University of Montana ScholarWorks at University of Montana Montana Business Quarterly, 1949-2021 Bureau of Business and Economic Research Winter 1995 Montana Business Quarterly, Winter 1995 University of Montana--Missoula. Bureau of Business and Economic Research Follow this and additional works at: https://scholarworks.umt.edu/mtbusinessquarterly Let us know how access to this document benefits ou.y Recommended Citation University of Montana--Missoula. Bureau of Business and Economic Research, "Montana Business Quarterly, Winter 1995" (1995). Montana Business Quarterly, 1949-2021. 145. https://scholarworks.umt.edu/mtbusinessquarterly/145 This Magazine is brought to you for free and open access by the Bureau of Business and Economic Research at ScholarWorks at University of Montana. It has been accepted for inclusion in Montana Business Quarterly, 1949-2021 by an authorized administrator of ScholarWorks at University of Montana. For more information, please contact [email protected]. MONT A N A BUSINESS QUARTERLY Volume 33, Number 4 Winter 1995 MONTANA BUSINESS QUARTERLY Volume 33, Number 4______________ Winter 1995 LARRY GIANCHETTA MARLENE NES ARY Dean, School of Business Editorial Director Administration PAUL E. POLZEV SHANNON H. JAHRIG Director, Bureau of Business Publications Director and Economic Research Bureau Advisory Board LAURIE EKANGER PATKEIM Helena Helena BRUCE L. ENNIS JACK PROTHERO Billings Great Falls RHONDA ROBERTS SCOTT R. SCHROEDER Billings Missoula TIM GRATTON Whitefish The M ontana Business Quarterly (ISSN 0026-9921) is published four times a year by the Bureau of Business and Econom ic Research, and is a service of The University of Montana, Missoula. The subscription rates for the Q u a r te r ly are S25.00 per year. S45XX) for two years, $6000 for three years, and $600 per issue. Second class postage paid at Missoula. M T 59812. POSTMASTER: Send address changes to the M on tan a Business Quanerty, Bureau of Business and Econom ic Research. The University of Montana. Missoula. MT 59812. Consents of the Quarterlyreflect the views and opinions of the authors and do not necessarily represent those of the Bureau, the School o f Busi­ ness or The University. The contents of this publication may be reproduced without the consent of the publisher and/or authors. Proper credit should be given to the Q u a r te r ly and its contributors for the use of any published material. The Montana Business Quarterly is available on microfilm from University Microfilms, 300 N. Zeeb Rd . Ann Arbor. M l 49106. Reprints of the articles are not available but additional copies of the Q u a r te r ly can be secured at $600 per copy. All inquiries regarding subscriptions publications etc , should he addressed to: Montana Business Quarterly. Bureau of Business and Economic Research . The University o f Montana. Missoula. M T 59812. (406) 243-5113. C O N T E l\LI_& Chancey Revenues: A Review of 2 Gambling in Montana by Stanley N icholson and Marlene Nesary Baby Boomers in Montana: 10 A Demographic Profile Consumer Sentiment 12 by Susan Selig W allwork Health Insurance Coverage among 13 Montanans, 1995 by Susan Selig W allwork Estimated Population for Montana 14 Counties and Incorporated Places Montana's Major Airports: 16 Economic Activity Profiles b y Ja m es T. S y lv ester Cover photo by Steve Adam s GAMBLING Chancey Revenues A Review of Gambling in Montana b y S ta n le y N ic h o ls o n a n d M a r le n e N e sa r y n the economically difficult decade of the 1980s, oversight o f gambling within the Department o f Justice. Montanans took several steps that institutionalized Legislative actions since then have tinkered with limits on the gambling. Video poker machines became legal in number of machines per casino and with payout levels, and 1985. The next year voters approved a state lottery by a margin have progressively decoupled the link between gambling of I69-31 percent. And in 1989, the Legislature established the revenues and school funding—a link many believe accounted Gambling Control Division, which centralized statewide for initial widespread approval o f the lottery. 2 Montana Business Quarteriy/Winter 1995 GAMBLING We argue that the time is ripe for review of this institution. Montana’s two main non-reservation gambling systems, the lottery and video gaming, have been in place for several years now, and we should have useful data on revenue trends and distribution patterns. If there are serious gaps, that too tells us something important. Moreover, we should be able to compare our gambling experience with that of other states, see where we stack up, and what else we might learn. Finally, with facts in hand, perhaps it’s time to ask for citizen input. For instance, do Montanans understand and approve the fiscal relationship between gambling and schools? Does a state run lottery constitute wise use of scarce government resources? D o the system and rate of taxation on Montana’s privately owned video machines make sense? Should the Legislature revisit the splits? Before we jump into the data, one disclaimer. This report leaves much not done. Gambling on Montana Indian reservations, for instance, is beyond our scope here. N or can we do much more than nod at the growing body of literature on gambling’s social cost. However, we can point you to the The state is owner and promoter of the lottery. State February 1995 issue of Montana, Magazine, which is helpful on employees run it. Revenues from the sale of Montana lottery both these matters (“Gambling: H igh Stakes Industry,” by tickets support the lottery enterprise. And the excess supports Duncan Adams, pp 36 - 47), and to other reference material as other “essential state programs”—to the tune of $8.6 million in appropriate. fiscal year 1995. Figure 1 shows the relationship over time between total ticket sales and “transfers,” the excess after State Government as Owner, Regulator accounting for prize payouts and other operating expenses. Current law provides for two major sources o f gambling As Figure 2 demonstrates, gross income (the equivalent of revenue in Montana, the lottery and video gaming. The lottery sales) and tax revenues from video gaming are several Gambling Control Division, and thus the government and times larger; taxes were just over $31 million in fiscal year 1995. citizens of this state, play quite different roles with regard to Yet in many respects, the state’s role is much reduced. (See each. sidebar for more on video gaming gross and net revenues.) For Montana Business Quarterly/Winter 1995 3 GAMBLING THE WIZARD OF ID Brant parker and Johnny hart NOBODY'S PERFECT By permission of Johnny Hart and Creators Syndicate, Inc. one thing, video gaming machines are owned and operated by Montana Magazine for their story). private corporations and individuals, while the Gambling Interestingly, the Montana Education Association has been a Control Division is charged with regulatory responsibility. long and active critic of the state’s gambling institutions. This regulatory role, however, depends on accurate, thorough, Gambling revenues—specifically the lottery—have been sold as and current information about machine activity. We’ll examine entertainment that helps schools. And while the lottery audit systems—so crucial to industry credibility—later on in transferred almost $42 million directly into school fund this report. But first, a look at revenue trends and taxes. accounts between 1987 and 1994, that amount accounted for only about 1 percent of state school budgets during that Has the Initial Growth period. Thus, MEA president Eric Fever hailed the 1995 Bubble Burst? Legislature’s decision to officially decouple lottery revenues from school A recent Wall Street Journal article “Our state has by fa r the smallest split financing, saying it was an “illusion” announced that the gaming industry’s at 15percent. South Dakota's take is 50 that lottery revenues were a big help “race across America has hit a speed percent Oregon's 65 percent an d to public schools (Great Falls Tribune, bump.” (WSJ, November 28, 1995, p. , , August 1, 1995, p. B-l). B-l) High profile casino projects are Alberta's 85 percent." Certain other constituencies, of being scrapped because of shrinking course, do want Montana’s gambling industry revenues, and a “sour” industry to grow and prosper. For instance, tavern owners and market for new ventures, according to the article. those who make and sell video gaming machines. Those Furthermore, “efforts to legalize casino gambling in more states whose jobs and incomes are keyed to gambling. And several have also run into more organized resistance from conservative large Montana cities. political groups, which cite the spread of gambling as evidence of moral deterioration [and] focus on the social costs.” Montana may be far from the big leagues of gambling, but Montana Cities Make Out Like we seem to be following a similar trend. Refer again to Figure (One-Arm) Bandits 1. Lottery ticket sales and transfers have actually declined in Montana may be a rural state, but the video gaming action the past year. Growth has stalled in Montana’s other major mostly pays off for urban areas. Table 1 shows the basic split gambling sector as well. After several years of double digit over time between the state General Fund and local growth, video gaming revenues grew by just 4.3 percent government jurisdictions. The former takes one-third of the between FY1994 and FY1995. gross income tax, then rebates the rest to city and county According to Janet Jessup, administrator of the Gambling governments, depending on machine location. If the machine Control Division, “People are using discretionary income for is outside city limits, the tax goes to county government; if this, and there’s a limit to which they can stretch that inside, to city government.