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Is hope of casino jackpot a sucker bet? State’s gambling tax revenue booming, but it’s not from casinos

Gambling generated a record $1.4 billion for the state over the last year, but that’s despite a seventh straight year of declining returns from Illinois’ 10 existing casinos. Six more casinos in the pipeline could ‘exacerbate’ the problem, a state commission found.

Gamblers play craps at Aurora’s Hollywood Casino in 2001.
Gamblers play craps at Aurora’s Hollywood Casino in 2001. File Photo.
Jean Lachat/Chicago Sun-Times

Statewide gambling tax revenue is at an all-time high, but the percentage of those funds coming from casinos keeps trending lower and lower.

Just two months after Gov. J.B. Pritkzer signed a sweeping gambling expansion into law, it’s a crapshoot to say how that money stream will be affected by throwing six new gambling dens and a bevy of other new betting options into the mix, a state commission said Thursday.

But it’s only a matter of time before the Illinois casino market begins cannibalizing itself, the commission found.

“It is expected that cannibalization at existing Illinois casinos is inevitable, especially those in the Chicago metropolitan area where the majority of the gaming expansion will take place,” according to an annual report released by the bipartisan Commission on Government Forecasting and Accountability.

“The extent that revenues from these locations will suffer remains in question. Some would argue that many portions of this metro area are already near saturation, even without gaming expansion,” mostly due to the state’s 32,000-and-counting video gambling terminals, the report said.

The Casino Queen in East St. Louis, pictured in 2005, is among the Illinois casinos that saw overal revenue drop off for a seventh straight year in 2018.
The Casino Queen in East St. Louis, pictured in 2005, is among the Illinois casinos that saw overal revenue drop off for a seventh straight year in 2018.
AP file photo

That’s a grim forecast for an industry that saw its seventh straight year of declining returns over the last fiscal year, with the state’s 10 existing casinos raking in $269 million for Illinois, or about 3% less compared to the previous year.

But coupled with revenue from the Illinois Lottery, video gambling and, to a far lesser extent, horse racing, gambling operations generated a record $1.4 billion for the state, up 3.5% from the prior fiscal year.

While lottery and racing held “relatively stagnant” annual tax revenues at $735 million and $6 million, respectively, video gambling funds — which have trended upward since the now-ubiquitous machines were introduced seven years ago — offset the dwindling casino numbers, shooting upward by about 13 percent to $395 million.

The commission predicts video gaming revenue “should grow in future years” as the expansion introduces more machines and higher betting limits.

But for existing casinos — which will also each see their max gaming positions surge to 2,000, plus 4,000 for a potential Chicago mega-casino — the downward trend “may be exacerbated,” the report said, a concern that previously has been shared by casino industry interests.

“It’s not a real good day for the existing casinos in the state,” Tom Swoik, executive director of the Illinois Casino Gaming Association, said after Pritzker signed the expansion law. “This market is already saturated.”

And while the commission noted that one-time licensing fees would pump an automatic $1 billion-plus into state coffers, the expansion’s “precise value remains in question as many of these fees are based on casino performance and future casino operation decisions.”

“Despite the fact that authorized gaming positions could more than triple under [the new gambling law], the Commission projects only modest growth in gaming related tax revenues.”

The commission’s report was lukewarm on the prospects of newly allowed casino games at the state’s three racetracks — a long-sought revenue stream that was controversially declined by the owners of Arlington International Racecourse — but noted “the racing community is hopeful that the recent authorization of racinos and sports betting at Illinois horse tracks will help turn the industry around.”

They also withheld judgment on the yet-to-be launched sports-betting industry, saying revenue projections should “met with restraint,” but noted “it does allow Illinois to keep up with many other states, including Indiana and Iowa.”

Asked to respond to the report, Pritzker’s office kept a poker face.

“The Governor worked with the General Assembly to pass a bipartisan gaming expansion that was years in the making to create jobs and spur economic development around the state while generating revenue to rebuild our universities, community colleges and hospitals,” a spokesman said. “The administration understood the unpredictable nature of gaming revenue and took that into consideration when putting together the revenue projections for Rebuild Illinois.”

Read the full report here: