Gambling in Maryland

Calvert Institute for Policy Research
2002-08-01

The recent discussion of slot machines at race tracks makes it appropriate to focus on Maryland's existing gambling enterprise: the lottery. Critics of gambling have done little to see to it that gambling revenues are distributed so as to compensate the jurisdictions in which they are raised, which are also the jurisdictions which suffer any adverse social impacts. In 1984 and 1985 the proceeds of the new Lotto game were distributed to the originating jurisdictions, but the amounts distributed were negligible: $7 million in the first year and $13 million in the second,as against total lottery sales in 1985 of $681 million.

In 2001, total lottery sales were $1,207,434,522. Roughly three-eighths of these sales were net revenue; about 8% of net revenue went to the Stadium Authority and the balance–nearly $400 million–to the State General Fund. That $400 million was not contributed proportionately from the state's subdivisions, but disproportionately from Baltimore City and Prince George's County, as the following table reveals:

Subdivision	% of sales.	% of pop.	Pop.per terml.
Baltimore City Prince George's Baltimore County Montgomery Anne Arundel Harford Charles Howard Frederick St.Mary's Worcester Carroll Washington Calvert Wicomico Cecil Allegany Dorchester Queen Anne's Talbot Somerset Caroline Kent Garrett	21.73% 21.19% 14.73% 9.15% 9.06% 3.04% 2,88% 2.21% 2.04 % 1.76% 1.70% 1.68% 1.54% 1.28% 1.17% .96% .94% .56% .52% .50% .46% .39% .28% .22%	12.70% 15.28% 14.08% 16.21% 9.26% 4.20% 2.28% 4.56% 3.64% 1.65% .83% 2.91% 2.49% 1.38% 1.56% 1.59% 1.41% .58% .76% .64% .47% .58% .37% .58%	880 1274 1197 2230 1313 1380 1049 1839 1411 1053 464 1366 1277 1263 1143 1016 1045 931 1398 1089 1050 1139 1228 1134

If net lottery revenues were distributed proportionately to the subdivisions in which they were raised, an additional $36 million annually would accrue to Baltimore City and an additional $24 million annually to Prince George's County. This statistic has not troubled the last five state administrations.

Three other observations can be made about gambling. When a lottery was introduced in Britain by the Macmillan government, it took the form of what were known as "Premium Bonds". The tickets had a high, 5 pound purchase price, and only a small portion of the proceeds was given out, in the form of a few large prizes to winners. The losing tickets could be redeemed for their purchase price, without interest, ten years later, the prize money being funded by the government's savings on borrowing costs. The slogan used was "if you can't save sinners, make sinners save." These peculiar bonds now survive alongside a conventional lottery, though the British government has not sought to popularize them by reducing the price, which computer technology now makes feasible. No American state has tried these; since our lottery agency continuously seeks to introduce new games, this less socially damaging one might usefully be considered.

The second observation relates to advertising. The Supreme Court, in its decision in the Posadas de Puerto Rico case in 1986 upheld a regulation restricting gambling advertising to advertising directed at tourists as distinct from local residents. While the logic of the decision has been questioned, it is unlikely to be overruled on its facts, which allowed advertising to be restricted to out-of-state advertising and that in travel sections, airline, tourist, and hotel magazines and the like. This gives states some scope to control casino patronage.

Another technique is used by the British, who allow rather tame casinos with not more than 10 slot machines, require the casinos to be constituted as membership clubs, and require gamblers to give 24 hours written advance notice of their intention to use the premises, and to identify themselves. This also restricts casual patronage and focuses on tour groups and the like.

It is a mistake to consider that the introduction of casino gambling is a choice between all and nothing at all. If it happens, it is also important to see to it that the cable television experience is not repeated. and that franchises are not awarded to, and monopoly profits reaped by,the usual political suspects.