CHICAGO -- Voters across the country dealt state governments and the gambling industry a bad hand last week, rejecting most ballot measures that would have introduced or expanded gaming.
Nine states asked voters to approve additional gaming and only three got citizen permission to do so. In addition, Massachusetts voters rejected two non-binding referenda on casino expansion. And in Arkansas, propositions to authorize a state lottery and the state's first casino were put on the ballot but declared null by the state high court before the Nov. 8 election.
"For the first time in years, there was an overall reversal in the whole for the prospects of gaming," said Robert Durante, associate director of the public finance group at Standard & Poor's Corp. "For several years gaming referenda passed on a regular basis."
"Nationally, this was a watershed," said Prof. Robert Goodman of Hampshire College in Amherst, Mass. Goodman recently completed a report entitled "Legalized Gambling as a Strategy for Economic Development."
Voters in Florida, Minnesota, Rhode Island, Wyoming, Colorado, and Polk County, Iowa, all defeated measures that would have introduced or expanded gaming.
Some gaming measures won approval. Voters in Missouri approved the installation of games of chance on existing riverboat casinos, and voters in New Mexico approved a statewide lottery and video gambling. Voters in South Dakota voted to amend the state constitution to allow a video lottery, which essentially resurrected a game ruled unconstitutional by the state high court last summer.
The gaming industry is maintaining the corporate equivalent of a poker face, saying the votes nationwide are misleading.
According to Ralph Berry, director of communications for Promus Cos. Inc., many of the election defeats were either "very isolated cases, or not funded, or they were non-binding referenda, which typically lose."
Berry said the most significant vote was in Missouri, because it gave voters already familiar with gambling a chance to go to the polls and tell state officials they wanted more. Several developers that had stalled their casino plans in the state have dusted them off in the wake of the vote, he said.
Berry downplayed Florida's no vote on the construction of 47 casinos across the state. Polls by Promus, a gaming company that owns Harrah's Casinos, showed voters did not object to the casinos themselves, but disliked the plan's introduction of so many casinos without giving local governments the right to hold their own votes on the projects.
Gaming moguls have until now successfully promoted gambling as a boon to government coffers, because state and local bureaucracies usually take a share of revenues or levy an admission tax. Forty-eight states now allow some type of legalized gambling, with more than 10 states authorizing gaming in the past two years alone.
But Tom Grey, spokesman for the National Coalition Against Legalized Gambling, said the pendulum is starting to swing the other way. In addition to the numerous votes against expanded gaming last week, he said Pennsylvania's governor-elect recently promised to veto any casino legislation that is enacted without a statewide referendum in favor of gaming. And gaming opponents in Iowa are urging a four-year moratorium between gambling elections.
"There's a feeding frenzy going on on one level, but on another level, people are starting to have second thoughts, and they're wondering if all this gambling is good economics or good government:," Grey said.
If that's the case, some analysts say voters may be on the right track. Durante said state and local governments that rely on gaming revenue to balance their budgets are playing a high-stakes game because "the product life cycle is very difficult to predict."
One critic said the vote to bring back video lottery in South Dakota is a good illustration. "Video lottery amounted to $65 million of income to the state treasury, the second-largest income source for the state," said Jeffrey Bloomberg, state's attorney for Lawrence County, S.D. "You get wedded to it politically. All the ads in favor of allowing video lottery dealt with how the general funds would get cut, and how they would cut funding for schools and for health care for senior citizens ."
Durante said governments are better off steering gaming revenue to onetime projects. "What we'd like to see at Standard & Poor's is that any moneys received are used for non-recurring events, as opposed to funding something ongoing like police officers. A city we rate got a BBB because it depends on gaming revenues to balance the budget. Another city that gets an AA says, 'If we get the money, great, we'll use it to build park improvements or one-time infrastructure improvements,'" he said, declining to name the cities.
Some analysts said voters have observed the growing number of casinos and lotteries and concluded the market is becoming oversaturated.
"The current nature of gaming is that you get a lot of dollars coming in from other states, so it's still beneficial to the host states," said Jeremy Hawes, a corporate analyst at Moody's Investors Service. "But as it proliferates, it becomes more of a local entertainment, and then you're only getting local dollars recycled, so it may not be productive for the local community."
Nevertheless, some say gaming is here to stay because the gaming industry usually profits even if a government does not.
"Even companies that realize it's a short-term opportunity see they can pay off the capital cost of building a riverboat in as little as seven months," Goodman said. "They have a very different perspective than a city government, which has to look at whether it can pay off bonds."
Hawes agreed that the setback is only temporary, noting that proponents are already getting ready to put another gambling referendum on the 1996 ballot in Florida. "It won't go away," he said.