The Regular Person’s Guide to the

Maryland Slot Machine Referendum

Assessment of Proponents’ and Opponents’ Claims

Claim 1: In order for Maryland to balance its budget, slot machine revenue is necessary. 

ASSESSMENT:  TRUE, with qualifications

The state’s financial plan depends significantly on slot machine revenue – up to $660 million in fiscal year 2013.  Without slots revenue, additional tax increases or difficult spending cuts will be needed.  Any cuts would be likely to affect education and health programs.  Tax options could include extending the surtax on incomes over $1 million, raising the gasoline tax, raising the alcohol tax, or extending the sales tax to more services.

The revenue estimates are reasonable. But, the estimates may not adequately consider risks from a slowdown in gambling industry revenues, competition from Pennsylvania, and the “substitution effect” whereby dollars spent on gambling take away from dollars spent on other goods and services.  Meaning that even with slots, some additional revenues or cuts will be needed.

Also, the slot machine revenue will not arrive in large amounts until fiscal year 2012.  Spending cuts or other revenues will still be needed to balance budgets until then.

Once slots are in place, they will not inoculate the state from future budget shortfalls.  In 2007, the percentage of slot machine states with budget shortfalls is virtually the same as no-slot machine states; about 60%.

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