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Thursday, May 01, 2003

By Joe Mandak, The Associated Press

If Gov. Ed Rendell succeeds in his drive to put 24,000 video gambling machines at Pennsylvania racetracks, the machines could realistically generate the $789 million a year in state taxes that he projects, analysts and gambling officials in neighboring states say.

But for that to happen, gamblers will have to plunk down $28.6 billion per year, 36 percent more than the state's projected $21 billion budget, according to an analysis by The Associated Press. That's an average of nearly $1.2 million into each machine per year, or roughly $3,265 per day.

Critics say that's a travesty.

"Studies have shown that 34 [percent] to 54 percent of the money [wagered in slot machines] comes from people that are addicted," said David Robertson, a board member of the National Coalition Against Legalized Gambling. "If there weren't people that were problem and addictive gamblers, these machines wouldn't produce the money that they do."

Daniel Heneghan, the spokesman for the New Jersey Casino Control Commission, doesn't dispute the projected wager figures, but said an example is needed to put them into perspective.

"If you bet $100 and get back $90, then put that $90 in and get back $80, you put $80 in and get $70 back, then put $70 in and get $60 back, and finally put $60 in and get $50 back, you've gambled $400," he said.

"But you've lost only $50 and put only $100 [the amount you started gambling with] at risk. With these machines, your money gets recycled several times."

Robertson isn't buying that logic.

Gambling officials "like to say that these machines give you [about] 90 percent of your money back -- but this guy [in Heneghen's example] didn't leave with 90 percent of the money he started with, did he?" Robertson said. "He lost half of it."

But it's that reality, the electronic, whiz-bang give-and-take between gamblers and the machines, that makes them so profitable.

Rendell wants to use 35 percent of the net machine profits to fund education, which dovetails with a bill proposed by state Rep. H. William DeWeese, D-Greene.

DeWeese's bill calls for as many as 3,000 machines each at up to eight racetracks, including two that have yet to be licensed, or the 24,000 machines that Rendell proposes.

If the state's 35-percent share is $789 million, the overall machine profits must be $2.254 billion, after a proposed 1.5-percent administrative fee has been subtracted. That means the gross machine profits -- the difference between what gamblers put in and the machines pay out -- would be $2.289 billion each year.

But generating that $2.289 billion requires tens of billions more in wagers, because Pennsylvania's slots will likely pay out 92 percent of the money they take in. That's what machines in neighboring West Virginia, Delaware and New Jersey also pay out, according to officials in those states.

Rendell's office didn't return calls for comment. DeWeese's secretary, Barbara Grill, said the lawmaker's income projections are similar to Rendell's, and were based on numbers gathered from officials in nearby states with slot machines.