EDITORIAL: Indiana can't continue to rely on gambling revenue

The IBJ

When Hoosiers approved a 1988 referendum to create a lottery, only gambling critics were warning of mission creep, of a state becoming addicted to the revenue.

Well, we've arrived. State and, to some extent, local government has come to rely on the revenue for much more than capital projects. And now that neighboring states are launching a competitive assault on Indiana casinos, it's time to get back to the original intent before the revenue shrivels and leaves necessary government services high and dry.

Gambling revenue was originally billed as a supplement to traditional taxes. It was to be used to build public buildings and for other capital projects-never for operating costs. The uncertain nature of the business would make it too risky to rely upon, went the thinking two decades ago.

Now, though, $600 million a year flows from riverboat casinos into the state's general fund. Taxes on retail sales, income and motor fuel generate more money, but casino revenue is near the head of the pack, topping even corporate taxes as a source of state revenue.

But gambling revenue could be headed south.

Gamblers have cut spending as the economy soured; if they continue to put their personal financial houses in order, casinos and other venues won't be sending big payouts to the state till for a long time to come. Hoosier Park, the horse track in Anderson, is desperate to restructure $400 million in debt, and isn't the only site struggling to survive.

The other problem is rising competition. On Oct. 19, a Legislative Services Agency analyst told lawmakers on the Gaming Study Committee the state could lose $250 million in casino taxes if casinos planned for just across state lines in Kentucky and Ohio make it out of the ground.

Ohio voters are deciding the issue in November, and Kentucky Gov. Steve Beshear continues to call for slot machines or casinos at racetracks.

Most Indiana casinos aren't exactly inconvenient for Buckeye and Bluegrass gamblers, so it's understandable why the neighboring states would want to persuade their residents to keep their money at home.

Indeed, the study discussed projected that Horseshoe Indiana Casino near Louisville could see 40 percent of admissions wither. The casinos near Cincinnati would see hits nearly as great.

Indiana legislators have been aware of these concerns for more than a year, and they should take action during the upcoming session to reduce reliance on gambling revenue to fund schools, courts and other core services. If they don't want to take on the topic during a short session, they should lay groundwork for 2011, when they are charged with writing a new two-year budget.

The Kentucky and Ohio threats won't appear overnight. Even if they're approved, the venues probably wouldn't be able to attract their first patrons for more than a year.

Still, this is the time to prepare. It would be a shame if Indiana services were left with too little money because lawmakers were shortsighted.