Looking past glitz and toward results

The prospect of opening two casino resorts in Georgia presents both opportunities and risks. State officials should recognize that they hold the winning cards, and act accordingly.

It’s ironic that a good tidbit of advice for Georgia lawmakers considering legislation to legalize casinos comes from the old Kenny Rogers song about an advice-dispensing gambler. “If you’re gonna play the game, … You gotta learn to play it right,” Rogers famously sang.

That is wise counsel for the General Assembly, which is setting aside its usual buttoned-down ways to examine Senate Bill 79 and House Bill 158, which would allow for two casinos (lawmakers call them “destination resorts”) if voters pass a Constitutional amendment to that effect.

The bill ran into an apparent wall Thursday, with a planned committee hearing being canceled, reportedly on account of considerable opposition. There is still a chance that the matter could rise again this week. Given the amount of potential money at stake, it’s a smart bet that casino legislation could defy bets of an early demise.

The gaming bill has drawn an interesting set of players to the table.

On one side are social and religious conservatives who’re adamant in their opposition to any new expansion of gambling in Georgia. Their numbers and sizable influence weigh strongly on elected officials at the conservative-dominated Gold Dome.

Yet the prospect of bringing casinos to one of the last large, virgin markets has gaming operators employing legions of lobbyists to stress gambling’s potential upside for the state. Topping the list is a revenue stream not derived from new taxes that are anathema to fiscally conservative politicians.

And neither lawmakers nor average Georgians can ignore the large presence on the sidelines, which is the need to further buttress – and hopefully expand – Georgia’s whittled-down HOPE scholarship programs that help defray college costs.

All of which makes for an interesting game indeed. Georgia legislators, however, cannot let their fiscal concerns, if not worries, shove them into making poor moves around further legalizing gambling. The stakes are far too high to allow costly missteps to harm Georgia, its taxpayers, or state, county and local governments.

For starters, Georgia must clearly recognize that we already hold the winning cards here. There is no reason to start the legislative process behaving as though we have a losing hand. The Wall Street Journal began a story on all this last week by noting that, “The world’s largest casino corporations have set their sights on Georgia this year, hoping state legislators will consider opening up one of the nation’s last untapped regional markets to full service gambling.”

Our position of advantage means that lawmakers should have no qualms about asking for – and receiving — a percentage of any future gambling proceeds that would be sufficient to both fund state initiatives such as HOPE and cover social or other ancillary costs that new casinos might impose on taxpayers.

Admittedly, that ask will be a difficult one for a low-tax, low-public services state like Georgia. But it must be a non-negotiable end-game for lawmakers.

That means the legislative process should take the hardest of looks at the proposed 20 percent gross receipts tax rate for casinos. If Georgia was in a much-weaker position, that amount might be acceptable. That’s not the case.

Some states tax casino receipts at more than twice that amount, so Georgia needs to leverage its strength and demand more. By comparison, Maryland’s casino tax rate is more than 50 percent, and Pennsylvania taxes slot machine revenue at 55 percent.

There is research and experience indicating that well-run, well-regulated casinos can provide a notable boost to a state’s revenue, at least for a time. Yet it remains unclear as to just how the two new gambling resorts envisioned for Georgia would mesh with local and regional economies.

A January report commissioned by downtown champion group Central Atlanta Progress noted what should be a commonsense point. “In the past decade, Downtown Atlanta has seen over $3.8 billion in investment. It is critical that future developments, including a possible casino, advance this momentum rather than hinder it.”

The state, as part of the necessity of creating a regulatory system that’s up to the task if gambling is expanded, should devise a quantitatively sound way to assess the effect of casinos on local economies. A key factor in need of accurate measurement is what’s called “spending substitution,” as in an entertainment dollar spent in a slot machine may well have been spent on other leisure pursuits if gaming did not exist here. And there’s also the flip side that casinos draw new money that wouldn’t have otherwise been spent – and taxed – in Georgia.

Enabling accurate means of assessing such fiscal effects is critical, given casinos’ potential impact on tax coffers at all levels of government. The CAP report gives an example of somehow using point-of-sale spending data to monitor how casinos are affecting other businesses, and other tax coffers.

And as part of all this, legislators should earnestly consider how to adequately share casino revenue with local and county governments. Those entities will face on-the-ground costs of protecting and servicing gaming resorts if they’re legalized here. They would also be on the front lines of dealing with any increase in social costs that expanded gaming will produce.

To properly account for such costs, the CAP report urges a “flexible” strategy, cleverly using a word and concept often-spoken by lawmakers loath to levy new taxes. The CAP report urges that “Funding for mitigation efforts should be flexible and responsive… . This approach, rather than attempting to predict a specific problem before the casino is built and lock-in funding for only those anticipated programs, is helpful in directing resources to ease any problems created or exacerbated by the casinos.” This strategy makes sense and should not be overlooked by the Legislature.

The prospect of adding casinos as a revenue source for Georgia carries both significant risks and opportunities. Making the right call here demands that lawmakers soberly look past glitz and stay focused on the state’s bottom line.

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Andre Jackson, for the Editorial Board.