(11/1/2006)

Video Lottery: South Dakota’s Stealth Addiction...for People and Government

Can we replace the revenue and end a dangerous practice?

BY BOB ELLIS

DAKOTA VOICE

*Note: This article is republished from the October print edition of Dakota Voice.

SOUTH DAKOTA—Dan Brendtro, a Sioux Falls lawyer, is heading up Forward South Dakota (www.forwardsouthdakota.org), the fourth campaign to end video lottery in South Dakota. The measure will be Initiated Measure 7 on the November 7 ballot.

Voters have considered the matter three times previously in 1992, 1994 and 2000. Brendtro believes this year will be different because his organization intends to show that the revenue from video lottery can be replaced without the budget chaos video lottery proponents say a repeal would bring.

South Dakota became the first state to legalize video lottery in 1989.  Since then, Louisiana, Montana, New York, Oregon, and West Virginia have followed suit.    According to the South Dakota Lottery website, there are 8,300 terminals in 1,400 establishments across the state.  Video machines feature variations of poker, keno, blackjack and bingo games of quarters and nickels.  The bet limit is $2 a pop with a top prize of $1,000.    The state of South Dakota receives 50% of the 2005 $220 million video lottery income.    South Dakota has budgeted $244,000 for the next year for the Division of Alcohol and Drug Abuse to pay for treatment services for individuals impacted by compulsive gambling

A 2005 report on gambling addiction done by Mountain Plains Research of Dillon, MT indicated that only 54.6% of those addicts examined had stayed away from gambling 12 months after treatment.    Gambling addiction causes lost productivity in the economy because of missed days (an average of 3 days per month according to the Mountain Plains study), being late, inattention and distraction.  Arrest/conviction was the most common reason given for entering treatment at 16.2%. 

When combined with other legal reasons, this percentage rose to 29.7%.  Other reasons were an ultimatum from a spouse (10.6%) or an ultimatum from an employer (4.6%).  Most (37.7%) reported incomes between $10,000 and $30,000.  The percentage of gambling addicts being treated for gambling machines was 92.3%.  Reasons given for gambling was "forgot my problems" (55.6%), "numbed my feelings" (51.2%) and "liked excitement and action" (46.2%).  A little over one-fourth (26.2%) used alcohol while gambling. 

Some other statistics concerning people in the study:   38.5% reported previous treatment for gambling 63.4% reported gambling on holidays 80.6% said gambling replaced other activities 41.9% reported absences from work for gambling related activities 87.6% admitted spending family funds on gambling 89.5% said they had tried unsuccessfully to cut down or stop 70.5% admitted to illegal acts to finance their gambling 81.3% thought of gambling as a way to solve their financial problems   The state Supreme Court ruled in 1994 that video lottery was unconstitutional and the industry shut down for 100 days.  But legislators met in a special session and rewrote the section of the state constitution which dealt with gambling and the voters signed off on the change that November. 

Video lottery has been called "the crack cocaine" of gambling because it is so addictive.    A report entitled “Video Lottery and Treatment for Pathological Gambling: A Natural Experiment in South Dakota” published in January 1996 in the South Dakota Journal of Medicine, calls the 100-day 1994 shutdown of video lottery a “natural experiment” where treatments for gambling addiction dropped 93.5%.  It also says that 97.9% of gambling addicts were addicted to video lottery, not other types of gambling.  

A report from Focus on the Family cites a 2002 Rhode Island Gambling Treatment Program research paper which says two of every three gambling addicts said video machines were at the root of their problem.  The same report quotes Robert Hunter, an expert on gambling addiction and head of the gambling treatment program at Charter Hospital in Las Vegas, as saying video poker players make up more than two thirds of his patients.    Stories of crimes committed to feed gambling addictions often involve armed robbery and tremendous amounts of bad checks written.  Parents addicted to gambling have let children go hungry as grocery money goes to feed the video machines.  A 10-day old baby girl was left in a hot car for seven hours while the mother played video poker.  A Chicago woman suffocated her seven week old daughter to cash in a life insurance policy to feed her addiction.

Brendtro cited a study from Montana which found that for every million dollars spent on video lottery we have 172 crimes as a result.

As terrible as the social cost of video lottery is, Brendtro believes the reason a repeal of video lottery has not succeeded in the past is because the video lottery industry was effective in making people believe the money could not be replaced, and important government programs would have to be cut.

According to Brendtro, about $75 million of the $110 million revenue could be made up with a half-cent sales tax. As Brendtro put it, “People have committed suicide over video lottery losses, but no one ever committed suicide over a half-penny sales tax.” He says that even with a half-cent increase, South Dakota would still have a lower sales tax than most of our neighboring states.

Other means of making up the shortfall could include a freeze in state budget growth, which grows an average of 5% annually, Brendtro says. He also believes “pork” could be cut from the state budget in various areas to help make up the difference.

The state also has a budget reserve of $43 million which Brendtro says could be used to help cover the difference or provide cushion until the legislature makes the necessary adjustments.

Brendtro also says it should be obvious on the face of it that a 50% tax (the amount South Dakota makes from the video lottery industry) is a grossly inefficient method of taxation. He believes the amount of money going into video lottery would have a ripple effect on the economy that would create a better sales tax and property tax base.

If Initiated Measure 7 is passed by the voters in November, Brendtro says Governor Mike Rounds could call a special session of the legislature immediately after the election in order to develop a plan for replacing the revenue. Initiated Measure 7 would not go into effect until the beginning of 2007, so the state would continue to receive money from video lottery for almost two months, providing time for a plan to be developed. When the 2007 legislative session begins in January, they could them implement adjustments to make up for the revenue no longer received from video lottery.

Brendtro also believes with the good economy we currently enjoy, employees of the video lottery industry, who currently average $6.50 to $7.00 an hour in wages, could find other, more stable employment without much of a problem.

As November 7 fast approaches, Forward South Dakota will be purchasing TV ads to educate voters, but will mainly rely on a grassroots effort of local volunteers across the state to get the word out that the state can carry on without video lottery revenue.

“The myth is that we can’t survive without video lottery,” Brendtro concluded. “But we can, and we can end this scourge, this cancer on our state.”