NH Public Policy
New Hampshire Center for Public Policy Studies

Business NH Magazine: What are NH's goals in gambling debate?

What are New Hampshire's Gambling Goals?

June 27, 2013

Business NH Magazine

by STEVE NORTON AND DANIEL BARRICK

What does NH want from expanded gambling?

That question is not as simple as it seems. The recent debate has focused on a handful of crucial questions about jobs and tax revenue, social costs and cross-border commerce. But these questions, while important, presuppose a set of goals about which there has been little explicit discussion. In a recent report, the NH Center for Public Policy Studies outlined some potential goals and analyzed possible outcomes associated with them. The primary aim was to clarify some of the questions policymakers and the public should keep in mind as this debate progresses.

What is the state's more important goal: one-time, upfront revenue, or a reliable stream of long-term revenue?             

Viewed in the simplest terms, a new casino will generate revenue through a single upfront license fee and annual taxes levied on casino earnings. A higher license fee will likely make casino developers less willing to pay higher taxes on earnings. Conversely, a lower upfront fee will likely allow NH to increase the tax rate on casino operators, who would trade a bigger initial payment for lower annual profits.

But what are the state’s goals? Is it better to get a larger initial sum and forgo higher long-term revenues? The expanded gambling legislation now on the table includes a lower tax rate (30 percent of gross gaming revenue) than most previous proposals. Has this decision been thoroughly discussed in the context of the state’s revenue goals? What does the trade off mean for the state’s revenue stream?

Should expanded gambling be part of the larger state budget debate?

Earlier this year, Gov. Maggie Hassan included $80 million in revenue from a one-time casino license fee in her two-year budget proposal, complicating an already complex policy conversation. Hassan's reasoning? As state revenues continue to increase modestly, those seeking increased spending—higher education, mental health, roads and bridges—have few options. She offered expanded gambling as a solution.

But House budget writers removed the casino license fee from their budget plan. Policymakers may wish to consider the issue outside of the highly charged budgetary discussion, especially where it is tied to specific state funding. Why? There’s considerable uncertainty about when the state would receive the initial license fee from a casino developer.

The Center’s research found evidence it could take several years after gambling legislation is passed before license fee revenues accrue to state coffers. In Massachusetts, casino gambling was legalized in November 2011. However, the state does not expect to award casino licenses until next year due to time needed to establish regulatory oversight (among other steps). If Massachusetts’ timeline is any indication, it likely does not make sense to count on upfront license fees to meet immediate budgetary needs. 

How should Massachusetts developments shape discussions in NH?

Since any NH casino would likely be sited in southern NH near the Massachusetts border, gambling activity in that state is crucial to NH's debate. Massachusetts lawmakers have authorized up to three new casinos in that state. Some portion of NH residents will surely travel to them, likely leading to  a decline in NH’s lottery revenues, among other losses. But is legalizing expanded gambling in NH the best response to Massachusetts’ gambling policy? If one goal in expanding gambling in NH is to cover the social costs of gambling associated with expansions in either state, is the amount dedicated to addressing these costs sufficient?

What are the state’s goals in terms of the social costs associated with problem and pathological gambling?

Gambling proponents and opponents acknowledge that expanded gambling—in either state—will increase pathological gambling. How precisely the state should attempt to account for that is tricky since increased gambling will certainly result in increased pathological behavior. The effect of this behavior, however, will occur on a protracted timetable, and won’t be easily quantifiable the way gambling revenues will be.

There is wide disagreement about the value and potential of these various goals. But prioritizing them is an essential first step in making meaningful progress in this debate.

Steve Norton is executive director and Daniel Barrick is deputy director of the New Hampshire Center for Public Policy Studies, an independent, nonprofit, non-partisan organization that pursues data-driven research on public policy. For more information, visit www.nhpolicy.org.