Recession can have devastating repercussions for casino industries in rural areas; however, it may not be as devastating as you think.
Studies published in the Journal of Gambling confirm that gambling activity increases during economic expansions and declines during recessions, offering gaming industries valuable information regarding personnel decisions, snack and drink supplies and promotional events.
Discretionary Spending
Many states use casino tax revenue to finance various programs. Public education is one of the primary beneficiaries, making a compelling argument in support of casinos during pro-casino campaigns. Unfortunately, there is little empirical evidence showing that money earmarked for education actually increases total educational expenditure since legislators can simply reduce other sources and bring spending back down to pre-casino levels.
Another area of contention involves whether casino gambling causes retail sales declines that in turn reduce county revenues. This issue has been the subject of considerable discussion in academic circles; yet no definitive answers have emerged. Depending on visitor density (whether from urban or rural areas) as well as gaming establishment density in an area (with more gaming establishments tending to buffer any recession better due to drawing visitors from all around).
Competition
Casinos provide local governments with much-needed revenue. But it is essential to understand how their revenues are affected by economic cycles – this is especially relevant when new casinos enter a region; when this happens, existing properties often see reduced revenue as new properties take away customers from local competitors, sometimes even leading to bankruptcy for some casino properties.
The Great Recession altered consumers’ spending patterns significantly. Consumers prioritized entertainment dollars more efficiently by choosing less costly gaming options closer to home and prioritizing spending them there instead of traveling long distances for gambling trips. This proved especially advantageous to nondestination gaming states such as Indiana that saw gamblers opting for casinos nearby rather than traveling far distances for casino entertainment.
This study used time series analysis with monthly coin in and table drop interventions as well as regression analysis on employment impacts to examine gaming volumes and employment in Indiana’s urban and rural locations prior, during, and post the 2007-2009 recession.
Taxes
State and local governments increasingly rely on gambling revenues as part of their general revenue sources. In 2021 alone, gambling generated approximately $35 billion for state and local government revenues – this included state lotteries at $24.4 billion, casinos at $8.3 billion, parimutuel wagering at racetracks/riverboats ($8 billion), video gambling ($1.9 billion).
Casino tax revenues are often set aside for social good programs. But this revenue doesn’t represent new money to society – rather, it represents the transference of income from casino owners to state and local governments and program recipients.
While this study offers valuable insights into casino revenue trends during economic downturns, more research needs to be conducted into the relationships between gaming volume and employment in both urban and rural locations. Such studies will assist state and local policymakers with economic forecasting efforts as well as provide greater understanding about how casinos respond to recession-induced changes in discretionary spending patterns.
Regulation
Although regulation often triggers negative responses, its benefits extend far beyond casinos and gamblers – it protects all parties involved from scams while setting minimum age requirements and providing support networks for those addicted to gambling. Therefore, proper regulation serves everyone involved.
State and local governments collected more than $35 billion from various forms of gambling during fiscal year 2021. Of this figure, lotteries accounted for an estimated $24 billion, followed by casinos ($8.5 billion) and parimutuel wagering.
Proponents of casinos often point to the decrease in local unemployment after opening as proof of economic benefits from casinos. But this data should be evaluated against statewide unemployment changes; population shifts and business cycles all play an important part. Furthermore, casino jobs typically require some skill, so lower unemployment may just reflect more skilled workers moving to an area.
