—and for everybody but our casinos and our pro sports teams.

After watching an wholesome young woman, who describes herself in a commercial as a mother and a former teacher, tell me that approval of Amendment 2 in November (Sports Wagering) will mean millions of dollars for our public schools, I stopped by the State Auditor’s office to get some information that would tell me if the commercial is true.

I wanted the truth because my experience is that the casino industry and the sports teams pushing to legalize sports wagering have not been shooting straight for years with the legislature and now they are not shooting straight with us, the voters.

When a court ruling recently allowed the amendment to be on the November ballot, spokesman Jack Cardetti with Winning for Education, the misleadingly named organization campaigning for voter approval, proclaimed the decision a “big victory” that will “provide tens of millions in permanent, dedicated funding each year for our public schools.”  And he sounded the long-spoken mantra of the movement that approval would end Missourians going to other states for sports betting “which deprives our Missouri public schools of much-needed funding. A vote for Amendment 2 will bring those dollars back to Missouri classrooms.”

The fiscal note, as the document is called, tells a far different story about Amendment 2, the way it is written and the situations it creates. And it suggests the claim that approval would provide “tens of millions in permanent dedicated funding” for education is much less than fully true.

Your faithful observer has opposed the sports wagering bills in the legislature for several years, not because he opposes casinos (that issue was settled in 1992) or sports wagering. I have no use for them, but I have friends who lose as much money in an evening at a casino as I will spend treating Nancy to dinner and a movie or something like that. I leave the moral judgments on these issues to others. I am opposed, however, to casino and sports teams masquerading their multi-million dollar money-grabs as great benefits to the state, particularly to education which the fiscal note states clearly is not the case.

Those two industries will write as many checks as they need to, to sell the idea that sports wagering will make the state financially better off.   Far from it, as I hope you will learn today as we review the fiscal note for Amendment 2.

Let us start with something not in the fiscal note. Casinos will pay a 10% tax on revenues from sports wagering if Amendment 2 passes. Revenues from the two forms of gambling we have now—slots and table games—are taxed at 21%. The amendment, therefore, proposes an AVERAGE tax rate for all forms of gambling of 15.5%.

That’s right. Vote for Amendment 2 and you are voting to give the $1.9 Billion casino industry that plans to grow by hundreds of millions more an overall 25% tax cut. We will return to this issue later.

The Auditor, in assembling the fiscal note, asked a long list of state agencies to determine if the proposal has a monetary impact on them, positive or negative. Most say it won’t affect them but the Department of Revenue, which collects taxes from you, me, sports teams, and casinos, concludes after a lengthy division-by-division assessment:

“The Department of Revenue assumes this IP will not generate any revenue to the state.”

(“IP” refers to the initiative petition.) Then, the fiscal note details why it won’t.

Although the teams and the casinos will claim great financial benefits for the state, the department points out that Amendment 2 does not give the Revenue Department any power to COLLECT any taxes or fees. While the Gaming Commission is authorized to issue licenses for mobile betting companies, it is not authorized to COLLECT any of those fees. “It appears these retail license fees will not generate any revenue to the state, the Commission, or to the Compulsive Gaming Prevention Fund,” says the assessment of licensing fees, a phrasing used two other times on two other issues.

While the proposed amendment sets a ten percent tax on sports wagering revenues, says the fiscal note, it does not require casinos to pay it. “Without the identification of an agency to collect the tax, no tax can be collected,” says the study.

The Highway Patrol provides security officers at our casinos. The casinos do not reimburse the state for the costs of that security. The state pays those bills out of the tax revenue it receives, and in doing so reduces the amount of money available to schools and industry regulators.

The department estimates initial costs of additional staff will be more than $1.6 million with ongoing costs of more than $1.2 million, with those moneys paid out of the state gaming fund, again, lowering the amount available to education. However, as noted by the Revenue Department, there is no power for the department to collect those funds from the casinos.

The Missouri Gaming Commission, which told me earlier this year was short 23 people already and is stretched thin just keeping up with contemporary responsibilities, estimates it will need to hire fifteen new people just to regulate sports wagering. The total cost of their salaries, benefits, and expenses is put at almost four million dollars a year and increasing in future years with salary and benefits increases.

Now, let’s do some simple math. The gaming commission estimates it will collect $11.75 million in licensing fees in the first year. Licenses last five years so there would be little or no revenue for the next three years until renewals would produce a new revenue stream.  After the commission takes out its costs, the amendment requires ten percent of the revenues or five-million dollars a year go into the Compulsive Gambling Prevention Fund.

Here’s some more simple math:  The Gaming Commission estimates casino taxable revenues, before any deductions, could total $1,044,684,610.20 in the first five years. That’s Billion.

At ten percent, the state could receive $104,468,461.02 during that time.  If that amount were taxed at the same rate Missouri taxes slot machine and table game revenues (21%), the state would realize $219,383,768.14 before casino deductions allowed in the amendment.

So Cardetti is correct.  Education will get tens of millions of dollars—-$104.5 million in the first five years.   But our schools would receive $219.3 million if sports wagering was taxed at the same rate charged slot machines and table games. To bring this down to a more easily-grasped situation:  If someone were to offer to give you $10,500 if you gave them $21,900, would you take that deal? Supporters of Amendment 2 hope you will.

There is no reason Missourians should accept a ten percent tax on sports wagering. Fourteen states have gaming taxes of more than the proposed ten percent including neighboring states of  Illinois (20-40), Arkansas (13-20), and Nebraska (20). Three states tax sports wagering at 50-51% (Delaware, New Hampshire, and Rhode Island). Pickswise.com says the national average is 19%.

While the commission calculates the $104.5 million in taxes that the state might get in the next five years “may be sufficient to cover the Missouri Gaming commission costs to license and regulate sports wagering,” there is a major caveat.  The calculations “are uncertain based on the inclusion of a deduction for ‘any federal tax’ with no corresponding definition or explanation as to what that would include.”  Such a deduction, and others allowed in the proposal, can significantly cut revenues to the state.

Long story short: “There is concern that the licensing fees will not cover the expenses of the Missouri Gaming Commission…during the years in which licensing fees and renewals are not collected (i.e. years two, three, and four,” says the Revenue Department. On top of that is the failure of the proposal to state where those fees would be deposited.  Also not clear is how that money will be disbursed if and when it is collected and deposited.

The Commission now has no limits on fines for sports wagering operators for violations of the laws and rules.  The proposed amendment limits those penalties. Bad idea, says the commission.  Casinos, of course, think it’s just swell.

And getting back to that $104.5 million for education. The proposition says tax revenue will go to elementary and secondary education only after the Commission takes out its “reasonable expenses” plus another five-million dollars for the gambler’s fund. In years when little or no renewal or licensing fees are collected, the MGC will have to dip into the tax funds that would otherwise go to the schools to pay its bills and to put that five-million dollars aside for the problem gamblers fund—which the gaming commission would oversee, although it thinks the Department of Mental Health would do a better job. So, in years two, three, and four, the tens of millions for education will be reduced by some, or several, tens.

Now, here is the capper.

All of these calculations of state revenues are completely uncertain—

—because this proposition, for the first time, allows casinos to deduct a lot of money from the revenues that are taxed.  So in addition to a sports wagering tax rate that is less than half the rate on other forms of gambling and creates a 25% cut in the overall gambling tax rate, the casinos want voters to approve a system that lessens the amount that can be taxed and, in fact, will allow casinos to pay NO tax, perhaps for months at a time.

If you want to know what that could mean, says the Gaming Commission, look at Kansas.

In February 2023, Kansans wagered more than $194 million in sports bets. The state, however, received $1,134 in state tax revenue due to language permitting operators to deduct free play or promotional credits before assessing their state taxes.  Some operators had not paid any state taxes through the first quarter of 2023 due to the deductions they were permitted to claim.

February, folks.  That’s Super Bowl month when a lot of Missourians (according to the casino industry) went to Kansas to bet.  And the state of Kansas—with provisions similar to those the casinos want to enact in Missouri—was paid only $1,134 dollars in taxes on $194 million in bets.

It could happen here because the proposed amendment allows a casino whose accountants calculate losses for one month to carry over the loss to the next month’s calculations, leading the Commission to conclude, “The totality of the deductions…will result in sports wagering licensees showing negative adjusted gross revenues and therefore paying no sports wagering tax…The carryover provisions…would further impact the ability of the Commission to meet its reasonable expenses and further impact or eliminate contributions to the Compulsive Gambling Fund and education in the state of Missouri.”

Read that again—Provisions of this proposed amendment might NOT put millions into our education system at all.  Instead, they could “impact or eliminate” contributions to our schools.

So—the basic question for the people of Missouri is this: Who is being honest with you?  Is it the Department of Revenue and the Missouri Gaming Commission, or is it an industry that flourishes because its games are guaranteed to take all of your money sooner or later?

And the casinos want to keep it all. The records show that the gaming industry will not leave a penny behind in Missouri that the people and the state do not force it by law—not written by the gaming industry—to leave.

The proposition that the attractive mother and former school teacher wants you to think will be wonderful for our schools is a shell game without a pea.

And believe it or not, this is only part of the story.  There is more.  And it’s equally bad, if not worse—especially if you are a veteran and if your city has a casino in it.

We’ll get to that later.

If you want to read the entire fiscal note, ask the State Auditor’s office to send you fiscal note 24-160.

Some of you might be much more sophisticated mathematicians than I am.  Please let me know if there are unwarranted or even plain erroneous assumptions in any of the statistics quoted here. I would note, however, that they are based on the State Auditor’s fiscal note for Amendment 2. If necessary, corrections will be made in this entry and a future entry will ask readers to go back and note the corrections.