Maryland budget deficit looms as lottery revenue falls off
Posted: 11/29/2006 8:21:00 AM
Maryland's lottery has been slowing down as a revenue source for years and will continue to underperform as residents seek other gambling ventures, including betting on slot machines in neighboring states, budget analysts and state officials say.
The lottery "has been, until very recently, the third-largest general fund revenues source," said David Roose, director of the state's Bureau of Revenue Estimates. "But in the last few years the corporate income tax has become the third-largest."
"They may have seen some growth in the lottery [sales], but relative to growth in the economy, it's not keeping track," said Tori Gorman, a former economist for the state legislature.
At its peak in fiscal 1986, the Maryland Lottery provided $323 million, or 7.8 percent of the state's $4.2 billion in revenue, a state official said.
In fiscal 2006, which ended June 30, the lottery produced $480 million, or 3.9 percent of the state's $12.9 billion in revenue. The state lottery was created in 1973 and first produced revenue in fiscal 1975.
The lottery's diminishing contribution to the state budget is one of many reasons why Maryland is facing nearly $8 billion in deficits over the next five years, analysts say.
Most of the state's economic growth has occurred among high-income earners, who do not regularly play the lottery, said Mrs. Gorman, who co-wrote a recent budget study for the Maryland Public Policy Institute, a nonpartisan, nonprofit research group.
That is one reason the lottery, despite its growing ticket sales, does not add as much to the budget, she said, adding that lottery players tend to be lower-income workers.
But Maryland Lottery Director Buddy W. Roogow said the state is losing customers to slot machine gambling in Delaware, West Virginia, and Atlantic City, N.J.
"The biggest customers of Delaware slots are Marylanders," Mr. Roogow said. "I've been told by the Delaware Lottery folks that around 35 percent of their players come from Maryland."
Marylanders account for as much as 40 percent of slot machine players in Charlestown, W.Va., he said.
The Democrat-controlled General Assembly stymied attempts by Gov. Robert L. Ehrlich Jr., a Republican, to legalize slot machines.
State Senate President Thomas V. Mike Miller Jr., Southern Maryland Democrat, strongly supports slots, but House Speaker Michael E. Busch, Anne Arundel County Democrat, still strongly opposes them, as do many state lawmakers.
Although Gov.-elect Martin O'Malley, Democrat, has said that he favors limited slots at horse-racing tracks, he also has said that he does not see them as a source of revenue.
Some legislators disagree.
"We know without a doubt that there's $400 [million] to $500 million a year leaving the state right now to go play slots in West Virginia and Delaware, and Pennsylvania just approved 1,000 machines that will be up and running within another 12 months," said state Sen. Patrick J. Hogan, Montgomery County Democrat.
Mr. Hogan is vice chairman of the budget committee, which will be the legislature's ground zero for the next few years as it tries to reconcile spending totals with revenue totals.
The state is required by the constitution to balance the budget each year.
Mrs. Gorman said the state could cut the anticipated budget deficits by about 40 percent by maximizing revenue from in-state gambling and from the sales tax, which she said is not keeping pace with economic growth.
"The state has a relatively narrow tax base on sales tax because it doesn't include a lot of services," said Mahlon Straszheim, economics professor at the University of Maryland at College Park.
State Sen.-elect Richard S. Madaleno, Montgomery County Democrat, has said that the state should consider broadening the number of items covered under the sales tax.
The remaining 60 percent of the deficit, Mrs. Gorman said, would have to come from spending cuts and waste elimination.
Income and sales taxes account for about 75 percent of the state's revenue.
Source: Washington Times
