Bangor

The above figures are based on an assumed annual gambling revenue of $82.5 million per year.  The first 20 months of slots operation in Bangor provide actual operating data that largely confirm the above expectations.  Gamblers are now losing at the rate of $43 million per year, most of it from Maine residents.  After the full effects of gambling addiction take hold, the annual loss rate could very well reach the $82.5 million figure that the developers have projected from the beginning.

While the slick pre-election ads assured voters that passage would mean only a "limited number of slot machines" at existing racing venues, the expected loss rate of $82.5 million per year is five times larger than the amount now lost on all harness racing wagering in the state (live and OTB).

The detailed breakdown of funding amounts shown above is based on the assumption that the slots operator would take the maximum amount of profit permitted by LD 1820.  It turns out that the operator of Hollywood Slots is currently paying out 92% of the bets in winnings, whereas by state law the payout could be as low as 90%.  For the bettors, this higher payout means that they can spend a few additional hours at the machines while losing a given amount of money.

However, the most direct beneficiary of this higher payout ratio is the State's gambling "control" bureaucracy, which is funded by a 1% tax on the amount bet (not the amount lost).  In contrast, funds that benefit the general public (such as university scholarships) are calculated as a fixed fraction of the money lost.  Due to this peculiarity in the tax calculation, the benefit to the general public has now dropped to just 14% of the amount lost by bettors.  

Who's in Charge in Augusta?

The cozy relationship between the gambling interests and the State Legislature has not changed much since the post-election alteration of LD 1820. This relationship was the subject of an important article published in the July 1, 2007, edition of the Lewiston Sun Journal.  The author of the article is Mike Peters, a former Member of the Gambling Control Board established by LD 1820.  

Mr. Peters is a close observer of the gambling scene in Maine.  In his report, he writes:

"When members of the Legislature's Appropriations Committee earlier this year suggested changing the 2004 statute governing gambling revenues, Penn National erupted in indignation, shut down its $131 million Bangor construction project, and caused a State House stir that ground the entire legislative process to a halt. Quickly, all proposals in the Appropriations Committee concerning Penn were pulled, and closed-door meetings were held by legislative leaders, the governor's office, Penn National, and others.

The apparent result?

Penn National agreed to restart construction, but with the guarantee that their revenues, and the money received by the other statutory beneficiaries, could never be touched. Gov. John Baldacci, and the leadership of the House and Senate, apparently acquiesced to this cockeyed demand.

Some of their astute advisors, however, knew supplying Penn with this guarantee required a strategy to circumvent statutory limitations and challenges. Otherwise, citizens, like myself, could continue to confront this giveaway of Maine tax dollars, and this total lack of legislative accountability.

Thus, the governor issued an executive order on June 1, creating a 'special committee.'

The purpose of this committee, I believe, is to protect the money Penn National and all the other statutory beneficiaries collect into the future. It also precludes changes to the list of beneficiaries."

Our Taxes will be Raised to Pay the Social Costs

Another reason to reconsider the legalization of slots is that the Maine Legislature has consistently shown a total lack of interest in the large costs imposed upon society by this highly addictive form of gambling, for example, the cost of bankruptcy, embezzlement and insurance fraud, police and court costs, lost business productivity, mis-spent household funds, and the cost of addiction treatment, family abuse and suicide.  

Mainers have already had a close-up look at the social costs of slot machine gambling. Hollywood Slots in Bangor had been open barely two months when John Ethridge, former manager of a Somesville, ME, convenience store, was facing a theft charge after reportedly admitting to taking more than $23,000 and blowing it at Hollywood Slots. According to published news reports, Ethridge admits he has a severe gambling problem. It is also reported that Mount Desert police officer Leigh Guildford has viewed videotapes of Ethridge feeding the stolen money into high-payoff slot machines at the Bangor facility.

According to another recent news report, the dream of striking it rich at Hollywood Slots has turned into a nightmare for one  Bangor area woman.  On March 21, 2007, reporter Meg Haskell wrote in the Bangor Daily News, "Since early last year, 'Nancy,' a health care professional in her mid-50s, has lost at least $100,000 at Hollywood Slots in Bangor.  In the process, she has drained her pension fund, remortgaged her home and put her marriage in jeopardy."

U. of Illinois Prof. Earl Grinols is a nationally respected economist and author of the new book "Gambling in America: Costs and Benefits," Cambridge University Press.  In his book Prof. Grinols writes that, because of its addictive nature, casino-style slot machine gambling imposes huge social costs on the general public, including those that do not gamble.  He estimates that this cost sums to around $54 billion per year in the US, about equal to the amount of money lost directly by the gamblers themselves.

A study by Clyde Barrow, University of Massachusetts Dartmouth, indicates that 95% of the patrons of the Bangor casino are Maine residents. This means that 95% of the social damage done by the Bangor casino is being done right here in Maine.

Most of the social costs associated with gambling originate with the out-of-control behavior of pathological and problem gamblers. Unfortunately, LD 1820 does not require the State or the operator to identify addictive gamblers or exclude them from the Bangor facility. Nor does it impose loss limits, which several states have imposed to try to limit the financial damage that addictive gamblers do to themselves and their families, friends and employers.  Loss limits also serve to limit the usefulness of gambling venues for the purpose of money laundering.

Because of these omissions, there is no reason to expect that the social costs arising from this project will be any lower than they have been in other states.  If the gross gambling revenue reaches the figure of $82 million per year mentioned above, then the involuntary social costs will also be around $82 million per year.  In other words, the general public will have to pay over $7 in increased social costs for every $1 of benefits they receive.

If you want to learn more about how these costs are estimated, Grinols' book is available online in hardcover for around $30, including shipping, or it can be ordered on interlibrary loan from your local library.

While the personal pain caused by bringing slot machine gambling to Bangor will be felt most acutely by families in the northern half of the state, communities throughout Maine will be forced, through taxes, to share the burden of paying the social costs.

There is an additional cost to casino-style gambling, namely, the loss of jobs.  Although promoted as a source of jobs and economic growth, a recent review of the facts shows that the slots facility in Bangor will result in the net loss of more than 400 jobs in the Bangor market area.

The Threat of Runaway Expansion

Finally, it has to be noted that every day that passes with Maine in the business of big time casino-style gambling increases the likelihood of the construction of additional casinos in the state.  The appalling situation in California gives some idea of what we may be facing if this trend is not reversed.

The best recent example of runaway expansion of gambling in Maine is the citizens' initiative by the Passamaquoddy Tribe to authorize a new racetrack and casino in Washington County.  After some well publicized problems with rejected signatures, backers of this plan finally did get (just barely) enough signatures approved to place their legislation on the November 2007 statewide ballot.