Nevada Does Not Have A Lottery And Casinos Are Fighting To Keep It That Way

John Mehaffey March 27, 2015 2287 Reads
Nevada lottery proposed

A proposed state constitutional amendment would allow for a lottery in Nevada. The sponsor is Harvey Munford, D-Las Vegas. The bill immediately drew opposition from the gaming industry and anti-gambling groups.

Nevada is just one of six states without a lottery. State-sponsored lotteries are prohibited by the constitution. Charities are permitted to offer limited lotteries through a 1990 amendment.

The gaming industry has long fought a Nevada lottery. The contention is that the state should not compete against its biggest industry.

Casino-sponsored study found lottery would cause loss of gaming jobs

Boyd Gaming and Station Casinos released a study in 2007 that concluded that a state lottery would create 316 new jobs, while eliminating 595 gaming jobs, for a net loss of 279 positions. The same study estimated a Nevada lottery would profit about $48 million per year.

The study is not available online and attempts to obtain a copy were unsuccessful.

Based on what is publicly available from the report, the job assertion seems dubious. The $48 million estimate is profit. That is after the administration jobs created, as well as ones in retail and field operations.

Assuming a profit margin of 30 percent, standard for lotteries, the handle would be $160 million. The typical administration cost is about 8 percent of the handle. That would give the lottery about $13 million per year for equipment and labor. Spending half that amount would create 316 jobs paying about $41,000 per year, making the estimate in the Boyd/Station report appear to be accurate.

That number does not include the jobs created with lottery proceeds.

The current lottery proposal would use proceeds to improve education and provide care for senior citizens. The estimated $48 million would go towards school supplies, school construction, teachers, senior facilities, and caretakers.

Assuming just half of that money goes towards jobs, there would be 585 jobs created if the average salary was $41,000 per year. That would net over 300 jobs per year at the first level before taking into account what would be created in the secondary economy, some of which could find its way into a casino after all.

Nevadans clearly have a desire to purchase lottery tickets

Some of the cash spent on a lottery might come from the locals gaming market, but not all of it. An estimated $18 million is already spent by Nevadans at California border stores.

The Primm Lottery Store is a 30-minute drive from the edge of the Las Vegas Valley. It is the number one lottery retailer in California. A spokesman with the California Lottery told the NY Times that the Primm Lottery Store sold $13 million in lottery tickets in 2009.

The Primm Lottery Store only has road access from Nevada. It is on a dead end street that crosses the border into California.

Baker, the closest city in California, is 50 miles away. Baker has its own lottery retailers. While nobody tracks this information, it is a safe assumption that a vast majority of the tickets sold at this location are to Nevadans.

The closest lottery retailer to Reno sold $6.3 million in tickets in 2009, according to the same report.

The closest lottery retailers to Las Vegas in Arizona are about 30 miles south of Hoover Dam.  Two shops in the town of White Hills combined to sell about $4 million in lottery tickets.

These four units combine to generate about 15 percent of the projected revenue a Nevada lottery would generate.

While the gaming industry opposes a lottery for protectionist reasons, there are actually anti-gambling opponents in Nevada speaking out against it, too.

Janine Hansen, state president of Nevada Families, feels that the lottery would prey upon low-income and young people, according to the Las Vegas Review-Journal.

The low income argument is a tough sell in Nevada. A drive through the worst neighborhoods in Las Vegas reveals video poker in gas stations, grocery stores, and bars. Adding lottery tickets to the mix will not substantially change the availability of gambling.

The age point may be more valid. Gamblers in Nevada must be 21 years of age. The minimum age for lottery sales in 41 of 44 states is 18 years old. Nebraska sets a minimum age of 19, while Louisiana and Iowa require players to be 21 years of age. If this really is a concern, setting the minimum age to 21 resolves it.

An overwhelming majority of Nevada residents support the addition of a state lottery. Two polls last decade showed 70 percent or more of Nevadans approve of it.

If gaming opposes lottery, raise taxes

Gaming has not been more than 50 percent of Las Vegas Strip revenue since 1999. The casinos are making more than 60 percent of their revenues from amenities. There is no corporate income tax on this revenue, meaning that the tax base does not grow at the same rate as it did when gaming was the main business.

Nevada taxes gaming revenue at nonrestricted gaming licensed casinos at a rate of 6.75 percent. That is the lowest in the country. Raising that rate to 7.1 percent would generate the exact amount that a lottery would, based on projections made by the Boyd/Station report.

Another option is to tax restricted gaming at the same rate as resort casinos. These are taverns, grocery stores, and gas stations with 15 or fewer slots. A good location can generate $1,000 per machine each day, yet only a licensing fee is collected. Treating restricted licensees the same as resort casinos would provide more than enough income to forgo a lottery.

Nevada residents want a lottery. If the gaming industry wants to force its will on the people in the state, it can pay more into the system to help bring the education level in the state to a respectable level.

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