Will Texans Win With VLTs?

AUSTIN, Texas – As lawmakers consider ways to fund Texas government, some are advocating an expansion of state-run gambling to include video lottery terminals, or VLTs. With some projecting a $2 billion windfall, VLTs are an attractive source of income.

But a report issued today by the Texas Public Policy Foundation suggests the VLT lucre does not come without costs.

“It is likely Texas will shoulder an increased annual cost of at least $1.5 to $3 billion dollars if VLTs are legalized,” said Chris Patterson, the Foundation’s director of research and author of the report. “This cost would be magnified by reductions in state revenue from the diversion of spending on goods and services to gambling, which is an amount that is difficult to predict.”

Patterson notes in her report that gambling on state-operated lotteries is the most popular form of gambling in the U.S., generating in excess of $14 billion for state coffers last year. VLTs have eclipsed lotteries in recent years. Growth of lottery sales slowed to just 3 percent annually in states with legalized VLTs while the revenue from VLTs increased by 16 percent. Throughout the nation and internationally, VLTs represent the fastest growing form of gambling.

Eight states now operate and tax VLTs: Delaware, Iowa, Louisiana, New Mexico, New York, Oregon, Rhode Island, and West Virginia.

Patterson’s study identifies the costs and benefits associated with gambling. The benefits include, particularly as relating to casinos: (1) new revenues; (2) job creation; (3) increased tourism; and (4) increased sales revenues from businesses that cater to gamblers.

Costs associated with gambling include: (1) a reduction of approximately 10 percent in state lottery revenues; (2) an investment of approximately 10 percent of revenues in regulatory costs for gambling; (3) criminal justice costs underwriting an 8 to 13 percent increase in crime; (4) lost state and local revenue resulting from diversion of spending from goods and services to gambling; and (5) lost jobs resulting from decreased spending on non-gambling goods and services.

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