House Speaker Robert DeLeo appears determined to steal a page from Pennsylvania as he crafts a proposal to raise hundreds of millions of dollars by rolling out slot machines at local racetracks.
But as Beacon Hill eyes a Pennsylvania-sized slot jackpot, it’s not clear if DeLeo and company will fully take into account a big lesson offered by our sprawling cousin to the south – the importance of strong regulation.
Spurning some key expert advice, Pennsylvania lawmakers created a weakling regulator to oversee its new gambling industry, one that was under the thumb of powerful legislators. And predictably, despite its financial success, Pennsylvania’s fledging gambling industry has been beset by one regulatory scandal after another.
Really, given the Bay State’s long and colorful history of public corruption, no one under the age of 10 would seriously argue this could not happen here. And so far, there have been few signals out of the backrooms on Beacon Hill as to how lawmakers envision policing this lucrative, but also very powerful, industry.
“Clearly the speaker is taking the Pennsylvania route,” writes Rev. Richard McGowan, a Boston College economist and gaming industry expert. “It will certainly result in the greatest revenue as soon as possible.”
But he also offers a warning as well.
“A great deal of care needs to be taken in setting up a gambling commission that is independent of the Legislature,” McGowan said in an e-mail.
Similar Structures
The House leader is preparing to roll out a gambling bill in the next few weeks. DeLeo has mentioned Pennsylvania as a role model, but is looking at a variety of other states that have legalized expanded gambling as well, said DeLeo spokesman Seth Gitell.
“We are trying to take the best from a lot of different states,” Gitell said.
Derided by both gambling opponents and those enamored with creating a Massachusetts Foxwoods, humble racetrack slots, or “racinos,” are nevertheless poised to catapult Pennsylvania past long-time casino powerhouse Atlantic City.
DeLeo has signaled his initial focus will be similar, with short-term plans to roll out slots at the state’s four racetracks. Longer-term intentions are to develop one or more larger, resort-style casinos – exactly the same approach Pennsylvania took, with spectacular financial results.
Since legalizing slot machines in 2004, Pennsylvania spent its first few years building several racinos. This stripped-down version of gambling has gone over well in lean times, recapturing Pennsylvania gamblers who for years had filled the coffers of Atlantic City’s glitzy casinos.
Pennsylvania’s slot machine complexes shelled out more than $1 billion last year in state taxes, on nearly $2 billion in revenue. And in a step that could prove even more troubling to struggling Atlantic City, Pennsylvania lawmakers recently gave a green light to poker, roulette and other traditional table games.
The Pillsbury Doughboy
But there is an underside to Pennsylvania’s gambling success story that our own lawmakers need to heed. That state’s flawed regulatory structure has come close to sparking a voter backlash and bringing the whole enterprise into disrepute.
When they legalized slot machines six years ago, Keystone State lawmakers just couldn’t resist the temptation to create the Pillsbury Doughboy of state gambling regulators. A new Gaming Control Board was established, but the Legislature was given the power to appoint key members.
Incredibly, lawmakers were even allowed to invest in various gambling operators bidding to develop racinos in the state, notes McGowan, the BC professor.
Pennsylvania’s green and inexperienced gambling regulator was given the difficult job of vetting the backgrounds of gambling operators seeking licenses to do business in the state. This was against the advice given by industry experts, who recommended Pennsylvania take a page from neighboring New Jersey, where law enforcement officials do the background checks.
The results were predictably dismal.
Pennsylvania regulators, after a supposedly thorough background check, dutifully doled out a gambling license to a local businessman, only to find out he was under investigation for being a little too friendly with local mobsters. Not long after, the Gaming Control Board came under fire for clearing contractors with criminal records to work on projects at various gambling venues.
Topping it all off was an extravagant junket to Rome by board members of the supposed industry watchdog, piling up tens of thousands of dollars at the city’s finest hotels, poolside service and all.
Gov. Ed Rendell was finally forced to intervene, directing his chief of staff to whip Pennsylvania’s all-too-friendly gambling industry watchdogs into shape.
Hackocracy?
Closer to home, it’s hardly clear if our far-seeing lawmakers on Beacon Hill have fully explored how to regulate what overnight would become one of the Bay State’s largest industries – one awash with cash and temptation.
In a good/bad sign, Attorney General Martha Coakley last summer slowed the gambling steamroller at the State House with the demand that regulations and laws be put into place before – not after – expanded gambling is legalized.
It’s good that she recognized the need, but not so good that it took the attorney general to force lawmakers to start thinking about such basics.
Nor was Coakley clear who would do the background checks here – a major question given what has transpired in Pennsylvania.
It is too early to say what kind of gambling industry regulator Massachusetts will have, DeLeo spokesman Gitell said. But one reason the bill is taking time to roll out is that the House leader has made it clear he wants “to take the time to do it right.”
The danger here is that we could wind up with a good, old fashioned, Massachusetts-style hackocracy, packed with patronage hires who couldn’t care less about doing background checks on gambling operators.
Maybe I’m too cynical. But given our state’s dubious reputation in such matters, you’ll have to convince me otherwise.
