Gambling revenues have become a significant source of public revenue, with commercial gambling now being legal in 48 states (Utah and Hawai’i are the two exceptions). The most common forms of state-sanctioned gambling are lotteries and casinos: 44 states and the District of Columbia have state lotteries, about half of the states have some form of commercial casino gambling, and gambling venues run by sovereign Indian tribes or nations are present in 29 states. An increasing number of states also allow machine gaming outside of casinos and wagering on live sporting events. Although lottery revenue has declined in many states, gambling and gaming remain significant contributors to public budgets, amounting to more than $27 billion in state and local government revenues.
States use lottery and gaming revenues to fund a variety of public programs and services, including education and economic development, and as a supplement to general funds. Many states also use a portion of gaming revenue to mitigate the negative effects of gaming. Out of 24 states with commercial gaming, 23 fund treatment and research on gambling addiction. According to the National Council on Problem Gambling, 2 million (1%) of adults are estimated to have a gambling addiction and another 4-6 million (2-3%) are considered problem gamblers.
Some states also use lottery and gaming proceeds to fund the arts. Six state arts agencies receive funds from gaming revenues, comprising on average 39% of these agencies’ state funding in fiscal year 2018. These funds are significant sources of income for state arts agencies in Colorado, Iowa, Kansas and West Virginia and provide modest revenue in Wisconsin. In FY2016, Maryland started to receive revenue from the state’s admission and amusement tax (on electronic bingo and electronic tip jars).
Mechanism: Gaming Tax
Statute: CO Rev Stat §12-47.1-701
All revenues generated from the gaming tax, along with license and application fees, are placed in the Limited Gaming Fund. Annually, $2 million is allocated to Colorado Creative Industries through the creative industries cash fund. In FY2018, this mechanism was the only source of the agency’s appropriated funding.
Mechanism: Gaming Tax
Statute: Iowa Code §99F.11
Revenue from a tax imposed on authorized gambling is appropriated each fiscal year to the Department of Cultural Affairs, with one-half of the funds allocated for operational support grants and the remaining one-half allocated for the community cultural grants program. In FY2018, the Iowa Arts Council received about one-quarter of all state funds from this mechanism.
Mechanism: Lottery Tax
Statute: K.S.A. 79-4804
Eighty-five percent of state gaming revenue goes to the state economic development initiatives fund. This fund is designated for programs and projects that contribute to economic development in Kansas, including the Creative Arts Industries Commission. In FY2018, the agency received 78% of all its state funding from this mechanism.
Mechanism: Admissions and Amusement Tax
Statute: Article – Tax – General §2–202
Five percent of the revenue from taxes levied on electronic bingo and electronic tip jars is distributed to the Special Fund for Preservation of Cultural Arts in Maryland (up to $1 million), with the remainder allocated directly to the Maryland State Arts Council. In FY2018, the agency received 10% of its total state funding from this mechanism.
Mechanism: Lottery Tax
The West Virginia Commission on the Arts receives a portion of a lottery tax through funds dedicated to the Education, Arts, Sciences and Tourism Debt Service Fund. In FY2018, the West Virginia Commission on the Arts received 40% of its state funding from this mechanism.
Mechanism: Tribal Gaming Tax
The state of Wisconsin has entered into gaming compact agreements with tribal nations as permitted by the Indian Gaming Regulatory Act of 1988, 25 U.S.C. §2701. Revenue from tribal gaming had been used to fund state agency programs since FY2000. In FY2018, the Wisconsin Arts Board received 3% of total state funds from this mechanism.
The Council of State Governments, State Revenues from Gambling Shrinking, 2016.
National Conference of State Legislatures, Keeping State Lottery Revenue Alive, 2017.
The Nelson A. Rockefeller Institute of Government, State Revenues from Gambling: Short-Term Relief, Long-Term Disappointment, 2016.
Stateline, State Lotteries Fight ‘Jackpot Fatigue,’ Casino Competition, 2017.
American Gaming Association, Responsible Gaming Regulations & Statutes, 2016.
National Council on Problem Gambling, Responsible Gaming Resources.