October 26, 2004

Herman Hernandez

    When it comes to Michigan’s constitution, it is said that folks will change or modify it to suit their mood. This year the topic of marriage and gambling are scheduled for a statewide vote. When those two subjects are working well, everyone is happy. But when these two fail, the fallout can affect more than just the direct parties involved.

    The two sides are primarily the Detroit casinos who seek to slow down the expansion of non-Indian gaming in the state and then those forces who seek to open new an expand existing gaming facilities in the state. These facilities include racetracks with the addition of slot machines, bars and restaurants with the introduction of specialized computer gambling machines and the state lottery system who seeks to introduce new forms of gambling to generate more revenue of the state. All designed to increase revenue to an industry slowing in growth and sales or boost foot traffic to existing bars and restaurants.

    Then there are those persons in the state who have long opposed gambling, the expansion of gambling or the notion of gaming locations in their community. This unorganized group has given way in the past decade to approve the three casinos in Detroit. Additionally some communities have witnessed Detroit casinos in action and have hoped to bring something similar to their areas to boost government revenue. In other words get more money without raising taxes but without lower those taxes on residents.

    The one main argument for those looking to defeat this amendment is that it would hurt schools and the state lottery be reducing or eliminating revenue. Those making these claims and other news outlets or independent researchers have been able to substantiate this belief. In fact none have been able to show how passing this proposal will have any effect on state or local revenue whatsoever. In fact according to the Detroit News, “The lottery last year generated $644 million, about 5 percent of the state’s school aid fund” which shows how little the lottery contributes to state educational funding. No increase in the lottery will bring a windfall to the public schools. In fact it would take a miracle the make the state lottery become a strong financial contributor to the funding of public education in Michigan.

    What the governor and house speaker have not repeated is that in the past two years Michigan schools have received less money under the current state budget. The deficits have not allowed for increases in funding and instead have led to cuts from k-12 and funding to the universities, this during a time when new lottery games were introduced or saw improving revenue. A key to the school funding deficit is that it’s tied to the sales tax. This is separate issue from gaming and while the two do support education they are unrelated. The closing of many KMART stores for example hurt the state as those lost sales lead to smaller sales tax revenue. Increases in sales tax revenue through a better economic environment would do more to boost educational funding than an increase in the scope of the state lottery.

    Governor Granholm and her cohorts are saying that if Proposal 1 passes then the money from the state lottery will be in jeopardy. But this ballot measure does not kill current lottery games it only requires state voters to approve new products. The current funding will continue to exist.

    Those opposing this proposal have also raised the issue of taxes. Granholm and Rick Johnson have both stated that passage of this measure would lead to a tax increase. Well, the question is who will be the one to raise those taxes and how much will they have to be raised. The governor has promised not to raise taxes. While the republicans have no made the same promise they frequently claim to be against taxes. Also the republicans are not looking to get tangled up in President Bush tax pledges.

    The only group who has attempted to raise taxes in the past 3 years has been the republican leaders in the state legislature. They attempted twice to raise taxes on Detroit’s casino industry. Not to mention other tax increases passed by the legislature in order to balance the budget. Just this past year Johnson has tried to triple the income taxes on the three Detroit casinos. Is this the action of a man who claims to want the opposite? The attempts to raise taxes by the republicans are clearly partisan moves directed at the strongly democratic Wayne County and city of Detroit. This would weaken the economic climate for the city of Detroit. While the casinos are legally barred from direct political actions and contributions, and while the immediate investors and direct contractors are also barred, the money spent has a trickle down effect and pumps money into the local business climate not connected to the casino companies which allows them to donate and affect politics both locally and state wide.

    The Governor, Jennifer Granholm, has been joined with Rick Johnson, Republican Speaker of the (state) House and Oakland County Executive L. Brooks Patterson to fight this proposal. But their funding for the now airing commercials have come from race track industry supporters who wish increase the gambling options in the state. Rick Johnson is hoping for a NO vote on this proposal. His track record is consistent. Some have said that everything Johnson has supported has been hurtful to Detroit. There is the strong opinion that the republicans in the state fear a politically stronger Detroit. But the republicans have no leverage over the investors nor have they developed political relationships as they have with the Race Track industry companies and officials.

    The Race Track industry is funding the No on 1 campaign. This campaign has become a contest between gambling industries. Those gambling interests in Detroit and those who want to build in or near Detroit. Long before Detroit received its three casinos racetracks in Michigan were going out of businesses. All they had in so far as answers then was to close some tracks to lessen the effects of competition. They applied for tax credits and other perks with the state legislator but none were passed.

    Those persons opposed to gambling point to other states that have placed video lottery and other portable gambling machines in bars and restaurants. It’s not inconceivable that restaurants could replace the traditional jukebox with a slot machine. That instead of having cigarette dispensers it, will instead or in addition to, dispenses lottery tickets. That the now somewhat family restaurant which has a bar and separate restaurant area could replace the video games that some carry to help pass the time with gaming machines to lure more customers on slow days.

    Most of Michigan is rural. Few want a gambling establishment in their community. The lure of casinos to Detroit was because of the size of the downtown area, the lack of direct immediate residents to the casinos and the separation from the neighborhoods. It fits into the business climate and helped to fill empty areas in the central business district. And last but not least Detroit voters approved a ballot measure to allow casinos in the city.

    Let Voters Decide – the group pushing Proposal 1, in a recent commercial stated that a state memo considered introducing Internet gaming for the state lottery. If this is true, and the memo has not been confirmed, then those public service commercials that try to persuade folks to stop patronizing the current Internet gaming industry would then be turned against the state of Michigan lottery.

    Currently the republicans in the state legislature have bills pending which would create or expand additional gambling forms and venues in the state. They have used this leverage with the governor in their budget negotiations to engineer support from the governor in exchange for passing of her budget reforms to balance the states deficit.

    Patterson is appearing on the commercials with Granholm, as a stated leader of the republican party, stating that if proposal 1 passes that schools will be in trouble. But Patterson has entertained the idea of a casino development at the Silverdome.

    All these persons opposing this proposal have ulterior motives for their reasons. They each want to gain more money for themselves. The false statements, the spoken words that are untrue must cause some voters to think about why these politicians would put themselves on the line for a citizens vote

    Neither side in this issue has been totally honest. But the state legislators, republican politicians from Oakland County and the governor are not campaigning against this proposal because of a fear for a lack of revenue. These persons have joined forces to have a direct and substantial impact on economic development in the state.