Gambling Not a Solution to State Revenue Woes

From the Rockefeller Institute:

States turning to gambling as a possible quick fix for revenue woes have often been disappointed with the results, according to a just released study from the Nelson A. Rockefeller Institute of Government, entitled State Revenues From Gambling: Short-Term Relief, Long-Term Disappointment [PDF link].

According to Lucy Dadayan, senior policy analyst at the Institute and principal author of the report, despite the steep declines in tax revenues during the "Great Recession" most states were reluctant to raise taxes on income or sales. As an alternative, she reports, officials in many states turned to taxes on gambling, part of what are often called "sin taxes." In the recession's wake, over a dozen of states have legalized and expanded different forms of gambling activities in the hopes of raising more revenues, despite the fact gambling revenue plays a small role in state budgets, ranging between 2.0 and 2.5 percent of state own-source general revenues in the typical state.

The report demonstrates that tax and fee revenues from gambling activities have softened considerably in recent years, due, in part, to market saturation and industry cannibalization.

State Revenues from Gambling Show Weakness Despite Gambling Expansion

States derive the bulk of gambling-related revenues from three major sources—lotteries, casinos, and racinos. While casinos experienced dramatic growth during the 1990s, that trend shifted downward over the past decade. In recent years, much of the growth has shifted to racinos—hybrids of casinos and racetracks —as more states have approved such facilities. Pari-mutuel betting, once the major source of gambling revenue for states, now represents less than 1.0 percent of such revenue.

When tax revenue weakens during economic downturns, states often consider expanded gambling operations among other options for balancing budgets. That has been no exception during the Great Recession and its aftermath. Since the recession began in December 2007, over a dozen states have enacted various measures to expand gambling.

States’ revenues from gambling showed soft growth at 0.6 percent in fiscal 2014, despite expansion of various gambling activities in recent years. In fiscal 2014, revenue collections from lotteries and racinos grew by 0.6 and 1.5 percent, respectively, while revenue collections from casinos declined by 1.4 percent. The expansion of gambling across the nation created stiff competition for certain regions of the nation and heightened rivalry for the same pool of consumers.

More from the Rockefeller Institute of Government

State Government Revenues Exceed Expenditures in 2013

New Government Finance Statistics from Annual Survey of State Government Finances and Annual Survey of Public Pensions       Total state government revenue rose by 16.3 percent, from $1.9 trillion in 2012 to $2.2 trillion in 2013, according to the latest findings on state government finances from the U.S. Census Bureau.         Nearly three-quarters of that increase (73.9 percent) is attributable to the growth in insurance trust revenue, which grew by 89.7 percent, from $255.8 billion in 2012 to $485.2 billion in 2013, and is comprised mostly of pension systems administered by state governments. These insurance trust figures reflect the market value of investments, meaning that they are affected by fluctuations in capital markets and not solely by governments’ fiscal policies.Total expenditures for state governments were $2.0 trillion, an increase of 1.2 percent from 2012.       “Unlike in 2012, total revenues exceeded total expenses,” said Kevin Deardorff, chief of the Census Bureau’s Economy-Wide Statistics Division.

State and Local Government Spending Grows Faster Than Revenue

Between 2007 and 2012, total expenditures for state and local governments increased by 18.2 percent, from $2.7 trillion to $3.2 trillion, while total revenue declined 1.1 percent over the same five-year period, from $3.1 trillion to $3.0 trillion, according to new U.S. Census Bureau data from the 2012 Census of Governments released today.       Two major contributors to the decline in total revenues were employee retirement revenue, which includes earnings on investments and contributions, (dropping 67.7 percent, from $533.3 billion to $172.0 billion) and interest earnings (falling 44.6 percent, from $91.9 billion to $50.9 billion).       “State and local government revenues continue to be impacted by capital market fluctuations, especially employee retirement revenues,” said Kevin Deardorff, chief of the Census Bureau’s Economy-Wide Statistics Division.       The findings are from the 2012 Census of Governments: Finance — Surveys of State and Local Government Finances, which shows revenues, expenditures, debt, and cash and security holdings by level and type of government. Level of government includes state, local, and state and local combined. Type of government includes state, county, city, township, special district and school district.

Revenue Increased in All Service Sectors in 2013

Revenue increased in all of the nation’s 11 service sectors for employer firms, according to http://www.census.gov/services/index.html 2013 Service Annual Survey statistics released this month by the U.S. Census Bureau. Within the utilities sector, natural gas distribution showed a revenue increase of 15.7 percent, from $82.2 billion in 2012 to $95.1 billion in 2013.

The Service Annual Survey provides the most comprehensive national statistics available each year on service industry activity in the U.S. In 2009, the survey expanded to include data for all service industries, which account for approximately 55 percent of the U.S. gross domestic product.

Highlights from service sectors:

Utilities
• Private sector utility revenue for 2013 was $541.0 billion, up 5.6 percent from $512.1 billion in 2012.

Transportation and Warehousing
• Revenue for transportation and warehousing for 2013 was $815.8 billion, up 4.1 percent from $783.9 billion in 2012.
• Pipeline transportation showed $36.5 billion in revenue for 2013, up 5.7 percent from $34.6 billion in 2012.

Information
• Information sector revenue for 2013 was $1.3 trillion, up 3.4 percent from 2012.
• Within the sector, the revenue for software publishers for 2013 was $172.3 billion, up 6.8 percent from $161.3 billion in 2012.
• In 2013, the revenue for wireless telecommunication carriers (except satellite) was $226.0 billion, up 3.4 percent from $218.5 billion in 2012.
• Data processing, hosting, and related services revenue for 2013 was $95.5 billion, up 6.4 percent from $89.8 billion in 2012.
• Revenue for Internet publishing and broadcasting and Web search portals for 2013 was $62.5 billion, up 10.3 percent from $56.7 billion in 2012.

Finance and Insurance
• Finance and insurance revenue for 2013 was $3.6 trillion, up 2.3 percent from 2012.
• Financial transactions processing, reserve, and clearinghouse activities showed $47.6 billion in revenue for 2013, up 12.2 percent from $42.5 billion in 2012.
• Portfolio management had $206.0 billion in revenue for 2013, up 10.7 percent from $186.0 billion in 2012.
• Investment advice revenue for 2013 was $31.8 billion, up 13.8 percent from $27.9 billion in 2012.

Real Estate and Rental and Leasing
• Real estate and rental and leasing had $497.1 billion in revenue for 2013, up 7.0 percent from $464.6 billion in 2012.

Professional, Scientific, and Technical Services
• Professional, scientific, and technical services revenue for 2013 was $1.5 trillion, up 2.0 percent from 2012.

Administrative and Support and Waste Management and Remediation Services
• Administrative and support and waste management and remediation services had revenue of $745.2 billion for 2013, up 4.0 percent from $716.9 billion in 2012.

Educational Services
• Educational services revenue for 2013 was $56.9 billion, up 3.8 percent from $54.8 billion in 2012.

Health Care and Social Assistance
• Health care and social assistance revenue for 2013 was $2.2 trillion, up 2.7 percent from 2012.

Arts, Entertainment, and Recreation
• The arts, entertainment, and recreation sector had revenue of $222.2 billion for 2013, up 4.7 percent from $212.2 billion in 2012.

Other Services (Except Public Administration)
• Other services (except public administration) revenue for 2013 was $448.2 billion, up 6.0 percent from $422.7 billion in 2012.

Increased State Government Revenues and General Expenditures for 2011

Total state government revenue increased to $2.3 trillion in 2011, up 11.3 percent from $2.0 trillion in 2010, according to the latest report from the U.S. Census Bureau. Total state government revenue includes general revenues (mainly tax revenue), utility revenue, liquor store revenue and insurance trust revenue. General revenues were $1.7 trillion in 2011, a 5.7 percent increase from 2010. General expenditures by state governments rose 3.7 percent in 2011 to $1.7 trillion.

The findings are from the 2011 Annual Survey of State Government Finances, which shows revenues, expenditures, debt, and cash and security holdings for each state as well as a national summary of state government finances.

The increase in state government revenue in 2011 was mainly because of a $141.0 billion increase in social insurance trust revenue. Social insurance trust revenue includes employee retirement investments, which had gains in 2011. There was also an increase in tax revenue as government taxes collected in 2011 ($757.9 billion) grew 8.0 percent over 2010 ($701.7 billion) and accounted for 45.9 percent of general revenue.

Expenditures for education ($592.3 billion), public welfare ($496.8 billion) and health and hospitals ($125.7 billion) represented the top three expenditures in state government budgets.

State government budgets depend mostly on revenue from general sources: taxes, federal grants, service charges and other miscellaneous revenues. General revenues fund most state programs and in general comprise the bulk of state government revenue (72.9 percent in 2011).

Highlights of General Revenues

Social insurance trust systems showed revenues of $591.7 billion in 2011, a gain of 31.3 percent over the year before. Two major sources make up the state trust systems: state employee retirement systems and state social insurance trust systems including the unemployment compensation system, state government workers’ compensation programs and other insurance trust systems.

Individual income tax revenue ($259.1 billion) grew 9.8 percent in 2011 over 2010 ($236.0 billion). General sales taxes revenue grew 5.4 percent to $234.5 billion in 2011.

Federal grants increased 3.4 percent from 2010 to 2011 to $574.1 billion and accounted for 34.7 percent of general revenue. Federal grants for welfare programs comprised 57.9 percent of all federal grants received in 2011, increasing 5.3 percent to $332.6 billion.

Service charges (excluding those for utilities) collected rose by 6.6 percent from $169.9 billion in 2010 to $181.1 billion in 2011. Service charges accounted for 11.0 percent of general revenue.

Highlights of State Government Expenditures

State government spending on public welfare was greater than 30 percent of general expenditures in 14 states, led by Tennessee (39.0 percent), Rhode Island (37.5 percent) and Maine (36.3 percent). (See Table 1.)

Unemployment compensation spending was $121.4 billion in 2011; this represented a 10 percent decrease from 2010, when it was $134.9 billion. (See Figure 1.)

State government spending on education totaled more than 40 percent of general expenditures in 13 states, led by Georgia (46.6 percent), Indiana (45.5 percent) and Alabama (45.0 percent). The accompanying table shows general expenditures and education expenditures and their shares of total spending for each of the 50 states for 2011 and 2010. (See Table 2.)

The leading states in highway spending, measured as a percentage of general expenditures, were South Dakota (14.9 percent), North Dakota (14.2 percent) and Alaska (14.2 percent). (See Figure 2.)

The leading states in spending on public health and hospitals, measured as a percentage of general expenditures, were Hawaii (12.9 percent), Missouri (11.2 percent) and Connecticut (10.8 percent).

For the 43 states with lotteries, ticket sales totaled $54.7 billion in 2011, compared with $53.1 billion in 2010. Lottery prizes awarded totaled $33.8 billion in 2011 and lottery proceeds were $18.3 billion in 2011. The top three states in lottery ticket sales were New York ($7.0 billion), Massachusetts ($4.2 billion) and Florida ($3.8 billion). The same states also ranked highest in prizes awarded: New York ($4.0 billion), Massachusetts ($3.2 billion) and Florida ($2.5 billion).

State Govt Revenues Decline Nearly 31 Percent

Total state government revenue dropped to $1.1 trillion in 2009, a decline of 30.8 percent from $1.6 trillion in 2008, according to the latest findings from the U.S. Census Bureau. The large decrease in total revenue was mainly caused by the substantial decrease in social insurance trust revenue.

State governments received nearly $1.5 trillion in general revenues in 2009, a decrease of 1.4 percent from 2008. General revenue does not include utility, liquor store or insurance trust revenue.

Total taxes collected in 2009 ($715.1 billion), which accounted for 47.9 percent of general revenue, fell by 8.5 percent from $781.6 billion in 2008. This is the first year-to-year decline in tax revenue since 2002. Federal grants ($477.7 billion) increased 12.9 percent from 2008 to 2009 and accounted for nearly one-third of general revenue.

“The annual survey began in 1951, and every year since has provided state governments with a complete look at their fiscal condition and how their financial activities stack up against other states,” said Lisa Blumerman, chief of the Census Bureau's Governments Division.

These findings come from the 2009 Annual Survey of State Government Finances, which reports revenues, expenditures, debt, and cash and security holdings for each state as well as a national summary.

2010 3Q Summary of State,Local Govt Tax Revenue

Tax revenues grew in the third quarter, marking the fourth straight quarter of positive growth. Property tax, general sales tax and individual income tax revenues increased, while corporate income tax revenue declined. The decline in corporate income tax revenue is the third consecutive quarter of decline. This summary shows quarterly tax revenue data on property, sales, license, income and other taxes. Data are shown for individual state governments as well as national-level estimates of total state and local taxes, including 12-month calculations. This quarterly survey has been conducted continuously since 1962.

State Tax Revenues Plummeted in First Quarter

State tax collections plummeted in the first quarter of 2009, with almost every state showing a decline from a year earlier, according to the
http://www.rockinst.org/ Rockefeller Institute's latest state revenue "flash" report, released this week. The bulk of the decline came from a 15.8 percent drop in personal income tax revenue. Further deterioration in state revenues is likely to occur in coming months, according to the report.

New Rockefeller Institute Report on State Revenues

Last year ended badly for states, and the first part of 2009 looks to be even worse, according to the Rockefeller Institute’s latest 'flash' report on state revenues. Three-quarters of states reporting saw tax collections drop at the end of 2008, compared to the same quarter of 2007. Overall, states' revenues fell 3.6 percent in the quarter.

Baseball

From BNET: "From its origins amid scandal to its status as a legal monopoly to its modern-day experiments in online media, here's how the business of Major League Baseball has evolved." Also check out The Revenue Model: Why Baseball Is Booming and MLB’s Labor and R&D Formula, also linked off the post above.

Sales Tax Collections in Most States Declined in First Quarter

State sales tax revenues delivered the weakest performance in six years during the first quarter of 2008, while growth in overall state tax revenues continued to deteriorate, according to preliminary data issued May 1, 2008 by the Rockefeller Institute of Government. With 36 of the 45 states that collect sales tax reporting, revenue from sales taxes declined both nationwide and in 21 states during January to March 2008, compared to the same period a year earlier. Southeastern states were hit the hardest: nine of the 21 states reporting sales tax declines were in that region. When adjusted for inflation, sales tax revenues declined in at least 27 states. For the states reporting so far, the overall level of sales tax collections fell slightly — the first time such revenues have not grown in six years.

States' Tax Revenues Weaken

States across the country are experiencing "a classic nutcracker effect," as revenues weaken and costs rise sharply, the Rockefeller Institute's latest State Revenue Report finds. After adjusting for inflation and legislated tax changes, states' tax revenues dropped by 4.3 percent in the most recent quarter. Read the press release.

State Tax Revenue Faltering Again

As the national economy has slowed, state tax revenues showed further deterioration in the third quarter of 2007, a new State Revenue Report from the Rockefeller Institute of Government finds. After adjusting for inflation and legislated tax changes, revenues fell by 0.6 percent ­- the first such decrease in four years. To view the report and read the associated Wall Street Journal article, please visit www.rockinst.org.