As Montanans cut back on their spending to cope with the recession, one of the primary ways of saving a little change appears to involve staying out of casinos, at least if the latest numbers from the state Gambling Control Division are any indication. And out of all Montanans, Flathead residents appear to be cutting back on their gambling the most.
While a reduction in gambling may not seem like the most serious consequence of the current downturn, those who work in the gaming industry warn that the tough economy, on top of the smoking ban set to hit the bars and casinos in October, will have a grim effect on the state in the coming year as casinos shed jobs and tax revenue from video gaming plummets.
Tax revenue from video gambling was down 5 percent across Montana in the second quarter of the 2009 fiscal year (October, November and December of 2008) from the same period the previous year, according to a report from the state’s Gambling Control Division, marking a drop from $16 million to $15.2 million.
At this point in the fiscal year, the state has collected about $800,000 less than this time the previous year, according to Rick Ask, the acting administrator for the Gambling Control Division, which could make for the first ever reduction in the amount of revenue collected by the tax – even through previous recessions.
“We may see a decrease for the first time in the 21-year history of the tax,” Ask said.
Out of any major city in Montana, gambling in Kalispell has dropped off the most, with a 16 percent decline in gaming machine tax collections from the second quarter of fiscal year 2008 to 2009.
Revenues from Columbia Falls dropped 6.48 percent in that period, and Whitefish dropped 3.7 percent. Flathead County saw an overall decline of 11.7 percent, from $1.5 million collected in taxes by the state in the second quarter of fiscal year 2008 to $1.3 million in 2009.
The explanation appears obvious: as an area of the state that has been among the hardest hit by the recession, Flathead residents have less cash to spend on a cocktail and a few rounds of Keno at the local hangout.
“I don’t know of anything that’s doing it other than the economy,” Ask said.
Nearly all of Montana’s biggest counties saw declines in gambling revenue, with an 8.5 percent decline in Missoula County and an 8.6 decline in Gallatin County in the second quarter of fiscal year 2009. Communities in eastern Montana that have seen increased employment due to oil production in recent years, like Sydney and Glendive, experienced a rise in gambling tax collection, though those numbers remain much smaller than Flathead County.
Neil Peterson, executive director of the state Gaming Industry Association, anticipates further cutbacks in how much people are willing to spend in casinos and said he was actually surprised the reduction in tax revenue wasn’t greater, based on what he has been hearing from casino operators.
“Our players use discretionary income when they come into our locations,” Peterson said. “When their discretionary income goes down, we have to respect that they may have other priorities.”
In Kalispell, casino operators interviewed gave a mixed response to queries about whether local people are cutting back on their gaming.
Dan Skiles, manager of the Loose Change Nickel Casino, said he has a loyal customer base that continues to come in, but they’re not spending a lot of money either.
“My numbers are not down, but that doesn’t mean they won’t be next month,” Skiles said. “I would say that I haven’t felt the effect.”
But Doug Johnson, owner of the Double J Casino, said he began to see business drop off around the middle of 2008, and after working in the gaming industry for 26 years calls the current climate “the worst I’ve ever seen it.”
He anticipates a hit to his casino of 40 to 50 percent when the smoking ban takes effect, which he believes will result in job cuts across the valley, decreased liquor sales, less tax collection for the state, a decrease in the value of liquor licenses, and new difficulty assessing the value of gaming businesses as their profits sink.
“When you combine the non-smoking issue with the economic climate here, it’ll be ugly,” Johnson said.
He also anticipates his casino and others will be at a deep disadvantage to those on Indian reservations, where state restrictions on maximum payout and smoking won’t apply. If the state increased the maximum payout allowed, that could provide a boost to casinos down the road, Johnson said, but he thinks the severity of this recession, coupled with the smoking ban, could change Montana’s gaming culture permanently.
“It will never be what it used to be,” Johnson said. “Hopefully, I’m a thousand percent wrong, but I’m willing to bet that I’m not.”