Gaming a significant part of economy
By Neil Peterson
Gaming Industry Association, Executive Director
Well, the latest quarterly Video Gaming Machine (VGM) tax collections are out, and we've seen another 2 percent drop. Just when you think things are starting to level off and we might see some improvement, tax revenues continue to drop.
So far, since the smoking ban's initiation and the general economic downturn, VGM tax collections are about $12 million dollars less, which in turn represents an $80 million dollar drop in gross income to the gaming industry.
This drop in revenue is not spread evenly across all of the bars that offer gaming. Some areas of the state haven't seen much of a drop, while other areas that were booming due to the construction industry heyday have experienced significant reductions in revenue.
In 2008 the Bureau of Business and Economic Research of the University of Montana published an article titled “The Business of Gambling in Montana – 2008 Update.” The article was based on a random survey of 1,117 gambling license holders. The Bureau received a response from 444 license holders, which in turn worked out to an overall sampling error associated with the survey of /- 5%. The Bureau's 2008 report builds on similar surveys conducted by the Bureau in 1998 and 2002.
The report stated that Montana's gambling industry consists mostly of the 1,641 establishments with Montana Department of Justice licenses to operate VGMs.
These establishments received about $1.354 billion in revenue in 2008 with gambling activities accounting for $436 million, or roughly 32 percent of total revenue. Other important revenue sources include food (20 percent), alcohol (17 percent) and fuel (23 percent).
The largest expense for Montana gambling establishments was the cost of goods sold. The purchase of gasoline, food, alcohol and other items for resale accounted for about $721 million or roughly 60 percent of total expenses. Payroll costs, including fringe benefits, totaled about $242 million or roughly 20 percent of total expenses.
The report stated that net margins for Montana gambling businesses were roughly 11.1 percent of total revenue. I don't believe that anyone would think this type of return is out of line for any business type.
The report went on to state that based upon the survey, Montana gambling establishments employed 24,014 persons in 2007, both on a full-time and part-time basis.
The report also looked at taxes paid by Montana gambling establishments and estimated they paid $105 million in taxes and fees during calendar year 2007. Of the $105 million paid in taxes $59 million was attributed to VGM taxes and $46 million was attributed to other taxes such as real estate taxes, business income tax, city taxes and or fees and other fees and licenses.
The report concluded that gambling remains a significant industry in Montana and that attempts to downgrade the gambling industry could negatively impact a sizable portion of Montana's economy.
It bothers me that some newspaper editorials commenting on the downturn in gaming revenue have stated that maybe that's a good thing. Whether you like gaming or don't like gaming, we are talking about Montanans' jobs.
Is it a good thing when a location closes its doors and some Montanans lose their jobs or their businesses? I really don't see how someone could think that is a good thing for Montana. Having someone lose their livelihood in my opinion can't ever be considered a good thing.