Only a decade ago, casinos were viewed as the one-size-fits-all guaranteed antidote to declining state revenues. One by one, many states dismantled laws on the books that prohibited casinos altogether, or just land-based casinos, or some variation of the above.
The push to say yes to casinos was financial. Gambling — whether casinos or lottery ticket operations — have loomed large on the list of ways states have tried to grease the money machine.
But it’s not working. Or at least, not as well as most projections and advance business plans posit.
“In the last several states to open casinos — Ohio, Maryland, and Pennsylvania — overall revenue is coming in below baseline forecasts, according to a review of state tax data,” notes a USA Today report. “Officials blame miscalculations of spending habits and competition, but some also question how much the projected numbers reflected wishful thinking.”
Casinos were once the attractions in Atlantic City, New Jersey, or the tribal-owned mega-resorts in Connecticut. After Nevada, Pennsylvania has now emerged as the country’s No. 2 gambling marketing (it recently overtook Atlantic City, where four of 12 casinos closed in 2014).
Problem is, the projections of potential revenue are falling short.
“Projections are developed through so-called gravity models, premised on the concept that bigger casinos draw more people from farther away,” according to USA Today. “They are used by developers and regulators to estimate how a property will perform based on factors including the affluence of surrounding towns.”
There are huge margins of error. Of course, casino developers — eager for approval of their plans — regularly come back with more generous projections than the outside accountants and regulators who run the numbers.
“A recent study by Cummings Associates, a Massachusetts-based consulting firm, found that projections done for the same project were, on average, 20 percent apart and, in cases where the casinos were actually built, almost always were proved too high,” concludes USA Today.
It could be a case of casino cluelessness. Most thoughtful observers would be able to ascertain that — especially in an economy where the call for more jobs is incessant and even baby boomers are becoming more frugal — there is a limit to how many casinos in how many states should see gambling as a cure-all for budget shortfalls.
In fact, according to some industry insiders, this phenomenon — wild promises that fizzle — will become more prevalent in the near term, not less.
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