November 2010


VLT image

Texas Representatives Throwing Away
$1 Billion to Other States


As the new Texas legislative session is about to begin, efforts to bring video lottery terminals (VLTs) to Texas race tracks are mounting. Coalitions of race track promoters and horse people throughout the state are joining forces to convince the legislators in the upcoming session to pass a Constitutional Amendment that will then allow Texas voters to vote yea or nay on the issue.

The major issues of debate focus on the actual amount of revenue the state will receive from VLTs, how the economy and tourist trade will be stimulated by this new gambling venue, and the effects of increasing gambling in the state.

Proponents of VLTs have persuasive statistics to back their claims of increased state revenue, economy stimulation, as well as growth and support for the agri-business horse industry and tourist industry. Further, a special fund will receive a significant portion of net proceeds which will directly stimulate the entire horse industry from racing to recreational activities and youth programs.

Statistics over the past 10 years show that Texas has lost half its racing stock broodmares and stallions. Breeders have gone to Oklahoma and Louisiana where native born incentive programs are much more lucrative. The trickle down effect of this population change is felt throughout by veterinarians, farriers, feed store owners, training and boarding facilities, equipment suppliers and more.

Further, the decrease in race events due to the much smaller purse and prize offerings impacts the hospitality industry (restaurants, hotels, retail shopping). The multiplier effect of increasing the horse population and expanding gambling activity would boost many businesses in a variety of industries and create an untold number of jobs throughout the state.

According to Valerie Clark, Executive Director of Texas H.O.R.S.E. (texashorseweb.com), “Texas HORSE has developed the PERFORMANCE HORSE DEVELOPMENT FUND (PHDF) which gives a financial boost to national horse organizations located in Texas. These associations will be able to use funds innovatively to grow the Texas events and programs that they currently oversee as well as create new areas of growth.”
 
“A portion of the PHDF is set aside for horse activities that do not fall under the umbrella of the state or national organizations:  4-H and FFA programs & activities; rehabilitative riding programs; educational seminars and clinics about horses & horsemanship; equine research, etc. The goal of the PHDF is to give something back to the entire Texas horse industry,” Clark concludes.

Opponents of VLTs center most arguments around the moral dilemma of the expansion of gambling in the state. VLTs are viewed as more insidious than track wagering. Opponents believe there are sufficient means for any person to gamble in Texas; a new venue is unnecessary.

It is claimed VLTs are addictive and prey on the poor and elderly. Social costs increase in the form of crime, debt, family violence, and suicide. Studies have not been conducted to accurately assess these costs to society.

Introducing VLTs into Texas is viewed as a significant expansion and a step toward full scale gambling such as seen in Nevada and Louisiana. Opponents feel that it is immoral for the state to obtain financial support via expanded gambling.

Proponents counter these claims by showing that the social costs of gambling already exist in Texas from other forms of gambling. Pathological gambling is rare, affecting between 1 and 5 percent of the population. Texas already receives revenue from other potentially harmful activities and substances and VLTs are no different.

Casino type gamblers come from income groups above the national median and are more likely to hold white collar jobs. Some studies show that social costs, crime, and illegal gaming are reduced after legal gambling is introduced.

In an earlier study, the state comptroller estimated that more than $1 billion per year is lost to neighboring states as Texans travel to Oklahoma, New Mexico, and Louisiana to more attractive gambling venues. The horse industry has had significant losses from breeders and training facilities moving out of state to take advantage of better incentive programs and race purses.

State revenue from VLTs would be the same as the state receives from racetrack betting and the lottery. A percentage fee is taken from each wager, so the revenue is much the same as the excise tax on alcohol and cigarettes. This type of revenue stream may well bridge the gap of the upcoming budget deficit without raising taxes.

According to the state comptroller, income from VLTs may potentially provide Texas with an ongoing revenue stream around $1 billion annually. This estimate is based on the percentage take from betting, taxes on increased economic activity, and accounts for possible revenue losses as money is shifted from other taxable spending. Studies indicate that the social costs of gambling do not exceed the economic benefits of gambling.

Legislative goals that Texas HORSE supports can be found at: texashorseweb.com. The legislative process for a VLT bill must first gain a two thirds vote in the House and Senate for a Constitutional Amendment to allow the voters to decide on the issue in November 2011. Voters will want to ensure their votes for state congress this November reflect their positions on this matter.


 Video Lottery Terminals

Video Lottery Terminals (VLTs) are games of chance played on electronic terminals much like slot machines. VLTs, however, are monitored, controlled, and audited by the state lottery agencies. Slot machines are monitored by other state agencies and may not be centrally controlled.

VLTs take money or credits in return for a play at the game. Players can win cash, prizes, or use their winnings to play more games. Wagers range between 5 cents to $10 per play.

The payback to players for VLTs is about 90%. The other 10% is profit that is split between the state and the operators of the VLT machines and venues. Texas state would receive about 30% of this net income from every machine.

The current proposal would place VLTs at horse and dog race tracks throughout Texas. VLTs, track betting, and lotteries are all varieties of pari-mutuel wagering. The machines provide a new way to gamble, but would be located where gambling is already operating and approved by voters.