Category Archives: gambling

Premonition

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Your faithful chronicler was invited to speak to a group of freshman, sophomore, and junior State Representatives last week. It turned out they all were Republicans, including some Republican candidates for the House.

If Democrats want to hear the nonpartisan speech, I’d be glad to do it for them.

In fact, the words of a Democrat had a prominent role in the early part of the speech.  I had recited some facts about being raised in a Republican family. But I came of age in the Camelot era, a pedigree that I hope is somewhat behind my efforts as a reporter to harass both parties equally.

As I was researching some of the material for the speech, I came across the speech President Kennedy would have delivered at the Texas Trade Mart. As history records, the world ended for him ten minutes or so before he was to arrive there. The conclusion of the speech reaches across the generations since that day in Dallas.  Here’s the part of that speech that made it into part of my remarks last week:

“In this time of division and hostility, of narrowness and demagoguery often fueled by fear of the different instead of the opportunities presented by the things we have in common, it might be good to reflect on some of President Kennedy’s words again.  The other day I came across some words he would have spoken at the Dallas Trade Mart on November 22, 1963, a day I remember vividly as a young reporter.

Ignorance and misinformation can handicap the progress of a city or a company, but they can, if allowed to prevail in foreign policy, handicap this country’s security. In a world of complex and continuing problems, in a world full of frustrations and irritations, America’s leadership must be guided by the lights of learning and reason or else those who confuse rhetoric with reality and the plausible with the possible will gain the popular ascendancy with their seemingly swift and simple solutions to every world problem.

There will always be dissident voices heard in the land, expressing opposition without alternatives, finding fault but never favor, perceiving gloom on every side and seeking influence without responsibility. Those voices are inevitable.

But today other voices are heard in the land – voices preaching doctrines wholly unrelated to reality,…doctrines which apparently assume that words will suffice without weapons, that vituperation is as good as victory and that peace is a sign of weakness…

We cannot expect that everyone, to use the phrase of a decade ago, will “talk sense to the American people.” But we can hope that fewer people will listen to nonsense…

We in this country, in this generation, are – by destiny rather than choice – the watchmen on the walls of world freedom. We ask, therefore, that we may be worthy of our power and responsibility, that we may exercise our strength with wisdom and restraint, and that we may achieve in our time and for all time the ancient vision of “peace on earth, good will toward men.” That must always be our goal, and the righteousness of our cause must always underlie our strength. For as was written long ago: “except the Lord keep the city, the watchman waketh but in vain.”

It has been too long since we heard that kind of uplifting challenge. And it’s time for leaders with courage to speak that way again.”

The crowd provided a standing ovation at the end of the talk, which was nice. I hope that means they didn’t think they were listening to nonsense.  And that they won’t go out and deliver it.

Abdicating Authority

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The Senate Appropriations Committee has sent a House-passed bill on sports wagering to the floor for debate.  The bill taxes proceeds from sports wagering at eight percent rather than the 21 percent rate for all other forms of gambling.  Committee Chairman Dan Hegeman says there will be a substitute bill offered on the Senate floor that changes some of the provisions of the House bill.

I could have opposed this bill when it was before the committee a couple of weeks ago but decided not to do it because I’ve told this committee and House committees for about three years why the legislation written by the casino industry should be rejected—-because it does nothing or almost nothing for the state’s interests and, in fact undermines them.

The worst thing the bill proposes—so far—is a series of deductions from the taxes the casinos will pay the state.  The goal, plainly stated in the bill, is to let casino accountants turn profitable days into unprofitable days and then to carry over any paper losses to the next day’s calculations. And if the accountants can show enough days were losers, then an entire month will have no revenues that can be taxed.

This is what I told the committee—with some editorial modifications because this is a column not testimony.

First: The fiscal note on this bill talks about how much the state will gain, which isn’t much, but it does not talk about how much the state will lose because of the ultra-low tax rate proposed and other factors in the bill.  Eight percent of nothing is the same as 21% of nothing, and “nothing” is the goal.

The other two points unfortunately are combined.

This not only is the thirtieth anniversary year of the vote to legalize casino gambling, it also is the thirtieth anniversary of approval of term limits.  This legislation represents an unfortunate combination of these two issues.

We have seen the realization of two important things that critics warned would happen if term limits were adopted.

One was that imposition of term limits would eliminate the institutional memory of the General Assembly.

Institutional memory is passed along by the Elders in any society to newcomers.  It consists not only of previous experiences in what works and what does not. In the legislature’s case, it was a matter of teaching new members about traditions, practices, rules (written and unwritten), and behaviors that are essential to good governing.

It is a matter of understanding why people are “Ladies” and “Gentlemen” in the House and why the phrase, “Everyone is a Senator” is vital to the operations of the Senate.  Both standards are matters of respect and based on the idea that policy is shaped by debate among equals.  A debate between two gentlemen, two ladies, or a lady and a gentleman is a debate between equals. It is a matter of parliamentary discipline and political respect regardless of party, geography, color, gender, faith or any other factor.

“Everyone is a senator” is the same.  Senators debate Senators.  It is not us-versus-them.  Senator-to-Senator does not infer that one is superior to the other.

Institutional memory used to teach respect for the understanding that today’s opponent likely will need to be tomorrow’s friend. It was a system that worked for about 175 of Missouri’s 200 years. The sad result of the loss of that memory has been played out in the Senate this year.

The third warning we heard is that after institutional memory is gone, the General Assembly would lose the structure that protects its role as the people’s policy-maker.  Without that structure, without that discipline—critics warned—the power to make policy shifts to two elements that are permanent parts of government outside the chambers—the bureaucracy and the lobbyists.

The warning was that while legislators will come and go, both the bureaucracy and the lobbyists are permanent and their power grows.  And so it is with this bill.

In the last five years, the gaming industry has given legislators 29 bills on sports wagering with the expectation those bills will be passed.  In these five years, not one member of the House and the Senate—I haven’t counted but probably 230 or more people have served in either chamber during that time—not one member of the House or the Senate has independently introduced a bill that puts the General Assembly in charge of this issue.

Not one bill has been written by any member of the Missouri Legislature that legalizes sports wagering on the state’s terms, that asserts the General Assembly’s authority to act on behalf of the people who elected its members. 

And so the warnings from 1992 have come sadly true.  For five years the Missouri General Assembly has abdicated its authority—on this issue—to those who are not physically Ladies, Gentlemen, or Senators, none of whom have any responsibility for, or obligation to the people who sent you here.

And that is why you are being asked by backers of this bill to tell the people who sent you here that it is okay with you if your veterans continue to see declines in financing for their nursing homes, why it is okay with you if the state’s promise of education funding from casino gambling is broken, why it is okay with you if the cities some of you represent that play host to casinos will continue to lose thousands and millions of dollars every year because the gambling industry tells you not to update outdated laws.

It’s not too late to regain control of the process. Committee or floor substitutes, or committee or floor amendments can do it.

But the industry doesn’t want you to do it.  So you have a choice.

When you go home on the evening of May 13th and you have coffee the next morning with some constituents and one asks if you did anything good here this year—what will you say?

—that you stood up for your teachers and your veterans and your home dock cities…..

Or will you say, “I voted to let you bet on a baseball game tonight.”

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Time is running short and pressure to pass what the industry wants in this election year is likely to increase. Now we will learn if the legislature has the spine to act on behalf of the people they meet at home or whether they’ll go with the people they meet in the Capitol halls.

We hope the teachers and the veterans and the college kids looking for state scholarship help, or the city leaders of towns with casinos—and even families of those who become addicted to this industry’s product—ask in these weeks before the election whether their legislator abdicated policy-making power to the people in the halls.

Enhancing (?) Sports

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Baseball season finally has arrived.  By this time next year you might be able to place legal bets on its games.

That will make baseball even better, according to one big name in the biz.

The President of the St. Louis Cardinals, Bill DeWitt III, has told two legislative committees (he’s read the same script twice for one of them) that the Cardinals, Blues, Royals, Chiefs, and soccer teams in St. Louis and Kansas City, “first and foremost…support sports wagering as a way to increase engagement with our fans and provide a fun, exciting new way to enjoy sports.”

Your correspondent does not oppose casinos; voters approved them thirty years ago and it is unlikely they will have a major change of heart.  Sports wagering is inevitable although the proposed legislation guts gambling tax laws that serve the public.

What caught the ear in those hearings was DeWitt’s assertion that sports wagering “will increase engagement with our fans.”

I love baseball.  Some of my earliest memories are of playing the game in the yard of our home in a little Illinois town and hitting a ball that wound up in our living room, the picture window notwithstanding.  I played center field with a catcher’s mitt in my first organized game. I was about seven, and I was scared to death at the plate where I had to face a fourth grader (the town was so small that fourth graders and second graders were on the same teams) throwing smoke, or the fourth grade equivalent.  I remember that in the last game I decided I was going to swing the bat and I did, with my eyes closed, and I felt the ball hit the bat and I opened my eyes in time to see the ball scoot between the legs of the startled pitcher. It was my first official hit.

My first regular fielder’s glove was an Eddie Joost model. Joost was a long-time shortstop for the (then) Philadelphia Athletics, one of the first players to wear glasses in the field.

I played baseball or whatever permutation of it was available to me for as long as there was a game I could play.  I was 65 when I played my most recent game, a slow-pitch co-ed softball game. I took a two-hopper down the third base line and threw a strike over the shoulder of the runner trying to score, right to the catcher for an easy tag.   I say “most recent” because if Jefferson City had a league for fat old men over 75, I’d get my glove and buy some new spikes and I’d be out there smelling the dust mixed with lime, feeling and hearing the ball hit my glove, hearing more than feeling a solid contact with the bat, and going home sweaty with dust-gray socks except for the areas covered by my shoes which was still white.

I love the game.  And thank you, Mr. DeWitt, I will not be more “engaged” in the game because I can bet on it.

I tell you what would “engage” me more, sir—–

You need to call the casino company whose brand carries the television broadcasts of the Cardinals and Royals and tell that company to get the games back on Dish TV.  This will be the third season Nancy and I have had to fill our evenings binge-watching episodes of Grey’s Anatomy instead of watching men play the boy’s game I’ve never outgrown.

What also would “engage” me more would be if The Game was made better.  Columnist George F. Will, whose writings I enjoy although he is a dyed-in-the-wool Cubs fan, wrote a column on March 16th, skewering what the game has become—-and frankly, what it has become can’t be fixed by letting somebody bet on whether one of our teams gets more than six hits tonight.

Will complained that games have gotten longer “but with fewer balls in play.”  He noted that more than one-third of all at-bats “result in strikeouts, walks or home runs, which are four seconds of flying ball followed by the batter’s jog.”

“Longer games with less action,” he says, are an atrocious recipe for an entertainment business.

He is correct.  Too much of the game involves only three players. The pitcher and catcher and the hitter.

Sometimes as I listen to my protégé John Rooney’s radio broadcasts of Cardinals games, I think there are only three players involved—the pitcher, catcher, and the batter who often doesn’t try to beat the shift by going the other way or laying down a bunt.

Will points out there were 1,070 fewer stolen bases last year than a decade earlier and suggests,  “If the MLB’s attendance is going to get back to its peak of 80 million fans in 2007, it must restore the energy of the game as it was….”

I once watched the Cardinals and the Phillies play a doubleheader. The two games lasted a TOTAL of four hours, two minutes.  Bob Gibson and Ray Culp plus two relievers in first game won by the Cardinals 5-1 in 2:08.  Ray Washburn and Jim Bunning plus a reliever in game two, won by the Cardinals 1-0 in 1:54.

Will cites what arguably was the greatest World Series game ever played, Pittsburgh’s 10-9 win over the Yankees in World Series game 7, in 1960.  That’s the Bill Mazerowski walk-off homer game played in 2:36. Nobody struck out.  By contrast, he says, the SHORTEST game in last year’s World Series, won by the Astros over the Braves 7-2, lasted three hours-11 minutes. The game had 23 strikeouts, “45 percent of all outs,” he noted.

Betting might increase involvement but if engagement is a goal, give the audience something more than seven guys standing around holding their gloves while two multi-millionaires play catch and a third one takes mighty swings or looks at pitches go by while waiting to see if he can hit the ball over the fence.

It’s The Game—not the bet—that will increase the engagement with fans. And those who love The Game as I do might be excused for worrying that DeWitt’s condescending attitude ignores the apparent hypocrisy of Hall of Fame bans for Pete Rose and Joe Jackson as baseball crawls deeper under the covers with gamblers.

Legal sports wagering is coming to Missouri. But pretentions of it making The Game in some way better are nothing more than misplaced, self-serving platitudes.

The Casinos in Our Pockets

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We lived in an “appointment” world in 1993, when the first Missouri laws governing casino gambling were written.  Voters had approved riverboat gambling, as it was called then, in 1992. The first casinos on boats would open in the spring of 1994.

Many of us still got our national news with the 5:30 network newscasts on television and our local news at 6 and 10 p.m. when those laws were written.

If we wanted to buy new clothes, we went to a clothing store during the hours it was open.  We went to grocery stores during their open hours to get our food.

We knew when each day we could go to the mailbox to get letters from friends and relatives.

And by the end of the year we knew that if we wanted to gamble we would have to go to the riverboat at a certain time to be admitted.

The Station Casino-St. Charles and the President Casino on the moored Admiral riverboat opened May 27, 1994. Gamblers could board the boat in St. Charles from 9 a.m. to 1 p.m. for a two-hour cruise (for which they paid three to five dollars, depending on the day). If they missed the cruise time, they had to wait for the boat to come back so we could pay to get aboard for the next trip.

The President never cruised. It was permanently moored near the Gateway Arch because the old aluminum Admiral had no engines. Gamblers would pay two dollars during the week and five dollars on weekends and could board every two hours from 10 a.m. to midnight.

But the world was changing and the change accelerated each year. “Appointment living” was beginning to diminish although many of us did not realize it at the time.

There were some hints, however.

The Pew Research Center reported in 1994 that the percentage of Americans getting news from the internet at least once a week had more than tripled since 1991, going from 11-million to 36-million news users.

The number of hosts on the internet tripled from January, 1994 to January, 1996, the year something called a “browser” was created—Netscape, the same year that the island nation of Antigua and Barbuda passed a Free Trade and Processing Act allowing licenses to be given to companies wanting to allow internet users to gamble. By the end of the year there were fifteen gambling websites. The next year there were 200 and by 1998, a study was published showing online gaming revenues had topped $830-million. Modern online gambling in this country dates from November 22, 2010 when the New Jersey Senate passed a bill allowing certain forms of online gambling.

It was about that time that the casino industry was starting to see an erosion in patronage. In Missouri, casino admissions reached almost 54.3-million in FY 2005 then declined for three years before climbing back to almost equal 2005’s number. Admissions began annual declines after FY 2011.  In FY 2019 (the last full year before the pandemic crippled casino business), casino admissions had declined by 49%.

Various reasons for the decline can be suggested but the end result seems to be the same—people just don’t go to where casinos are.

So the casinos have to go where the people are.

The situation is not unique to the casino industry. It is part of our changing lifestyles and those changes have become more obvious with the COVID-19 Pandemic that has forced casino closures for in-person business and quarantines for many who would patronize them.

We no longer live in an “appointment” world.  We can buy clothing at any time of the day off the internet.  We can use the internet to get our groceries delivered.  We can order deliveries to our homes from our favorite restaurants.  The same with our pharmaceuticals. Telemedicine is eliminating some office and hospital trips.

Casino betting can happen 24 hours a day because, as one source has observed, “everyone has a casino in their pocket.”  Casinos are looking for new products that can be offered through the ubiquity of the internet that we call up on our ubiquitous cell phones.  First is sports wagering. But later, Missouri legislators are likely to be asked to let table game betting to take place remotely.

Those who find gambling a reprehensible sin will find nothing redeeming about gambling on the internet.  But thousands of other Missourians will welcome the opportunities—as they welcome opportunities to grocery shop from home.

In a world where less and less of life is lived by appointment, the gaming industry knows it must change. And it is, as it should.

Missouri’s casino gambling laws must change, too.  Laws written and fees created in the days of physical customer presence in casinos need to be changed to account for virtual presence.  State services relying on gambling fees and taxes will be increasingly diminished as appointment gambling diminishes.  Casinos, profiting from laws of the 1990s appointment culture, resist modernization of the law. It is understandable that they do.

What is not understandable is why the Missouri General Assembly would not want to protect the state’s interests by bringing our laws from the appointment era into the virtual, but very real, era.

 

The parable of the caretakers’ wealthy friends

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And the professor came among them as they convened to determine the welfare of the people.

And the professor said unto them, “Do not foolishly assume that following an unchanging law benefits the great mass of people who have chosen you to make wise decisions on their behalf.  Nor should you find it adequate to proclaim that enriching a few by adhering strictly to the law is good.”

And he said, “Suppose you, as caretakers of the common good, approve a generous spending plan of $32 billion for the benefit of those who have chosen you. And suppose you determine that $32 billion is adequate for the future and ignore the undeserving who believe your good stewardship of financial resources has become inadequate.

“But inevitably the system generates $33 billion in the next year, and $35 billion in the second.  By following the law, friends and supporters of those who established the “adequate” amount can divide the excess totaling $4.5-billion.

“But in the fullness of time,” said the professor, “those who are limited might rise up and say to those they assume to be their caretakers, ‘This is unfair for inflation has reduced the buying power of $32 billion to only $26 billion and those who rely on actually having $32 billion are becoming impoverished and the people who elect the caretakers are suffering.’”

“’You have established by the growth in wealth of your friends and supporters, year after year, the true value of the $32 billion. Yet you have refused to adjust the law to be fair to the greater number of those you serve while bowing to the wishes of supporters who offer benefits to you for being with them.’”

“’But we are only following the law.  We are meeting all of our obligations,’” you respond. “We are blameless.”

And the professor cast disdainful eyes upon them and said, “Your professions are hollow and self-serving! Those you proclaim are well-served are instead growing thin, yea, their ribs are beginning to show.  In the interests of fairness and justice, it is time—yea, it is PAST time—to adjust the law so that they shall be fulfilled.”

“But,” the caretakers said to the professor, “we do not understand why we should be forced to give our excess back to those who fall under the law.”

The professor rose and he said with passion, “Wisdom without honor has become greed.  You have impoverished those you claimed to help and it is time for those remaining with honor to show the courage to recognize what you have done and to correct it to the benefit of the greater public welfare.”

But the friends and supporters did not care about those who were being impoverished as they grew wealthier.  “You cannot change the law,” they said.  “Giving the impoverished dollars that are worth dollars would be punishment for our success.  Have pity on us for we are your friends.”

And the professor stood nearby hoping the caretakers of the public good would see the hollowness, self-serving, and greed of the supporters who demanded protection from those who trusted the caretakers to be just.

 

Who should control sports wagering?

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Kurt Erickson’s article in last Friday’s Post-Dispatch should be a warning that the state’s control of casino gambling is in danger.

Erickson wrote that four of our professional sports teams are launching a petition campaign to legalize sports wagering, an issue the legislature has talked about for several years but has been unable to get out of its own way and approve.

The St. Louis Cardinals, the St. Louis Blues, the Kansas City Royals, and the St. Louis City soccer club have filed nine proposed petitions with the Secretary of State. One of them will become the focus of a campaign to amend the constitution to allow sports wagering. The proposals also establish various tax rates and earmark revenues from sports wagering.

Some of the proposals will lower the overall tax on casino gambling by creating a super-low rate on sports wagering revenues. The proposals also change the way funds from gambling taxes are allocated.

Both are issues of legislative concern—-and of concern to educators in particular.  Both are issues the legislature dealt with in the 1990s when casino gambling was first legalized. The earmarking of funds from casino gambling has been a legislative prerogative from the beginning. The legislature changed the earmarks once, moving portions of casino admission fees from support for early childhood education to support for nursing homes and cemetery development for Missouri veterans.

Legislative leaders need to protect the general assembly’s authority to determine the best interests of the people of Missouri—the people who send their representatives and senators to the capitol on their behalf.

The only way to do that is to approve sports wagering during the 2022 legislative session.

The BEST way to do that is to recognize that casino gambling laws enacted in the 1990s are no longer adequate thirty years later at a time when casino gambling as an industry and  public access to casino gambling are changing.

Additionally, it is time the legislature recognize that the two-dollar admission fee established in 1993 has become a multi-million dollar liability to the state and to the casinos’ own host communities.

Proposed legislation has been written, but not introduced, that addresses all of those topics.  One of the major provisions is increasing the admission fee to a contemporary amount that is the equivalent of 1993’s two dollars. The United States Bureau of Labor Statistics says the equivalent for this fiscal year is $3.67.  A new estimate will be released in February, during the legislative session.

The proposed legislation increases the admission fee to $3.50, leaving seventeen cents unclaimed.

The proposed legislation increases the admission fee to $3.50.  We know the casinos will vehemently oppose this provision because they like to keep a dollar-67 in 2021 dollars for every two 1993 dollars they give the state (which have a purchasing power of only a dollar and nine cents now). They’re happy getting richer and richer while the state gets poorer and poorer

The proposal leaves seventeen cents unclaimed. The filing of the possible petitions has prompted a suggestion for the remaining seventeen cents.

We know from past experience that the private owners of professional sports teams will expect the legislature to put up state taxpayer funds to help pay for a new stadium. The tub-thumping for a downtown Kansas City Royals stadium is well-underway, in fact. The state does not have the major funds the teams want it to commit without cutting funding for other state programs.  A provision not yet in the suggested gambling reform bill could direct the unclaimed seventeen cents into a state fund for construction and renovation of professional athletic facilities, alleviating the inevitable pressure on the state for help with new professional facilities.

With wagering being permitted on sports, it is only proper that part of the proceeds from that activity be directed in that direction.

One reason sports wagering legislation has struggled and foundered in past legislative sessions is the effort to bring so-called grey-market gambling machines in convenience stores under state regulation. Efforts to make the two issues run in tandem have been counterproductive.

There is no doubt that it is important the state regulate those machines. But the stakes have been increased enough on sports wagering with the proposed petition campaign that the two issues should be separated and sports wagering should be a higher priority.

Nothing in what has been written today should be considered as opposing either sports wagering or regulation of the grey market convenience store machines. The author does not oppose either but does believe our gambling laws are outdated and are costing the programs the state once promised would be funded by those taxes and fees tens of millions of dollars a year.

The governor and the legislature have many issues to consider as priorities in the 2022 session. One of them is changing the law to make it harder to circulate petitions. We hope that issue will not obscure the importance of the sports wagering effort.

The proposed petition campaign should make state authority to regulate gaming and to appropriate the proceeds from it one of the major issues as a stand-alone matter that will not be endangered by other issues.

An Untenable Position

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Missouri Gaming Commission Chairman Mike Leara was no doubt relieved by last week’s Missouri Senate defeat of an omnibus gambling expansion bill.

The bill would have saddled the cash-poor commission with even more things to regulate.

Senator Denny Hoskins’ bill would have allowed slot machines at truck stops and veterans and fraternal organizations (there is a big disagreement whether video lottery terminals are slot machines that we are not going to get into). It also would have legalized betting on sports in casinos.

The gaming commission is largely funded by admission fees paid by casinos.  One-half of the admission fees go to the commission and the other half stays with the thirteen host, or home-dock, cities. The bill did not address the problems caused by our long-outdated admission fee law.

The gaming commission had to cut more than two-dozen employees last year because the pandemic forced closure of our casinos for several weeks and admissions understandably lagged for the remaining months of the fiscal year.  The commission also reduced funding for the Access Missouri scholarship program administered by the commission by twenty percent.

The commission’s position has been further weakened by an almost decade-long thirty percent decline in   casino attendance, a drop from 54.3 million admissions in fiscal 2010-11 to 37.5-million in FY 2018-19, the last non-pandemic year. The pandemic year that ended last June 30 saw another drop of about ten million admissions, leading to the commission layoffs and reduction in the scholarship program. Admissions so far this year indicate another weak year for commission and home dock city income from casino patronage.

Pardon us while we get into some mathematics here:

The admission fee was set at two-dollars per person in 1993.

The commission, therefore, has been dealing for some time not only with declining income because of declining attendance but with declining value of the money it has collected in admission fees. Almost thirty years of inflation have reduced the purchasing power of fee income by about forty-five percent.

Those circumstances left the Missouri Gaming Commission with significantly reduced resources to regulate the casino industry, producing layoffs and taving Chairman Leara justifiably concerned about how well the commisison could regulate an entirely new form of gambling as well as regulate a large number of slot machines in veterans and fraternal organizations throughout the state.

The bill defeated by the Senate provided no protection against continued funding declines.

While the bill might have been seen by Leara as three lemons, it might be viewed somewhat differently by Missouri’s educators.

Other sports wagering bills in the last three years sought to tax sports wagering adjusted gross receipts at six to nine percent, far less than 21% rate on all other forms of gambling.  The effect of those proposals would have been to lower the state’s commitment of gambling funds to public education by tens of millions of dollars yearly. None of the amendments proposed during floor debate sought to change the Hoskins bill’s provision taxing sports wagering proceeds in the same way all other forms of gaming are taxed, a good first step in making sure next year’s sports wagering legislation protects other state interests as well rather than undermining them.

The Missouri Gaming Commission, faced with the likely return of this legislation in the next session in some form, would do well to evaluate its present financial situation that is significantly worsened by outdated gaming laws and suggest ways the legislature can protect the ability of the commission to do its job by bringing laws adopted in the last decade of the Twentieth Century into the third decade of the Twenty-first. Sports wagering legislation would be a solid vehicle to accomplish that.

People’s Interests Being Dealt a Losing Hand

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Several bills have been introduced to legalize casino wagering on sports in Missouri this year.  Most are versions of bills that have failed to gain passage for the past three years.

None of the bills has a single word protecting the state’s interests in casino gambling.  Not a single word.

What are the state’s interests?

Funding for public schools.

Funding for various veterans’ services.

The National Guard

Funding of a college scholarship program.

Funding for a program to help people who become addicted to the casinos’ products.

Funding for the cities that are hosts for casinos.

The first hearing on one of the bills took place yesterday in a Senate Committee before which I raised this issue last year. In the year since, there has been time to dig deeper into this concern. And the concerns have become deeper.

Yesterday, I talked to the Senate Appropriations Committee about, first, the much-lower tax proposed for sports wagering adjusted gross receipts and, second, about the multi-million dollar damages that tax will cause to elementary and secondary education. Other concerns will be voiced as other bills are brought up for hearings.

None of these bills should be sent out for floor debate until they have been extensively revised to protect the state’s interests.

Please understand that these comments do not oppose casinos or sports wagering. But they do oppose the Missouri General Assembly being skillfully maneuvered into passing new gaming laws that degrade the state’s interests and the interests of the people of Missouri.

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After listening to three years of committee hearings on proposed sports wagering legislation, I am left with the impression that the proposals are being presented as if the issue is unique, separate from other forms of gambling and therefore should be treated as a special category.

It would be erroneous to accept that concept.

The creation of legalized sports wagering can be likened to the addition of a new kind of cheeseburger to the menu at McDonald’s. The biggest difference is that McDonald’s is not lobbying you to lower the sales tax on the cheeseburger while leaving it the same for all of its other products.

Sports wagering is just one more activity in which casino customers can take part. One more item on the gambling menu. But the menu also contains the same products it always has had. Separating one product from the other for taxation purposes makes no sense, whether is a sports bet or a cheeseburger.

This year’s proposed legislation makes it clear that sports wagering will not be done in some other building but will be done on the property of the casino, a phrase that bears scrutiny because it does not specifically say the activity will take place within the wagering area of the casino, a clear position for the state to take. Nonetheless, the assumption seems to be that bets will be accepted within the casino, processed within the casino, and—when necessary—paid within the casino—the same as with bets in all other forms of casino gambling.

Betting on sports is no different than betting on the fall of the cards, the roll of the dice, or the circling of a little white ball.  You will hear me say it many times in these discussions: a bet is a bet is a bet. It’s done in the same facility; the money goes into the same bank account; the taxes are paid on both kinds of money—although the casinos want much less tax charged on proceeds from sports betting by calling for a much lower rate and then by re-defining AGR to make less money taxable by exempting things from the taxable amount in some of the bills.

The proposed legislation accepts that casino winnings on sports bets will be considered part of the casino adjusted gross receipts (AGR) and part of those receipts will be funneled to public education. But the industry claims some of those receipts are not equal to the others for taxation purposes. Once again, a bet is a bet is a bet. That’s the central issue.

Although I have not seen a federal or state income tax form filed by any of our casinos, I doubt that there is one line for taxable income and a second line for taxable sports wagering income on those forms. The federal tax on that income is the same regardless of the source of the income. There is no fair reason why the state tax on AGR should be different from the tax on AGR generated by other forms of gambling.

Sports wagering is NOT something apart from the rest of the casino operations in either space, processing of bets, or in accumulated casino income.

The casinos argued in an earlier hearing that the tax on adjusted gross receipts should be much less than the tax on other forms of gaming because the house advantage on sports wagering is “only five percent.”  That is true. But it’s not the whole truth.

The house advantage of sports wagering is more than the house advantage of several other games offered by the casinos. A study done for the Center for Gaming Research at the University of Nevada-Las Vegas indicates the house advantage is lower than five percent for some of the other gambling opportunities in casinos, yet the industry has never sought a lower tax rate on those games.

Because sports wagering is just another gambling opportunity within the casino, the income from which is part of the general profits of the business, there is no reason to grant sports wagering a preferred tax rate or a different definition of AGR than is used for other gambling activities—as is proposed in this year’s sports wagering bills.

Missouri has 28 years of history to support this argument.  For almost three decades the monthly financial reports of the State Gaming Commission have broken out revenues from table games from revenues from slot machines for each of our casinos. Table games contribute about 15% of the revenues; electronic gaming devices, as the category is called, contributes the other 85%.

For almost three decades, the casinos have had no problems with the revenues from those two sources combined into one AGR figure and taxed at 21%.  Now, however, the industry wants you to approve and new, and what is likely to be the second-most lucrative revenue stream, but they want the legislature to approve a far lower tax rate for it—a tax rate that will undermine support from the other two categories for elementary and secondary education.

I have been told that casinos say they cannot do sports wagering with a 21% tax on AGR.  That’s THEIR problem.  The legislature has a responsibility and that responsibility is not to solve the casino industry’s problems.  The legislature’s responsibility is to the people back home–the school teachers and children, the veterans, the college kids needing a state scholarship, the home dock citis.

If the casinos “can’t do sports wagering,” there still will be gambling on sports.  It just won’t be legal.  and the casinos won’t make any money from it.  That’s their choice.

DAMAGE TO ELEMENTARY AND SECONDARY EDUCATION

Various sports wagering legislation this year proposes tax rates on sports AGR of nine percent, 6.75 percent, 6.25 percent and 6.0 percent. (The particular bill heard yesterday proposes a nine percent rate)

The present tax on AGR from all other forms of gaming is 21 percent.  Ninety percent goes into a fund for elementary and secondary education. Ten percent goes to the home dock cities.

We can explain the problem with a fourth-grade-style arithmetic example.

Johnny’s mother wants to make some apple pies.  She gives him some money and tells him to guy ten apples. There will be enough to buy something for himself if wants it.

Johnny buys ten applies and, seeing plums also on sale, buys a plum to eat on the way home. At the checkout counter, he learns the apples cost $2.10, or 21-cents per apple.  His plum costs 6.75 cents.  The first ten items cost 21-cents each. The last one lowers the average cost of the eleven items to 19.7 cents each.

Using this example, the tax rates proposed for sports wagering could lower the average AGR tax to 19.91% (nine percent rate), 19.70% (the proposed 6.75% rate), and 19.66% (the proposed 6.25 rate, which would establish a new low rate in the nation), and 19.64% (the 6.0% rate proposed in a House bill).

In fiscal year 2018-19—the last full year before the pandemic significantly affected the casino business, the casinos reported to the Missouri Gaming Commission that $15,160,505,906 had been bet in their slot machines.  Table games produced “only” $1,255,959,366 for a total bet in our casinos of $16,416,465,272.  The slot machines had a payout rate of 90.3%.  Table games had a “hold” of 20.8%–meaning table games produced a 79.2% pay out.

The result was an AGR of $1,735,757,881, or 10.57% of the total amount bet and Missouri’s tax on the AGR amounted to 2.2% of all funds bet in slot machines or at gaming tables.

The math shows that a nine percent tax on AGR (the definition used for all other forms of gaming in Missouri) would cost elementary and secondary education about $17 million. The loss to schools would top $21.2 million at the lowest rate proposed.

I don’t know how many members of the General Assembly want to go home and tell their school superintendents they favor legislation that would pump tens of millions of dollars into casino profits while cutting state funding to education by $17-21 million with no realistic hopes of recovery. It will take a lot of PTA chili suppers to make up the difference.

All of this is based on numbers supplied to the Missouri Gaming Commission by the casino industry in Missouri.  We believe it shows the depth of loss the state will incur if the legislature passes these gaming bills without major rewriting.

The extensive homework behind these observations is below.

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All discussion of percentages and holds and payouts aside, here is what the current AGR tax rate produced in that fiscal year and how much the state would have lost if the tax rate were reduced.

21%       $364,509,155    Existing rate

9% (19.91) $345,589,394     Reduction of $18,919,761 ($17,027,785-$1,891,976)

6.75%  (19.7)  $341,944,303     Reduction of $22,564,852 ($20,308,367-$2,256,485)

6.25%  (19.66) $341,249,999     Reduction of $23,259,156 ($20,933,240-$2,325,916)

6.0%   (19.64)  $340,902,848  Reduction of $23,606,307 (21,245,676-2,360,631)

It might be argued that the increased AGR of sports wagering would have offset those losses.  How much betting would have been necessary to bring about that offset?

It would have taken an AGR increase totaling $210 million to produce $18,900,000 at 9%

It would have taken an AGR increase totaling $336 million to produce $22,680,000 at 6.75%

It would have taken an AGR increase totaling $372 million to produce $23,251,000 at 6.25%

It would have taken an AGR increase totaling $ 394 million to produce $23.640,000 at 6.0%

Actually, the AGR increase would have had to be even more substantial because the sports wagering bills re-define AGR through a series of exemptions that would have lowered the amount of money that was taxable.

If, using the 2018-2019 fiscal year as the basis, we calculate how much more would have to be bet on sports to reclaim the lost funds, and understanding that AGR represents 11% of the total amount bet (we’ve rounded up the percent), then the amount bet on sports to recover the lost funds at the four tax rates advocated in this year’s bills would be:

9%—$2,079,000,000

6.75%—$3,326,400,000

6.25%—$3,682,800,000

6.0%—$3,374,938,195

And further, there would have been another loss occurring because of the lower tax rates because the schools and home dock cities would be losing income from the AGR if it had been  taxed at the present 21%.  For example:

$210,000,000 taxed at 21% would have earned $44.1-million.

$336,000,000 taxed at 21% would have earned $70.56 million.

$372,000,000 taxed at 21% would have earned $78.12 million.

$394,000,000 taxed at 21% would have earned $82.74 million

In other words, the schools and home dock cities, while waiting to collect $22,564,853 at 6.75% would have been foregoing $70.56 million that would have reached them at the current 21% rate.

The loss to elementary and secondary education and to the home dock cities, therefore would have been (approximately) $25.2 million, $48 million, $54.8 million, and $59.1 million.

Elementary and Secondary Education (and the home dock cities) will NEVER catch up.

The goal for the casinos in adding sports wagering is to INCREASE their AGR.  This study shows how much the DECREASE in elementary and secondary education and the home dock communities might have been if the average AGR tax had been lowered, that it would have taken hundreds of millions of dollars in wagering to REPLACE the funds lost by elementary and secondary education through the lowering of the average AGR tax rate, and the income loss while waiting to replace lost income through increased wagering would have been an even larger financial setback.

Casinos don’t seem to care about elementary and secondary education, veterans, college kids, problem gamblers, or even their home dock cities.  Somebody has to raise these issues. Perhaps you might ask your legislator about whether he favors passage of legislation that will undermine financing for all of these issues we’ll be raising in subsequent hearings.

I hope legislative committees don’t send any of these bills to the floors for debate without substantially rewriting them to protect the interests of the state.

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Us vs It—part IV, Best guess

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(Before we get to the main point of today’s missive, your constant observer must confess that he feels a slight fever and has trouble breathing every time he hears the phrase “new normal.” He would quickly recover if the political and media leaders more accurately referred to the next positive step as the “new ABnormal.”   Likewise, he would be interested to see if President Trump could communicate without using the word “beautiful,” including the usual hand gestures.)

Legislative leaders, last we heard, are still thinking of reconvening the session on the 27th despite concerns by some members that the recall will be happening just about the time some analysts say Missouri will hit its Coronavirus peak.

Several issues could be before the House and Senate but the biggest one is the state budget for the fiscal year that starts July 1. The Missouri Constitution says the legislature must adopt a budget by the next-to-last Friday of the session, in this case, May 8.

Our lawmakers face complicated and sad choices. Today we are going to try to explain how our state government has no good alternatives and why. Please stay with us because this will be a long class.

Here’s some history of why the Missouri Constitution requires passage of a budget a week before legislative adjournment and what that means in today’s circumstances.

Last nights of legislative sessions were usually quite wild until 1988. We recall when the legislature adjourned at midnight and the last budget bills, “Midnight Specials,” some called them, hit the floor minutes before the deadline. Chaos might not be an adequate word to describe those minutes when the legislature rushed to pass last minute budget bills. The fact that everybody was exhausted and not a few were feeling the effects of early celebration of the session’s end added to the disorder.

But in 1988, Article 3, Section 25 of the Missouri Constitution was changed to say, “No appropriation bill shall be taken up for consideration after 6:00 p.m. on the first Friday following the first Monday in May of each year.” That left the session’s final week for consideration of regular legislation, created a less chaotic ending, let members get home to their families before midnight and let the reporters file their stories before sunrise the next morning. Your faithful correspondent thinks it was one of wisest laws ever enacted in the state of Missouri. Until then, members of the General Assembly had a tendency NOT to go home after midnight adjournment but to go out to the Ramada Inn after midnight and get really serious about celebrating. And it often was sunrise or later before he could go home from his Missourinet newsroom.

If the General Assembly fails to enact a budget by the deadline, what happens? If economic uncertainty makes it unrealistic to adopt a reasonably realistic budget during the regular session, the Constitution allows the governor to call a special session to get a budget done for the fiscal year starting July 1. The General Assembly also could call itself back. But it will be easier for the governor to do it, and he would. The legislature has never operated a budget on the basis of a continuing resolution, as Congress too often has done, so it is unlikely to take that strategy—-which (to a non-lawyer) seems to be unconstitutional in Missouri anyway.

A special session in June is not unprecedented.

The legislature in 1997 failed to appropriate money for Health and Mental Health, nor did they appropriate money for their own salaries as well as those of judges and statewide officials. That last problem arose when legislators argued they could not appropriate money for themselves and others until they have approved funding for everybody else. Governor Carnahan called a special session that, we recall, started right after the regular session adjourned so the last two budget bills could be approved. It took six days to do it because the legislative process of introducing and passing bills takes a little time.

In 2003, Governor Holden and the legislature got into a big snit and he vetoed appropriations bills for education and social services. He called a special session in June that was unproductive. With time running short, he called another one. The legislature told him to take it or leave it. He finally signed appropriations bills for elementary, secondary, and higher education on the last day of the fiscal year.

Special sessions usually cost more than six figures a week, mostly for legislative travel expenses and per diem payments. However, the expenses of one this year would be significantly reduced by savings realized by the shutdown of the legislature from mid-March until late April—except for the couple of days lawmakers returned this month to pass the important supplemental appropriations bill.

After the legislature approves a budget and the governor signs it, he will have to make sure the state does not fall into constitutionally-forbidden deficit spending. Given what is likely to be an indefinite period of economic uncertainty, it would not be surprising for the governor to sign a budget but withhold funds from various services and programs to make sure the budget remains in balance for the entire fiscal year. He can announce spending restrictions when he signs the budget and he can make adjustments throughout the year, although the later in the year he makes them, the harder it is for agencies and their employees to deal with them.

Under the circumstances any budget the legislature approves is likely to be only a best guess.

Governor Parson will have to adjust it downward, if necessary, to keep it in balance. We have seen examples of that within the last few days when the governor withheld $228 million in the current budget because the diving economy makes the amount of money available for the fourth quarter uncertain.

Education has a tendency to absorb the biggest share of cuts and withholds. Here is why.

Joe and Josephine Missouri might have trouble understanding why it’s so painful to make cuts in the state budget of almost $30.1 BILLION dollars proposed by Governor Parson in the flush days of January. If you are a Joe or a Josephine, we hope we can help you understand some important things about that thirty-BILLION dollars.

The legislature can decide how to spend only about one third of that money and even then it is limited in what it can do.

More than ten billion of those dollars come from the federal government for state-run federally-financed programs.

Another ten billion dollars is considered “other” funds. Those are funds that are dedicated to specific purposes. Gas tax money that goes for our road and bridge system is one example. The Conservation Sales tax money that funds our wildlife areas and Conservation Department programs is another. The special sales taxes that help fund our state parks system and help limit soil erosion is another one. Gambling proceeds that fund a tiny part of education. The legislature can’t fiddle with those because the Missouri Constitution sets them outside of legislative control.

That leaves $10,431,666,579 that the governor’s budget proposal said was under control of the state. But even that is not fully in play because other state mandates require funding for some things. One-third of that ten-Billion goes to Elementary and Secondary Education under the statutory formula for funding K-12 education. Other mandated spending eats up another $5.108-Billion.

So out of that thirty-billion dollars-plus, the legislature actually only has $1.881,921,936 to play with, if you will. But remember, that’s the figure the governor recommended back in January when the restaurants and malls and theatres and bars were open and we could go wherever we wanted to go.

When big budget withholdings have to be made or when cuts have to be made—as they have been and will be—that $1.9 billion dollars is the place to cut. That’s only six percent of the entire proposed budget.

Of that $1.9 Billion dollars, two state departments consume $1.102 Billion—Higher Education and Social Services. The next two are Elementary and Secondary Education ($136 million), and Corrections ($107 million). That chews up about $1.345 Billion of that $1.9 Billion dollars. But there are five other state agencies. The governor proposed $365 million to fund them. There’s another $166 million that falls into the “other” category. A good chunk of those “other” funds go to Elementary and Secondary Education and Social Services with relative pocket change scattered through several other agencies.

In his COVID-19 daily briefing on April 9, Governor Parson was pretty direct. “We’re gonna have to rebuild the budget,” he said. His January proposal is junk because of the pandemic.

It is likely the best-guess budget for the programs and services all of us use will take some really painful reductions for the fiscal year starting July 1. Everybody is going to be hurt to some degree. Programs already dealing with serious problems are going to be dealing with even bigger ones.   The biggest programs are going to take the biggest hits because that’s where the money is. People are going to lose jobs. People relying on those programs will struggle even more than they struggle now.

The people we elect to work for us are facing the possibility that they will have to hurt many of us. Do not think that when they show up at the Capitol on the 27th, or whenever the decision is made to reconvene the legislature, that they will not anguish about what they have to do.

If you were in their place, which of YOUR neighbors would you choose to hurt even more than they already are hurting?

Most of us can rage against our circumstances. These folks are the ones we have chosen to get beyond rage and do something about the circumstances facing us. They will have no easy choices.

Quixote

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I have a friend who thinks efforts to convince the legislature to make the casino industry financially support saving the irreplaceable treasure that is the Steamboat Arabia Museum is equivalent to Don Quixote tilting at windmills.

Maybe it is.

But if you never tilt at windmills, the windmills always win.

The Senate Appropriations Committee last week took a look at two of this year’s bills legalizing casino wagering on sports. After listening to the testimony on similar bills during the last two sessions, I decided it’s time to change the narrative.

—-Because the entire focus so far has been on what the casino industry wants. What it wants the legislature to do is to ignore the state’s promises to fund some important state and local services and programs with taxes the casinos don’t want to pay.

This is what I told the committee in the limited time given for individual testimony (this, by the way, is not a complaint about that. Committees try to shoehorn their meetings between other hearings and floor sessions and time is precious. So they try to make sure everybody gets to speak who wants to speak):

I am Bob Priddy, a resident of Jefferson City. A year ago when I was talking with most of you about a proposal to have casino admission fees increased by a dollar to finance construction of a National Steamboat Museum to house the artifacts from the steamboat Arabia when that museum closes in Kansas City in 2026, my research took me to a number of related issues. Sports wagering is one.

I do not oppose casinos, nor do I oppose sports wagering. I do not oppose the casinos making a lot of money. But I am concerned by the steps the industry takes to keep it. These bills are prime examples.

There is not one word in either of the sports wagering bills you have heard this morning that protects the state’s interests in casino gambling.

Taxes on adjusted gross receipts—21 percent—produce revenue for education.

Two-dollar admission fees paid to the state are split with one dollar going to home dock communities and the other dollar going to the Missouri Gaming Commission and a series of programs it administers for veterans homes and cemeteries, college scholarships, and help for those addicted to gambling.

The bills protect the interests of five corporations that operate thirteen businesses, to the detriment of services that are supposed to be supported by casino taxes.

During some House Interim Committee meetings looking at sports gambling and other casino issues last fall, witness Chris Krafcik of Eilers and Krejcik, a research and consulting firm in Irvine, California, suggested casino income from sports wagering would be 289-million dollars at maturity. The industry’s own numbers show that’s more revenue than was produced from ALL table games in the last fiscal year.

But these bills would tax those sizeable new revenues at less than one-half to less than one-third of the rate of tax on the table games. One of the tax rates would the lowest in the nation.

The result? A significantly lower contribution to education funding from this new form of gaming.

In other hearings the proponents have suggested lower taxes because the house advantage in sports wagering is “only” five percent. But a 2015 study from the University of Nevada-Las Vegas Center for Gaming Research indicates a house advantage of five percent is actually pretty high, not very low.

Proponents also have said sports wagering would bring more people to casinos although I have not heard any specific forecasts. Attendance at our casinos has been dropping since fiscal 2010-11 and it’s down another three percent so far this fiscal year. State admission fee income is at its lowest in more than two decades. It will take a whole lot of people drawn to casinos to bet on sports to offset those ongoing losses.

At a conference last year, industry analysts suggested that within five to ten years, 90 percent of sports wagering would be done remotely. Only ten percent would be done in person in casinos—and they did not suggest how much of that ten percent would be people already in the casino who visit the sports book.

Either way, having only ten percent of the sports bettors in the casinos won’t do much to improve on-site wagering.  

And it certainly won’t do much for the state’s income from admission fees.

Again, the bill seems to abundantly protect and enhance the interests of the casinos but do nothing or next to nothing for the state’s interests.

And I have not addressed how the two-dollar admission fee, established in 1993, is enriching the industry while producing a negative economic impact on state services the fee is supposed to support—and how within five years the casinos are likely to make more from admission fees than they pay to the state.

Point Two: This is not just a sports gambling bill.

It is the first major move to a 21st century gambling industry. But state law and regulations remain creations of the 20th century and their adequacy should be evaluated to protect the states’ interests.

This is the first proposal for remote gambling but more will come as casinos try to appeal to a new generation of people who don’t go to the casinos but will use the electronic devices they have grown up with to place bets. Casinos must attract that demographic to replace the older constituents who are dying off—and they’re not being replaced through the turnstiles by the television and internet generation.

The spread of remote wagering already is being planned by the industry that is developing new games that can be played remotely.  

These bills offer nothing to protect the state’s interests in these circumstances.  

In these two areas the legislation tilts the already-tilted table more in favor of casinos and farther away from the state’s interests in financing services with casino income.

As I understand these proposals—

Casinos want a new form of gambling that will produce big income gains but they don’t want sports wagering taxed the same way table games producing less revenue are taxed. The justifications for such lower tax rates in light of these numbers seems to make little sense, to me at least and I hope to you.

Whether this committee or the general assembly feels it appropriate to advance these proposals that have no protection for the state’s interest, or to put them aside until the economic scales can be brought more into balance is a decision for this committee. But I hope you will seriously consider these issues that have not been much, if any, part of the discussion until now.

I have prepared a lengthy memo that goes into greater detail—and includes citations for the statements I make—that I will send to the chairman later today after I have added a few tweaks based on this morning’s testimony. I know how busy legislators are at this stage of a session but I hope you will dig into that material for more details on what I’ve been saying and seriously consider whether these proposals are in the best interests of six million Missourians or just in the best interests of five corporations and thirteen businesses.

Will the committee take any of these words to heart in a campaign year when the interests pushing these bills have a lot of influence? Will the state’s interests be protected by those elected to serve in a building where the state motto is carved over the main entrance: “Let the Welfare of the People be the Supreme Law?”