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Thursday, May 23, 2013 02:22 pm

Giveaways to Big Gambling make Illinois budget crisis worse

If, during the last 23 years, Illinois had taxed Big Gambling at rates comparable to other states, then Illinois would have had an additional $35 billion to $56 billion in tax revenues – and no current budget crisis.

Distressed by Illinois gambling, former U.S. Senator Paul Simon sponsored the Congressional bipartisan 1999 U.S. National Gambling Impact Study Commission. As a follow-up to the commission, the multi-volume 2008-2013 U.S. International Gaming® Report has catalogued billions of Illinois dollars legally given away to Big Gambling’s political insiders.

At the time President William Clinton signed Sen. Simon’s Gambling Commission into law, the White House staff noted a 1995 lead article in the Arkansas Law Review titled “Legalized Gambling Activities As Subsidized By Taxpayers.” Produced at the University of Illinois, this academic article provided early highlights of the enormous Illinois giveaways of taxpayer dollars to Big Gambling and predicted much of the current budget crisis.

The 2013 Madigan Pension-Reduction Bill has an exculpatory nine-page historical record produced to document the supposed budget crisis accumulating during Rep. Michael Madigan’s three decades as Speaker of the House. But nowhere is there any mention of the $35 billion to $56 billion given away to Big Gambling’s political insiders.

Beginning in 1990, for example, Illinois legally gave away 10 casino licenses worth a total fair market value (FMV) of $5 billion to political insiders. Illinois charged only $25,000 for each license.

The first riverboat casino license was awarded to investors such as William Cellini and Lance Callis, who initiated the Argosy Gaming riverboat in Alton.

In a Feb. 25, 1993, article titled “Insiders Didn’t Take Much of a Gamble with Argosy Gaming,” the New York Times reported that the “insiders invested $201,000 for their stock, or roughly a penny a share. In the offering, they sold 8.3 percent of their shares for $31.7 million. Add in the $13 million of dividends they have received, and their investment looks pretty good.” The New York Times then noted that after only two years, the current “market was valuing the company at $462 million.”

In a 2003 Illinois analysis, the Maryland Tax Education Foundation confirmed that the FMV for casino licenses was approximately $500 million and cited Argosy Gaming’s 2001 purchase of a suburban Cincinnati casino license for $750 million. In 2002 the Rosemont casino license (which was originally granted by Illinois for $25,000) got a bid of $615 million, and in 2000 a Detroit casino license was $660 million.

Even casinos in regulatory trouble sell for approximately $500 million. One Nevada owner was forced to sell his Illinois casino for $465 million – but the initial Illinois fee was only $25,000. In Missouri, the tainted Station Casinos sold its casino for $488 million and exited the state. In a Louisiana scandal, Players International still sold its casino for $425 million.

But in Illinois amid the new 555-page gambling expansion bill, casino licenses are just $100,000 – another proposed $5 billion to $10 billion legal giveaway to Big Gambling’s insiders.

Via reductions in pensions and earned benefits, teachers and public employees are going to pay until the public realizes that Big Gambling is the Big Cause of the Illinois budget crisis.

University of Illinois Professor John Kindt is a senior editor of the U.S. International Gaming® Report. 
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