Racinos Impacting Ohio Budgets

As tax revenue from Ohio's four casinos declines, its soon-to-be seven racinos are prospering. But that's not necessarily good news for local governments that depend on casino tax revenue for a wide range of services. Racino revenues are controlled by the Ohio Lottery, which directs all profits to schools.

In 2009, voters in Ohio approved a constitutional amendment legalizing casino gambling and authorizing how gambling tax revenue would be split. Back then, overly optimistic forecasts indicated the 33 percent annual tax on gross revenues from four new casinos would top 0 million, with host cities sharing .2 million. In reality, however, actual revenues are 57 percent lower, based on 2013 fourth quarter distributions. Casino tax revenues going to counties also are off 57 percent compared to projections, which assumed a faster economic recovery and a bigger casino in Cleveland. Casinos also opened in Cincinnati, Columbus and Toledo.

Meanwhile, also in 2009, Ohio budget forecasters said if seven proposed racinos opened—which will happen by the end of the year–city-county casino revenue would drop by 27 percent.

It’s true casino tax revenue is shrinking: the last quarterly disbursement of casino taxes collected from October through December to cities and counties, was $68.6 million, a drop of 2.2 percent. However, for the same period, racino taxes were $28.1 million, an increase of 25 percent. Ohio’s third and fourth racinos opened in December.

Under state law, schools benefit from casino taxes plus state aid. But the Ohio Lottery regulates racino tax revenue and directs all of its profits to public education. As a result, schools could benefit as bettors move from casinos to racinos, said Damon Asbury, director of legislative services for the Ohio School Boards Association.

Asbury noted the overly optimistic 2009 projections of higher casino revenues have led school boards and local governments to use caution when budgeting with that money. Some local governments are using casino proceeds for “extras” like one-time building projects, economic development and port projects, instead of for mandated expenses like courts, elections and jails.

Commissioner Daniel Troy in Lake County, on the southern shore of Lake Erie, said, “Everybody’s not going to get what they thought they would get.

” He said the county has a $52 million annual budget and netted $2 million in casino taxes, a drop of about 3 percent in the past six months. Because casino revenue is uncertain, it will go toward optional items like business development instead of required spending on courts and jail expenses, Troy said.

In Cincinnati, Mark Ashworth, superintendent of accounts and audits, said, “I fully believe the racinos will further erode the traditional casino revenues,” with school benefiting and cities and counties feeling the financial pressure. Ashworth said Cincinnati may receive less than half of the originally projected $20 million in annual casino taxes.

Still, noted, Brad Cole, research director with the County Commissioners Association of Ohio, even though local governments could see casino tax revenues flatten out or continue to drop, “It’s money they weren’t getting five years ago.”