Wild Cards in the Special Session on Gambling

Governor Martin O’Malley has called the state legislature into special session beginning August 9 to deal with gambling issues. The administration will propose legislation to authorize an additional gambling location in the National Harbor development in Prince George’s County, and to allow table games (like blackjack, roulette and craps) at all of the casino sites in Maryland.

The proposal would then go to the voters for consideration at the November election.

The Governor indicated that the proposal would produce $100 million for education. He indicated further that it would include measures to hold harmless the jurisdictions that are already authorized for casino sites – including Anne Arundel County and Baltimore City.

Several considerations remain to be disclosed – of maybe they remain to be decided. That is to say, there are some wild cards in this game.

Will there actually be more money for schools? Up until now, the linkage between gambling money and schools has been nebulous. I described it in the Gazette newspapers as “financial sleight of hand.” You see, the bulk of the gambling revenues go into a “Education Trust Fund.” The trust fund money goes towards state aid to public school systems.

But the law that set up the trust fund did not change the funding formulas to increase the amount of funding for public schools. So what happened is that the slot machine money replaced other money from the state’s general fund.

The state is forecast to have a $400-to-$500 million revenue shortfall for next year. In the eyes of state budget-makers, the money from expanded gambling is just the first $100 million or so towards solving that problem. There might not be any extra money for schools. It may all go to help fill the projected revenue shortfall. (Of course, the state has to balance its budget somehow, so the alternative could be other cuts that would be just as bad).

Finally, while the voters are needed to expand gambling (because the approved type and locations for gambling is in the state Constitution), the legislature can adjust the tax rate on the casinos any time (because that's just a regular law).

There is a lot of suspicion that once the expansion is in place, the gambling interests will ramp up pressure to cut back on their tax rate.

Their “tax rate” IS where the money for schools comes from. If the legislature is going to let the casinos keep more of the profits, that will mean less money for schools, or more budget cuts somewhere else.

So, there are wild cards in this gambling game. If the state is going to expand gambling, it should assure that the schools come out ahead, and that future education funding is protected.