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Gambling industry brings revenue, jobs and problems to state

Whatever else opponents and supporters of legalized gambling may argue about,
nobody disputes that gambling has become a big business in Montana.

By ED KEMMICK
Of The Gazette Staff

Montanans and visitors to the state wagered almost $709 million on everything from
horse racing to video poker machines in 2000, the last year for which complete statistics
are available. Taxes and fees levied on gambling of all kinds poured $44.6 million into state
and local government budgets during the same year.
And it’s not difficult to find somewhere to gamble in Montana: there were about 16,500 video gaming
machines in some 1,700 casinos and other establishments across the state in 2000.
The Bureau of Business and Economic Research at the University of Montana estimated last fall that
18,800 people are employed by the gaming industry, more than work in mining, agriculture or wholesale trade,
and nearly as many as work in the construction industry.

None of those benefits, however, have come
without some costs.
A 1998 report on gambling, commissioned by the
Legislature, estimated that 23,400 Montanans, or 3.6
percent of the population, were classified as problem
gamblers. The report also showed a statistical
correlation between increased gambling and six types
of crime: burglary, theft, robbery, vandalism and
drunken-driving and weapons offenses.
The report said problem gamblers "informally
admit a very high incidence of illegal acts," including
check fraud, as well as high rates of divorce,
bankruptcy, credit problems, domestic violence, drug
and alcohol dependence, depression and suicide
attempts.

Gambling in the gun sights

As legalized gambling has grown in Montana, so
has the debate over whether it should be restrained,
allowed to expand or abolished. This year, largely
because of Livingston accountant Tom Shellenberg,
the long-standing debate is sure to heat up again.

Shellenberg, the founder of A Better Montana Without Gambling, is
leading a petition drive to place on the November ballot a constitutional
initiative that would ban video gambling.
Two years ago, Shellenberg proposed an initiative that would have
banned all forms of gambling in Montana. A Gazette State Bureau poll
conducted at the time showed that Montanans were equally divided on the
merits of the initiative, but Shellenberg and his supporters failed to obtain
enough signatures to get it on the ballot.
He could have better luck this time around. Another Gazette State
Bureau poll, this one conducted in late December, showed that 52
percent of the 625 registered voters polled backed the initiative, with 33
percent opposed and 15 percent undecided.
Shellenberg said he is concentrating on video gambling this time
because it’s a fight he has a better chance of winning. Video gambling
also dwarfs all other forms of gaming in Montana.
Of the nearly $709 million wagered in Montana in 2000, $658 million
was fed into video machines. The next-largest form of gambling, the state
lottery, accounted for only $29.9 million in wagers. The total for all other
forms of gambling that are tracked – live horse racing, simulcast racing
and live commercial bingo and keno – came to just $20.8 million.

Tax revenues climb

Since 1990, a year after the state Legislature centralized gambling regulation, tax revenues from video
gambling machines alone have marched steadily upward, from $17 million in 1990 to $40.5 million in 2000.
Until this year, two thirds of those tax proceeds went to local governments and one third to the state general
fund. In Billings, that translated into nearly $4.7 million in 2001, or about 18 percent of the city’s general fund
budget, which pays for basic services like police and fire protection.
Because of legislative changes, the money now flows directly to the state and is part of a package of
reimbursements that go to local governments. But that doesn’t lessen the reliance of cities and counties on the
stream of gambling revenue.
Montanans have demonstrated mixed feelings toward gambling over the years. In 1950, voters rejected an
initiative to legalize gambling by a 4-1 margin. In 1972, they voted in favor of a Constitutional Convention
referendum allowing the Legislature and the people to approve or disapprove of gambling.
In 1983, voters defeated an initiative that would have established a gaming commission and permitted a
limited list of games allowed by counties. Two years later, the Legislature passed an act allowing five poker
machines per liquor license. and unlimited keno. In 1986 voter approved the Montana Lottery.
If Shellenberg manages to gather 41,020 signatures by June 21, Montanans will have another chance to
weigh in on the gambling question.
Critics of gambling, including Billings Mayor Chuck Tooley, say the machines tend to drain money away
from those least able to afford it.
"When you look at the people who are actually playing the video games in Billings, you don’t see people
who appear to be especially prosperous," Tooley said. "Government finds itself in a regressive form of taxation."

Study backs perception

The 1998 gambling study seems to bear out Tooley’s observation that some of the neediest people in the
state are paying much of the gambling tax. It showed that 38.6 percent of problem gamblers reported
household incomes of under $15,000 in 1998, and 34.3 percent reported household incomes of $15,000 to
$35,000. Just 10 percent had incomes of $35,000 to $50,000, and 17.1 percent reported incomes of $50,000 or
more.
Opponents of gambling also blame the industry for the proliferation of pawn shops and the death of local
taverns, not to mention the inescapable beeping of video gambling machines in restaurants and bars.
Rich Miller, executive director of the Gaming Industry Association of Montana, said the loosening of credit in
the late 1980s and early ’90s changed the social landscape more than casinos, leading to a proliferation of
pawn shops, bad check charges and bankruptcies.
"That’s not a phenomenon unique to Montana," he said. "That’s nationwide."
Paul Polzin, director of the Bureau of Business and Economic Research at UM, said the dramatic increase
in consumer credit certainly was something that affected the whole country. There is "absolutely no evidence of
a correlation" between gambling and the spread of pawn shops, he said. "That’s pure hearsay."
Polzin also said that while the industry is sometimes blamed for creating nothing but low-paying jobs, they
are comparable to other jobs in the service industry. The 1998 report said the average employee in a gambling
establishment worked 30 hours a week and made $9,600 a year, not including benefits and tips.
According to the state Department of Labor and Industry, the average annual wage for workers in eating
and drinking establishments was only $9,186 in 2000, two years after the gambling study.
Polzin said there are a lot of workers in Montana who want to work less than full time and don’t have many
skills.
"There’s a very large pool of people out there for whom those jobs are very attractive," he said.
Mark Staples, a lobbyist and lawyer for the Montana Tavern Association, challenged the perception that
legalized gambling somehow contributed to the decline of small local bars.
"I think that gambling is the thing that saved neighborhood taverns, to the extent that they still exist," he said.
Without the revenue provided by gambling machines, neighborhood taverns would have gone the way of
neighborhood grocery stores, barber shops and pharmacies, he said.

From one pocket to another

Shellenberg said part of his opposition to gambling is tied to the fact that it creates false hopes of easy
money and robs one part of the population to enrich another. The relatively few people who win money
gambling are simply taking back a fraction of the money lost by their fellow citizens, he said.
Gambling supporters like to compare it to playing the stock market, Shellenberg said, "but when Montana
Power stock goes up, everybody wins. That is a net gain across the board. And there are tangible assets
behind them."
Most of the lost money comes from people who live here, not from outsiders spending their money in
Montana, he said. The 1998 gambling study concluded that nonresidents accounted for only about 4.5 percent
of all the money wagered in Montana that year.
"Gambling is not bringing much outside money into the state," a fact sheet prepared by A Better Montana
Without Gambling states. "Gambling is simply cannibalizing our own residents and businesses."
Staples said the lack of value-added industries, those that make use of Montana-made resources, is a
problem across all sectors of the state’s economy.
What’s different about the gaming industry, he said, is that "all these businesses are Montana-owned,
which is not the case in any other economic sector." That’s because only Montana residents can hold Montana
liquor and gaming licenses, "a fact of life that has bedeviled a number of would-be out-of-state investors,"
Staples said.
Miller, with the Gaming Industry Association of Montana, said the charge that casinos merely redistribute
in-state resources could be leveled against many businesses.
"We move money around when we go to the movies, when we go to the theater, when we buy boats and Jet
Skis," Miller said. "People have certain amounts of disposable income, and how they choose to spend it is up to
them."
Ed Kemmick can be reached at 657-1293 or [email protected]

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