NATIONAL GAMBLING IMPACT STUDY COMMISSION

#MR. WILLIAM HAMM

CHAIRPERSON JAMES: William Hamm?

MR. HAMM: Members of the Commission my name is Bill Hamm and I'm an economics consultant. Earlier in my career I was selected to be California's third legislative analyst by among others Speaker Leo McCarthy, a man who I have a great deal of admiration for.

Let me begin by thanking you for coming to California and allowing members of the public to comment on issues relating to gambling. The particular dimension of the issue that I'd like to comment on is how Indian gambling casinos affect state and local government revenues.

On estimating the impact of casinos on state and local government revenues, there are two key points that one needs to keep in mind.

Key point number one, is that money spent in an Indian casino is money not spent somewhere else. Now that somewhere else is outside the state of California. The Indian casino has a positive economic impact on the state.

On the other hand if that money otherwise would have been spent buying goods and services from California businesses then the impact of the casino, the economic impact is either neutral or slightly negative.

Based on the available evidence that I've gathered and it is detailed in the written statement that I've submitted to the commission; I have concluded that approximately three dollars out of every four dollars spent in Indian gambling casinos today comes at the expense of California businesses.

Since this is a $1.5 billion industry in California that means that California businesses are losing approximately $1.1 billion in sales each year to Indian casinos.

Now when gamblers shift expenditures from out of state businesses to Indian casinos, state and local government revenues go up. On the other hand when gamblers reduce purchases from California businesses in order to gamble at Indian gambling casinos, state and local revenues go down.

And this brings us to the second key truth that needs to be kept in mind, and that is that Indian casino operators do not pay taxes on their operations. They don't pay taxes on their profits like California businesses do. They don't collect sales taxes, many of them don't collect sales taxes on the sales that they make. They don't pay any wagering taxes like horse racing and card rooms do. They don't pay property taxes to local governments. And some of the casino employees do not pay state income taxes.

Now it's really not difficult to calculate the net effect of these pluses and minuses, and determine what the net impact is on state and local revenues. We've done that using a sophisticated economics model and I find that today Indian gambling casinos are costing state and local governments approximately $100 million in lost revenue.

And what this means, of course, as the commission knows, is either services have to be reduced to that extent or replacement money in the form of new taxes needs to be imposed.

CHAIRPERSON JAMES: Thank you.

MR. HAMM: Thank you very much.