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Gambling in Wisconsin becomes $15.8 billion bet

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Steven Walters
April 16, 2012

It was 25 years ago this month that Wisconsin voters rewrote the state constitution to allow a lottery.


Then, voters didn’t know that a federal judge would rule that, by legalizing a lottery, Wisconsin had to allow tribal casinos. The constitutional change also opened several greyhound racetracks, but all of them failed.


Perhaps most stunning is that legal gambling was a $15.8 billion industry in Wisconsin last year.


Another way to think of it: Did that recent $654 million Mega Millions jackpot get your attention? Last year, that’s about what was bet every 15 days at Wisconsin casinos and on lottery games.


State officials say that $15.8 billion bet last year broke down this way: $15.3 billion was bet at tribal casinos (an 18 percent increase in 10 years), and $502 million was bet on lottery games (a 25 percent increase in 10 years).


But that $15.3 billion total—the “handle”—for tribal casino bets last year is misleading because it includes repeat bets by gamblers.


In other words, if you went to a casino and placed a $50 bet, won $100, rebet most of that, lost some but went on gambling, the casino “handle” from you would be the total of every bet you placed that day. There is no way to know how much of that $15.3 billion total are repeat bets.


A better way to track casino gambling in Wisconsin is the total “net win”—or the amount of the handle that casino operators kept—and how much the casinos paid state government for the right to run those businesses.


According to the state Division of Gaming:


--In fiscal 2011, of the casinos’ $1.18 billion net win, payments to state government totaled $50.1 million. That’s an effective state tax rate of 4.2 percent.


--In fiscal 2010, of the casinos’ $1.21 billion net win, payments to state government were $50.7 million—or a tax rate of 4.17 percent.


Democratic Sen. Fred Risser of Madison opposed the 1987 constitutional change that brought Wisconsin the lottery, greyhound tracks and tribal casinos. He still thinks it was a bad bet.


“I thought it was a mistake then, and I still think it was a mistake,” Risser said last week. “What happened is, I’m convinced, the people who voted for the lottery were interested in just the lottery—not interested in expanding gambling to Native Americans.”


Risser also questioned why payments to state government by tribes on their net win, which includes profits after they pay expenses, only averaged 4.2 percent last year.


Other states make their tribal casinos pay much higher percentages of profits for the right to run casinos, Risser added.


According to a Legislative Fiscal Bureau summary, all tribes pay a percentage of their net win to the state, but the percentages vary by tribe.


It works this way: Smaller tribes pay 1.75 percent of net win in excess of $5.0 million. Other tribes pay 3 percent or 4.5 percent of net win. And the largest tribes pay between 5 percent and 8 percent of net win. In some cases, the percentage for a particular tribe will vary year-to-year.


Risser said he would like to revisit the issue of how much tribes pay state government for the privilege of running profitable casinos.


That’s easier said than done, however.


According to the Fiscal Bureau, state-tribal compacts signed in 2003 stipulate that the Legislature can’t ask the governor to seek changes to a gaming compact that involves payments for 25 years. Both sides could seek revisions at any time, however.


Although the tribes paid state government about 4.2 percent of casino net wins last year, lottery games returned a much higher percentage—28.8 percent—to taxpayers through tax credits.


According to the state Revenue Department, which runs the lottery, total sales were $502.6 million in fiscal 2011. Of that, $144.86 million offset property taxes.


Risser said the only right decision Wisconsin made in 1987, after it legalized the lottery, was to use lottery profits to lower property tax bills and not pay for public schools.


States that used lottery profits to subsidize public schools had to scramble to pay for education when the recession hit, Risser noted. Wisconsin lottery sales fell 4 percent between 2008 and ’09, for example.


Steven Walters is a senior producer for WisconsinEye. This column reflects his personal perspective. Email stevenscwalters@gmail.com.

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