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Attorney General Lockyer Announces Release of Report Providing Detailed Overview of California Gambling's Scope and Impact

State Research Bureau Report Surveys Economic Effects, Societal Costs and Benefits
Wednesday, May 31, 2006
Contact: (415) 703-5837

(SACRAMENTO) – Attorney General Bill Lockyer today announced the release of “Gambling in the Golden State: 1998 Forward,” a California Research Bureau (Bureau) report that provides a detailed overview of the current scope of gambling, and its effects on the state’s economy and residents.

“The past eight years have seen a rapid expansion of tribal casinos, Internet gambling and electronic games, and consolidation in California’s horseracing and cardroom industries,” said Lockyer. “These changes present significant challenges for the public, policymakers and regulators as we seek to successfully address the many issues associated with the integration of gambling into the state’s social and economic life. With its wealth of updated information, this report should prove very useful to decision-makers as they confront these challenges.”

Citing the substantially altered landscape of gambling in California, Lockyer in 2005 asked the Bureau to prepare the report. Lockyer’s office houses the state Division of Gambling Control. The Division investigates the qualifications of casino and cardroom operators and employees, and monitors their conduct for compliance with state laws and regulations. Additionally, the Attorney General serves as counsel to the California State Lottery Commission.

Among the 176-page report’s key findings:

Scope – Gross gambling revenues in California totaled about $13 billion in 2004, including Indian casinos, cardrooms, horseracing, the State Lottery and Internet gambling. Tribal casino revenues rose from $3.67 billion in 2002 to $5.78 billion in 2004, an increase of 36.5 percent.

Citing figures from Lockyer’s office, the report shows gross revenues at cardrooms totaled $656 million in 2004, an 8.5 increase from the $600 million earned in 2003. Betting on horseracing declined slightly in fiscal 2004-05, falling by $138 million to $4.1 billion. State Lottery revenues totaled $2.97 billion in 2004, up 5.9 percent from 2003.

As of 2004, California had 56 tribal casinos, with 58,100 slot machines and 1,820 gaming tables. Reflecting consolidation in the cardroom industry, the number of cardrooms dropped from 113 to 98 from 2001 to 2005, while the number of tables increased from 1,473 to 1,515.

State revenue sharing– From 2001-04, tribal casinos earned roughly $17 billion in gross revenues. From 2000 through September 2005, the gaming tribes paid 3.1 percent of that total, or $543.4 million, into two state revenue-sharing funds. Recently-negotiated compacts with the state will increase the tribes’ revenue sharing responsibilities. Additionally, a 2003 study by San Diego County found that local gaming tribes donated more than $7 million to community organizations. (The state does not track tribes’ charitable contributions.) The State Lottery’s contribution to public education in fiscal 2003-04 was $1.1 billion, which comprised three percent of the $35.9 billion in state expenditures that year. In 2004, the state received $39.5 million in fees from horseracing, a little more than 1 percent of total gross statewide revenues, while local governments received more than $7 million. Total fees paid by cardrooms have remained relatively stagnant over the past eight years, while gross revenues have increased by 75 percent.

Economy – The tribes’ casino and retail operations provide economic and employment benefits to the surrounding communities in rural areas, where most casinos are located. They have created tens of thousands of jobs, 90 percent of which are held by non-Indians. The economic effect in urban areas is much different and potentially negative due to displacement of existing retail operations. Regarding the effect on Indian communities, national research suggests tribes that operate casinos compare favorably to non-gaming tribes as measured by per capita income, family and child poverty rates, unemployment and housing conditions.

Crime – Studies suggest that, four years to six years after casinos open, surrounding communities experience increases in rape, murder and other violent crimes, as well as property crimes such as burglary and auto theft. Some gaming tribes provide financial support to local law enforcement through grants or memorandums of understanding. Some of the state revenue-sharing money also has helped fund prosecution of casino-related crime.

Problem gambling – Extrapolating from national data and figures from other states, roughly 1.52 million California adults and minors are problem or pathological gamblers. That figure includes: 589,000 adult problem gamblers; 333,000 adult pathological gamblers; 436,800 youth problem gamblers; and 159,900 youth pathological gamblers. In California, the estimated annual societal cost of problem and pathological gamblers is just under $1 billion ($998.1 million). That figure includes costs associated with welfare benefits, arrest and incarceration, bankruptcy, and physical and mental health treatment. More than 75 percent of the calls seeking help from the California Council on Problem Gambling come from gamblers who prefer casinos. California’s gaming tribes provide financial support for the state’s Office of Problem Gambling, which provides public awareness programs, research, and training for health care providers and industry personnel. The state, however, spends no money on actual gambling treatment programs. Under recently-negotiated compacts, tribal casino operators’ agreements with local jurisdictions will include provisions to combat gambling addiction.

Regulation – Resources for the two regulatory agencies responsible for overseeing tribal casinos and cardrooms appear mismatched to the industries they monitor. Combined, the Division of Gambling Control and California Gambling Control Commission (under the Governor’s Office) have 182 employees to regulate two industries that in 2004 generated more than $6.4 billion in gross revenues.

The report can be viewed on the Bureau’s web site at www.library.ca.gov/HTML/statseg2a.cfm.

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