Reprinted from Session Weekly, Minnesota House of Representatives
The Minnesota State Lottery had another record year in 2010, but other forms of gambling in Minnesota are on the decline, members of a House committee learned.
The House State Government Finance Committee heard last week from state officials who regulate the state’s lottery, horse racing and charitable gambling industries.
Lottery sales in the state soared to a record $499 million in fiscal year 2010. Despite this, Don Feeney, research and planning director for the lottery, said legal forms of gambling as a whole, saw a decline in gross sales. He said the slump in gambling sales is likely “a reflection of the economy.”
“Most lotteries around the country actually saw sales decline; we were one of the few exceptions,” Feeney said.
Charitable gaming, such as pull-tabs and bingo, and betting on horse-races both saw a decline in 2010, continuing a trend that’s been ongoing for several years. Feeney said the economy may be driving people to play the lottery rather than going to a bar to play pull-tabs or spending a day at the racetrack. He called this the “substitution effect.”
Richard Krueger, executive director of the Minnesota Racing Commission, said enthusiasm for horse racing has been on the wane for nearly two decades. He said competition from other forms of legal gambling — as well as online illegal gambling — has been hurting the industry.
“The race tracks obviously are revenue-challenged right now,” he said.
Responding to a question from Rep. Dean Urdahl, R-Grove City, Krueger added, “A racino would help. There’s no doubt about it.”
Gambling Control Board Executive Director Tom Barrett presented a report showing gross receipts by charitable gambling organizations fell nearly 32 percent in the state between fiscal years 2001 and 2010. Despite this, he said Minnesota is ranked second in the country for charitable gambling receipts.
Tax break
Charitable gambling organizations could get a temporary tax break if they contribute some of their proceeds to local governments.
The House Commerce and Labor Committee approved House File 2818, sponsored by Rep. Al Doty, DFL-Royalton, Feb. 16. The bill would reduce taxes paid by charitable gaming operations by the amount they contribute to local government projects and programs.
Doty said public assets in his district ranging from sidewalks to fire trucks to baseball fields have been funded with charitable gambling proceeds.
“Here’s the simple idea: if the charitable gaming funds are being used for something that would otherwise be a function of local government, then we are going to give them their taxes back,” Doty said.
Gambling organizations that qualify for the credit could apply for a quarterly refund from the Department of Revenue. The tax exemption would be effective July 1, 2010, and expire June 30, 2013.
King Wilson, executive director of Allied Charities of Minnesota, called the plan “a brilliant idea.”
“A large portion of money raised by charitable gambling goes to the local city, goes to the local high school. … Anything we can do that would allow organizations to have more money to spend on these local projects would be beneficial,” he said.
Committee members had bipartisan support for the proposal — though some expressed concern about its impact on the state’s projected budget deficit. Doty said the bill would cost $8.3 million in lost tax revenues.
“This has great merit; I just don’t know how you pay for it,” said Rep. Tom Anzelc, DFL-Balsam Township.
The bill now goes to the House Taxes Committee, where Doty acknowledged it faces potential opposition because of its state budget implications.
“I know what the tax committee is going to say,” he said, adding, “If this bill doesn’t happen today, then I think very shortly after we find $8.3 million would be the right time, because I think it’s a good idea.”
A companion, Senate File 2523, sponsored by Sen. Paul Koering, R-Fort Ripley, awaits action by the Senate State and Local Government Operations and Oversight Committee.
