Casino impact studies ignore social costs, researchers say_80904

Posted: 8/06/04

Casino impact studies ignore
social costs, researchers say

By Ken Camp

Managing Editor

Independent researchers maintain a recently released study on the economic impact of casinos in Texas trumpets casinos' benefits without fully considering costs to taxpayers.

And they claim a companion study on the social impact of casinos ignores overwhelming evidence of a correlation between easy access to gambling and prevalence of problem gambling.

The Texas Enhancement Group–made up of wealthy potential casino investors–financed the economic study by the Perryman Group of Waco and the social impact study by William Kelly, professor of sociology and director of the Center for Criminology and Criminal Justice Research at the University of Texas at Austin.

Barry Keenan, a casino developer who is working as a consultant with the Texas Enhancement Group, told the Austin Business Journal the group paid $163,000 for the study and will pay an additional $40,000 for follow-up analysis.

Keenan–who wants to build a $440 million casino in Austin–served more than four years in prison for the kidnapping of Frank Sinatra Jr. in 1963.

The Perryman study projected casinos would create up to 271,000 permanent jobs and generate from $2 billion to $2.88 billion in state and local tax receipts.

The study presented a series of possible scenarios, one of which predicted casinos could increase total spending in Texas by $30.6 billion a year and state tax receipts by $2.1 billion annually.

The Perryman report was “the wrong study with the wrong numbers that reached the wrong conclusion,” said John Kindt, professor of business and legal policy at the University of Illinois.

Instead of an economic impact study, Texans should look at cost/benefit studies of legalized gambling, he insisted, adding that lost sales tax revenues and other taxes would exceed any tax benefits from legalized betting.

In addition to regulatory costs, these include infrastructure, law enforcement and social-welfare costs, he noted.

For instance, a 1995 study in Wisconsin revealed 37 percent of the citizens in an area near a casino said their savings had been reduced since the casino opened. In that same study, 10 percent of the local residents said they would spend more on groceries, and about one-fourth said they would spend more on clothes if not for the casino.

“Cost/benefit studies for over a decade consistently have shown $3 in costs to taxpayers for every $1 in benefits. That debate is over,” Kindt said.

Ray Perryman disputed Kindt's assertions, saying his study examined net benefits after considering costs, including diversion of money from retail sales. He maintained Texas differs from some other states because it already has accessible gambling in neighboring states, and it is losing revenue to those venues.

But Kindt insisted Perryman's study failed to take into account either research or recommendations of the 1990 National Gambling Impact Study.

That federal panel called for a moratorium on gambling expansion and urged jurisdictions considering legalized gambling to examine independent cost/benefit analyses.

Kindt also cited research by another Waco-based economist–Earl Grinols of Baylor University–who takes to task many of the economic impact studies touted by the gambling industry.

Grinols and fellow economist David Mustard from the University of Georgia wrote in December 2000: “Some research that purports to evaluate costs or benefits actually examines local and not total social costs or benefits. Another concern is that much of the research has been conducted by organizations with a vested interest in the outcome of the research, institutes with industry ties or state agencies. Relatively little research is in peer-reviewed journals.”

Perryman took exception to any suggestion his research was unduly influenced by the group that commissioned it, saying: “Never in 25 years have we cooked the numbers.”

Robert Goodman, a professor at Hampshire College in Amherst, Mass., said he had not read the Perryman and Kelly studies.

But in general, Goodman characterized studies funded by gambling interests as “bogus” and “promotional” rather than scientific.

“Typically, these studies project job increases and make revenue projections without seriously looking at the cost of getting there,” he said, pointing particularly to the economic impact on communities as problem gambling increases.

Kelly did not return calls from the Baptist Standard offering him an opportunity to respond.

Goodman, the former director of the Center for Economic Development at the University of Massachusetts-Amherst, wrote “The Luck Business” about the economic and social impact of legalized gambling. That book detailed his research as director of the United States Gambling Study, a two-year project in the early 1990s funded by the Ford Foundation and the Aspen Institute.

His research at that time set the annual cost to society per problem gambler at $13,200.

Both he and Kelly set the incidence of problem gamblers at about 3 percent of the general population.

But Goodman estimated the percentage could increase by anywhere from 1 percent to 4 percent if legalized gambling became more accessible, while Kelly pointed to no increase.

In an executive summary of his social impact study, Kelly stated: “There is no consistent, scientifically reliable research that supports the argument that the proliferation of casino gambling in the U.S. has led to increases in the prevalence of problem and pathological gambling.”

Goodman countered: “That argument just doesn't hold water.”

At least eight independent studies point to a correlation between easy access to legalized gambling and increased prevalence of problem gambling, he asserted.

Raw data from a casino-funded study in 1997 conducted by the Harvard Medical School division of addiction studies demonstrated that same correlation, he added.

“Even studies funded by the gambling industry show that the more convenient it is, the more people will gamble,” Goodman said.

“And the more they gamble, the more likely there will be an increase in the prevalence of problem gambling. It just makes sense that there's a direct correlation.”

Kindt agreed, pointing to the National Gambling Impact Study Commission's findings that problem or pathological gambling doubles within a 50-mile “feeder market” around gambling facilities.

Rather than arguing cause and effect, the issue is correlation, Kindt said. And there is a clear correlation between the accessibility of legalized gambling opportunities and incidents of pathological or problem gambling, he stressed.

Bob Breen, director of the Rhode Island Gambling Treatment Program, said Kelly's assertion that no clear evidence proves a cause-and-effect relationships between legalized gambling and problem gambling is true. But, he added: “That doesn't mean there isn't such a relationship.”

If it could be proven, it probably would take 10 to 20 years and be incredibly expensive, he noted.

But he can point to anecdotal evidence indicating a link.

“In my career, I've treated over 500 pathological gamblers. This experience leads me to believe that many–maybe about 50 percent–only developed the disorder after some form of casino gambling was introduced to their geographic area,” Breen said.

“That's not empirical evidence, and it won't hold up in the court of scientific opinion. But I know what I know.”