Tuesday, March 23, 2010

Follow the money

After the passage of Obamacare, the debate on whether to allow video gaming machines to be installed at Canterbury Park and Running Aces may seem like just so much bread and circuses. Yet I spent some time recently researching this topic and exchanging some e-mails with the executive director of Racino Now. I learned a lot about Minnesota's conflicted attitudes toward gambling, but the legislative debate all really boils down to money.

On the one hand, we have the "trouble in River City" crowd which opposes installing video gaming machines, ostensibly on moral and legal grounds, at two Twin Cities locations: the aforementioned racetracks where gambling is in progress as we speak. Yet these good folks are strangely silent on repealing the Minnesota State Lottery, or shutting down the Indian casinos or the racetracks, or office football and basketball pools. If gambling was such trouble (with a capital "T"), why not shut it all down?

The answer: money. Who has the most to gain from a prohibition on the expansion of video gaming in particular? Why, the people who currently have a monopoly on it, of course. As Christopher Johnson, executive director for Racino Now, told me in an e-mail:

There are 18 casinos which receive hundreds of millions of dollars each year in net profits and do not pay any corporate taxes, property taxes or taxes on their gaming profits. Further, these entities charge their customers lodging taxes, tobacco taxes, alcohol taxes, sales taxes and gasoline taxes and the state turns around and gives the money back to the tribes. In 2008, the tribes collected $19.5 million in such taxes and the state refunded $17.25 million of the money back to the tribes.

On a recent At Issue segment on KSTP-5 Eyewitness News, conservative commentator David Strom and a spokesman for the Service Employees International Union, otherwise at odds, stood united against the bill. Host Tom Hauser shrugged off the results of a poll conducted by his own television station that found a bipartisan 80% of Minnesotans favor the racino bill.

In 2004, former speaker of the Minnesota House of Representatives Steve Sviggum called the Indian casinos' influence in state politics "deep and insidious." Do I begrudge the tribal casinos their gambling compacts with the state? No, but while opponents of the racino legislation are declaring the debate over, critical thinkers should follow the money.

Other conservatives have questioned the wisdom of giving government yet another revenue source, even one that is "dedicated" to certain purposes. As P. J. O'Rourke said, "Giving money and power to government is like giving whiskey and car keys to teenage boys."

In her recent e-mail to constituents, Rep. Sarah Anderson reported how Minnesota State Lottery proceeds may not always be going where you think they're going:

...While we all want to protect our natural resources, I am concerned that the House bill does not spend these dedicated funds in the way Minnesota residents expect them to be used. I question whether projects like digital photography classes and online field trips fit the mission of the Fund or the intent of the people of Minnesota.

During debate on this bill, I offered an amendment removing a provision that spent Environmental Trust Fund dollars to install new windows and doors for the director's residence at a learning center in Lanesboro. When a Minnesota citizen buys a lottery ticket or makes a donation on their tax form to benefit the environment, I doubt they are envisioning computer screens, camera lenses, or doors and windows for someone's home.

According to Racino Now spokesman Dick Day in an e-mail sent yesterday, "our racino bill was passed as an amendment to a bill in the Agriculture, Rural Economies and Veterans Affairs Finance Division Committee. The Committee, chaired by our author Rep. Al Juhnke (DFL-Wilmar), passed the amendment through committee on a voice vote with no audible opposition. This is wonderful news and reestablishes the positive momentum that the racino bill has generated this legislative session."

Tuesday, March 09, 2010

If I could be Dick Day for a day

Recently, you may have seen or heard former state senator Dick Day working as a lobbyist for "the racino," that is, legislation (SF2950) to permit the same video gaming machines that are already running legally at eighteen casinos around Minnesota to be installed at the Canterbury Park and Running Aces racetracks. The morning line has placed long odds on this old nag, which has repeatedly failed to reach the winners circle since 1997, the year then-Senator Day's racino bill first left the starting gate.

Unfortunately, this year as in 1997 and subsequent years, the racino is being sold on its revenue potential for the state of Minnesota's general fund. This is the wrong approach. A majority of Minnesotans have repeatedly said that video gaming revenue is the wrong way to finance state spending. Besides that, as a former Republican Senator, Dick Day knows that Minnesota does not have a revenue problem, it has a spending problem.

In horse racing, when your horse is not winning, you change something: adjust the horse's medication, add blinders, change the leg wraps, adjust the length or intensity of morning workouts or warmup routine, something.

I think that racino supporters should take a different route, one that appeals to the libertarian and fairness aspects of the measure. If I was Dick Day for a day, I would blow away most of the current communications strategy and sell the racino as a liberterian jobs and economic growth bill:
  • The racinos would create thousands of jobs and boost the local private economies near each location. Purse supplements from video gaming would enable true investments with true returns (not permanent taxpayer liabilities that are sold as "investments") in Minnesota's private racing, horse breeding, and agricultural industries. In a 2004 University of Minnesota study, the horse industry in Minnesota had an economic impact of $1 billion.

  • Legalizing video gaming machines at the Canterbury Park and Running Aces horse tracks would not represent an expansion of gambling. There is already plenty of gambling going on at these facilities.

  • Video gaming is already conducted at Minnesota's eighteen casinos. Why not allow it at Minnesota's two horse racing tracks?

  • Unlike professional and college sports stadiums, building two racinos will be 100% privately financed, requiring no investment or perpetual subsidy from the state.

In the current economic climate, the racino bill would give a needed kick to Minnesota's private economy, and provide an additional entertainment option for residents and tourists. From my perspective, the revenue potential is beside the point.

UPDATE: As one of our commenters pointed out, a poll conducted on March 3, 2010 by SurveyUSA found that 80% of Minnesotans favor a racino. So if we had initiative and referendum in Minnesota, we would have video gaming in exactly two additional venues that already conduct gambling.

Saturday, March 06, 2010

Radical idea: live within our means

When the amount of money going out exceeds the amount coming in, many households and governments alike delay short-term pain by going (further) into debt, or by spending from savings. While both measures have their legitimate uses, neither is sustainable — in either a household budget or a government budget.

Going deeper in debt, and robbing Superintendent Peter to pay Saint Paul are two dubious tactics that the Minnesota Legislature will again consider this session as they face what the Minnesota Management & Budget office reports is a multi-billion dollar budget deficit for the 2010-2011 and 2012-2013 bienniums.

Moody's Investors Service downgraded the state's debt outlook rating, citing the budget deficit and "the state's ongoing financial and economic weakness as the primary reasons. The ratings agency also singled out the state government's depletion of reserves and a heavy reliance on one-time resources to balance its budget as reasons for the downgrade," according to a report in Finance & Commerce. "This leaves the state facing the challenge of addressing ongoing structural imbalance with limited resources in an uncertain economic environment."

A downgrade by Moody's often leads to states having to pay higher interest rates on debt.

Predictably, Republicans like Rep. Sarah Anderson (R-Plymouth) are trying to deal with the fiscal realities, while the DFL is virtually deaf and blind to them. In an e-mail to constituents, Anderson said about the DFL bonding bill, "Though some of the projects in the bill are important for maintaining Minnesota's infrastructure, many of the proposals contained in the bill fail to meet the 'project of statewide significance' standard or are not fiscally prudent given the state's deficit of $1.2 billion [in the current biennium]. We will be spending state general fund dollars to support this debt bill at a time when other areas of the budget such as our schools are facing potential cuts."

"I have authored a bill requiring the Legislature to pass a balanced budget before they pass any other bill," said Anderson.

The state is also planning to temporarily withhold aid payments to school districts, forcing many districts to borrow or spend down their cash reserve funds. Sen. Terri Bonoff (DFL-Minnetonka) said, "I am very concerned by the precedent being set to borrow from school district reserves and penalize districts for sound fiscal management. Our local school boards and school administrators have worked hard to manage their budgets and secure positive cash reserves. Districts hold money in reserve for financial stability, cash flow, and to maintain their credit rating. Fund balances are often derived using local taxes paid by homeowners and businesses. It sends the wrong message to fiscally responsible school districts that the state would look to their positive cash reserves in order to manage state finances."

Messing with public school funding is highly disruptive to district operations. The state should get its runaway spending addiction under control, which would make accounting tricks like this unnecessary. The state does not have a revenue problem, it has a spending problem.

Thursday, March 04, 2010

SD43 endorses two first-timers

At its well-attended BPOU convention on February 27, west metro district SD43 endorsed two first-time candidates to challenge the district's two DFL incumbents.

Norann Dillon ran unopposed and was endorsed by acclamation for the state Senate seat. SD43 activist and soccer mom of four, Dillon is already familiar to SD43 delegates because she was seemingly everywhere this winter campaigning for the endorsement: meet-and-greets, Facebook, on the web, on the phone, at the precinct caucuses, and in a few direct mailings. She has little name recognition outside the party, however, and has only lived in the district a short time. She will need maximum face time with district voters and some major money to oust DFL incumbent Sen. Terri Bonoff.

Kathy Dettman is another newcomer to campaigning, but a familiar face at the House Republican Caucus. Dettman served on the popular former Excelsior Rep. Barb Sykora's staff, so she has an intimate understanding of how things work at the Legislature. With no web site and no official social networking presence, she has some catching up to do, even to get to where Dillon is today. Dettman won the HD43B endorsement on the first ballot against Brian Grogan, who has been preparing for a rematch against incumbent DFL Rep. John Benson almost since the day after Election Day 2008. (Disclosure: I worked on Grogan's campaign, published his occasional blog posts, and delivered a nomination speech for him at the convention.)

Dettman made a rather aggressive electability argument for her candidacy, saying that Republicans never should have lost the 43B seat (when Rep. Ron Abrams was appointed to a district court judgeship by Gov. Tim Pawlenty). Dettman said that the reason the Republicans lost to Rep. Benson twice was that they ran the wrong candidates. I am sure that the SD43 DFL would agree, but this made candidates Dave Johnson, Brian Grogan, and their supporters feel a bit slighted. Should, God forbid, Rep. Benson win a third term, I would encourage the next endorsement candidate to eschew this ungracious assertion. To their credit, our BPOU's "losing" candidates are still working hard for the party. The current crop of candidates, including Dettman, could benefit from their support, goodwill, and experience.

Conservative Republican and HD43A "favorite daughter" Rep. Sarah Anderson also ran unopposed and was endorsed by acclamation. In her second term, Anderson's committee assignments are to Taxes, Commerce and Labor, Higher Education and Workforce Development Finance and Policy Division, and Environment and Natural Resources Finance Division. Anderson defeated her DFL challenger Clint Faust by nearly 9 points in 2008. This cycle, Anderson will meet DFL challenger and Minnesota Valley Transit Authority public relations director Audrey Britton.

Notes from the convention floor: Third Congressional District Rep. Erik Paulsen returned from Washington to pledge his help to send more west metro Republicans to Saint Paul. Gubernatorial endorsement candidate Marty Seifert's supporters were out in force on his behalf. Seifert's rival Tom Emmer's campaign circulated a slate of delegates who endorse Emmer. Both candidates delivered spirited stump speeches to the convention. State Auditor endorsement candidate Pat Anderson promised a return to run a more active OSA, and to examine the finances of school districts which consume 37% of the state's $31 billion budget. HD43A resident, self-proclaimed "taxpayer watchdog," devoted father, and Hennepin County Commissioner Jeff Johnson greeted delegates on his way to another of his sons' sporting events. Hennepin County Sheriff Rich Stanek connected with delegates and thanked supporters with a commanding and reassuring presentation. Judy Johnson, Plymouth City Councilmember and former mayor, and newly-appointed government affairs director for the TwinWest Chamber of Commerce, greeted delegates with her characteristic, upbeat grace. Rep. Paulsen cited Johnson as an example of the "young future" of the Republican party.

Outgoing SD43 chair Greg Merz passed the gavel to his successor, Larry Thompson. Merz stepped in to perform chairman duties after the death of longtime activist Frank Weir in 2008.