Guest commentary: Illinois pensions, education losing out to gambling

Guest commentary: Illinois pensions, education losing out to gambling

By JOHN KINDT

Gov. Patrick Quinn's spring 2013 speeches repeatedly tie together three issues facing Illinois, specifically the state budget, pension funding and gambling. Lost in the analysis of these problems is that during the last 22 years Illinois technically could have collected $10 billion to $53 billion from gambling interests, according to the United States International Gaming Report — probably making Illinois pensions solvent today. States which rejected the Illinois gambling model 20 years ago have little gambling today and solid pensions — and even budget surpluses.

Compared with other states, the new Illinois gambling expansion bill SB1739 gives away another $5 billion to $10 billion to gambling owners. Furthermore, this bill partially ties pension funding and education monies to illusory gambling revenues, including speculative and legally questionable Internet gambling activities. For example, SB1739 supposedly dedicates Internet gambling fees to funding pensions — but only if there are any monies left after the tax credits gifted to gambling owners. In a similar misrepresentation, SB1739's expansion of slot machines/video gambling machines (VGMs) will supposedly enhance monies to education.

After stigmatizing Illinois with pension fraud on March 11, 2013, the Securities and Exchange Commission will doubtless be joined by other federal regulatory agencies in a heightened monitoring of Springfield's legislative sleight-of-hand.

While vetoing two gambling expansion bills within the last 12 months, Gov. Quinn noted that there can be "no loopholes for mobsters" and "Illinois cannot gamble its way to prosperity."

But if Illinois is going to have gambling, Illinois needs to collect the billions of dollars other states have collected. For example, Illinois casino licenses worth a fair market value of $500 million to $1 billion each are apparently given away in the pending gambling expansion bill for only $100,000 each.

During the early 1990s, the initial 10 Illinois casino licenses worth a total fair market value of at least $5 billion were legally given away for $25,000 each to political insiders, including one insider who is now in prison as part of the Rod Blagojevich scandals.

Ironically, a chief sponsor of current gambling expansion is also sponsoring a bill to make permanent the 67 percent state income tax increase. Passed during the 2011 lame-duck legislative session, the 67 percent increase in the state income tax currently provides an additional $8 billion in annual tax revenues. By comparison, the current gambling bill immediately gives away $5 billion to $10 billion in potential tax revenues.

Compared to low Illinois casino taxes, the tax on Canadian casinos has traditionally been 100 percent — with the casino companies receiving only management fees.

In another comparison, the 2009 Illinois Video Gaming Act authorizing another 45,000 to 75,000 video gambling machines in neighborhoods has local governments receiving 5 percent, the state 25 percent, and the owners/operators 70 percent of revenues — unlike other savvy states, where the government takes all or most of the revenues. Compounding these revenue problems, another Illinois gambling bill sponsored by Rep. Daniel Beiser, D-Alton, includes more tax giveaways by authorizing thousands of additional slot machines/VGMs into nebulously-termed "social clubs."

Historically, Illinois has tried to reverse this destructive fiscal course — and can still do so. In one example in 2005, Rep. John Bradley introduced a two-sentence bill, HB1920, which eliminated most Illinois gambling while increasing jobs, and with Speaker Madigan's support, the bill passed 67-42. However, HB1920 was procedurally derailed by Gov. Rod Blagojevich's protgs.

Gov. Quinn has repeatedly stated that the Illinois Legislature needs to address over $90 billion in unfunded pensions liabilities, as well as a depleted state budget, before considering gambling expansion. However, experts highlight that the current Illinois policy on "existing gambling facilities" should simply be "pay up or get out." New gambling proposals only misdirect more funds away from pensions and education.

Professor John Kindt has served in academic capacities involving benefits issues for public employees, including teachers. He is also a senior editor of the United States International Gaming Report. An abbreviated version of this op-ed was originally published March 28 by Crain's Chicago Business.

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