[Congressional Record Volume 142, Number 103 (Friday, July 12, 1996)]
[Extensions of Remarks]
[Pages E1283-E1285]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     GAMING AND COLORADO'S ECONOMY

                                 ______
                                 

                           HON. WAYNE ALLARD

                              of colorado

                    in the house of representatives

                         Friday, July 12, 1996

  Mr. ALLARD. Mr. Speaker, as Congress continues to research and debate 
the impacts of gaming, I believe that this report, published by 
Colorado's Office of State Planning and Budgeting, may be a helpful 
resource for members.

            Issue Brief: Gaming Impacts the Colorado Economy

       Demands on Colorado's general fund, the tax money that pays 
     the state's bills, increase each year, primarily from the 
     areas of K-12 education, higher education, human services, 
     public safety and capital construction. The state coffers are 
     filled by a variety of taxes and fees, including individual 
     and corporate income taxes, sales and use taxes, insurance 
     and excise taxes, and interest earnings. State lawmakers and 
     government budget officers try to stretch the general fund as 
     far as possible to maximize services, and they also look for 
     creative ways to raise additional revenues. The gaming 
     industry has been tapped in many states, including Colorado, 
     and each year it contributes a larger amount to the general 
     fund. How this industry began and has grown illustrate 
     clearly that gaming, when allowed to expand even under 
     tightly controlled regulations, is an ongoing source of state 
     revenue. During the last five fiscal years, revenues from the 
     gaming industry have steadily increased, demonstrating a 
     trend expected to continue.


                    Identifying a new revenue source

       Movies about the Old West have left most viewers with vivid 
     impressions of raucous poker games in dusty, smoke-filled 
     saloons. Slick gun-totin' professional gamblers were often 
     paired with innocent greenhorns fresh off the trail. Saloon 
     proprietors were only to glad to help empty their pockets of 
     any money, providing liquor by the bottle, a room and a bath, 
     entertainment, and, of course, gambling.
       Gradually, after statehood was attained, Colorado citizens 
     had a state constitution and volumes of statutes as the basis 
     for their legal systems. Permissive attitudes that had 
     existed in the wide-open towns gave way to tighter control. 
     Opinions regarding gambling obviously changed, because 
     prohibitions against such activities were written into the 
     criminal code in 1913. The legislative declaration states, 
     ``the policy of the general assembly, recognizing the close 
     relationship between professional gambling and other 
     organized crime, (is) to restrain all persons from seeking 
     profit from gambling activities in this state . . . from 
     patronizing such activities . . . to safeguard the public 
     against the evils inducted by common gamblers and common 
     gambling houses . . . '' (Source: Colorado Revised Statutes, 
     18-10-101)
       Prohibiting gambling was thereby deemed good public policy, 
     holding firm until 1949 when the Colorado Racing Commission 
     was created. In recent years, the gaming industry has been 
     expanded into other areas--bingo and raffle, lottery and 
     lotto, and limited stakes gaming. In fiscal year 1995, the 
     four gaming sources provided nearly $152 million in revenue.


                                 racing

       Members of the General assembly began to relax the 
     prohibitions against gaming in 1949 when the Colorado Racing 
     Commission was established. A portion of the legislative 
     declaration reads, ``. . . for the purpose of promoting 
     racing and the recreational, entertainment, and commercial 
     benefits to be derived therefrom; to raise revenue for the 
     general fund . . .'' (Source: Colorado Revised Statutes, 12-
     60-100.2)
       The Racing Commission and the Division of Racing Events are 
     located within the Department of Revenue. The commission's 
     five members are appointed by the Governor and confirmed by 
     the state Senate. They serve staggered terms and represent 
     designated geographical areas and political parties. In 
     addition, the statute specifies that one of the five members 
     must be a practicing veterinarian and two must have racing 
     industry experience. Duties of the commissioners range from 
     promoting the health and safety of the animals to setting 
     racing calendars. They also oversee the division's 
     professional staff, which includes veterinarians, security 
     personnel and other racing officials. The commissioners 
     license racetrack owners and operators and hold them to rigid 
     safety standards for spectators and sanitation guidelines for 
     animals.
       In 1995, Colorado had seven tracks with approved race 
     dates. Four of the tracks feature greyhounds, one is a major 
     horse track, and the remaining two are fair circuit horse 
     tracks. The dog tracks operate in either the north or the 
     south circuit, located either above or below ``a latitudinal 
     line drawn through the location of the Douglas County 
     courthouse in the town of Castle Rock as of June 6, 1991.'' 
     [Colorado Revised Statutes, 12-60-701(2)(a)] In-state and 
     out-of-state simulcast racing is legal in Colorado, and off-
     track betting (OTB) is also available in four licensed 
     locations, three in the Denver area and one in Black Hawk. No 
     one under age 18 is allowed to purchase or redeem any pari-
     mutuel ticket.
       During the 1995 racing season, 322,614 people visited 
     Colorado's horse tracks, with an average daily attendance, 
     including off-track betting, of 1,204. Total attendance at 
     the dog tracks was 1,190,237 during the same period, with a 
     daily average, including off-track betting, of 1,653. In 
     1995, the gross amount wagered, known as the ``handle,'' was 
     just over $257 million, with the average daily handle hitting 
     $260,232, a 21.6% increase over 1994's average daily handle. 
     Occupational licenses and other fees added another $130,095.

[[Page E1284]]

       Colorado's general fund has received over $8 million in 
     revenues from racing in each of the last five fiscal years, 
     with the largest portion coming from the dog tracks. The 
     table that follows shows the state's income in calendar year 
     1995 for the horse and dog race tracks.


                            bingo and raffle

       Colorado voters adopted a constitutional amendment in the 
     1958 general election permitting ``games of chance,'' 
     commonly known as bingo and raffle, effective January 1, 
     1959. Regulatory authority for this additional gaming area 
     was assigned to the Secretary of State.
       Bingo and raffle games are reserved specifically for fund-
     raising activities by charitable or non-profit organizations. 
     Religious, fraternal, educational and veterans' groups clear 
     enough profit from these games of chance to fund extra-
     curricular activities and athletic efforts for youth groups 
     and to subsidize targeted projects of churches and community 
     organizations.
       After purchasing operating licenses, which must be renewed 
     annually, and ensuring that their members have completed the 
     necessary instructional courses, the groups can rent or lease 
     commercial bingo facilities and conduct their games. 
     Licensees are also permitted to sell pull tabs, sometimes 
     called pickles or jar raffles. These are sealed tickets sold 
     to players who then open them, hoping to reveal cash amounts 
     that then become their winnings.
       Licenses must be purchased by the landlords or owners of 
     the bingo halls ($525/renewable annually), and these 
     individuals are prohibited from any involvement in managing 
     or operating the games. The same license fees are paid by the 
     suppliers and manufacturers of equipment necessary to conduct 
     the games, including the bingo cards or sheets, raffle 
     tickets and pulltabs.
       Agents for manufacturers or suppliers pay a $125 fee and 
     must renew annually. Additionally, manufacturers and 
     suppliers are charged 1.1% of their gross equipment sales 
     quarterly. Bingo and raffle licensees pay 0.3% of their gross 
     receipts quarterly.
       In any calendar year a licensee may conduct bingo games on 
     a maximum of 105 occasions. The largest cash prize or value 
     for any single bingo game cannot exceed $250, and the 
     aggregate amount of all prizes on any one occasion is limited 
     to $1,500. Only volunteers from the sponsoring charities can 
     ``work'' at the bingo halls, and any remuneration is illegal. 
     The volunteer workers, while conducting the games, are not 
     allowed to play bingo themselves, and no under age 14 is 
     permitted to assist. Participants must be 18 or older to play 
     bingo or purchase pulltabs.
       The gross amount wagered on bingo and raffle games in 1995 
     was nearly $221 million. State revenues from the tax on 
     proceeds amounted to almost $1.3 million in fiscal year 1994-
     95, while license fees added $171,000. (Source: Secretary of 
     State, Licensing and Elections Division)


                           lottery and lotto

       To generate more revenue for ever-increasing expenses, 
     states began sponsoring lotteries in the mid-1960s, with the 
     first in New Hampshire in 1964. More and more states jumped 
     on the bandwagon, and by the end of the 1970s there were 14 
     state-sponsored lotteries, primarily in New England and other 
     eastern states. This total has since grown to 37 states and 
     the District of Columbia.
       Lottery proceeds are often earmarked for a variety of state 
     purposes, with 17 states using the funds for education. 
     Others use lottery proceeds to help fund economic 
     development, tourism, property tax relief and senior citizen 
     programs, while Nebraska dedicates a portion of its proceeds 
     to its Compulsive Gamblers Assistance Fund. Only 15 states do 
     not designate lottery revenue for specific purposes.
       Colorado added its state-supervised lottery effective 
     January 1, 1981, after a constitutional amendment was passed 
     in the 1980 general election. The amendment stated: ``Unless 
     otherwise provided by statute, all proceeds from the lottery, 
     after deduction of prizes and expenses, shall be allocated to 
     the conservation trust fund of the state for distribution to 
     municipalities and counties for park, recreation, and open 
     space purposes.'' (Source: Colorado Constitution, Section 13, 
     Article XII)
       The Lottery Division was placed in the Department of 
     Revenue, and its governing board is charged with operating 
     and overseeing all aspects of Colorado's lottery. Serving 
     staggered terms, the five Lottery Commission members are 
     appointed by the Governor and confirmed by the state Senate. 
     One of the members must be a law enforcement officer, one an 
     attorney, and one a certified public accountant; and each of 
     these must have five years of experience in his or her field. 
     The commission meets monthly, or more often if necessary, and 
     members are compensated $100 plus expenses for each meeting 
     attended. Headquarters for the division's operations are 
     located in Pueblo.
       There was reluctance by some public officials to having a 
     lottery at all, so it was written into the statutes that the 
     division will terminate on July 1, 1999, unless the General 
     Assembly decides to continue it. To aid the legislators in 
     making this decision, the state auditor will complete a 
     thorough analysis of the lottery by January 15, 1999. The 
     areas to be evaluated include comparing lottery collections 
     and the actual revenue derived, determining whether organized 
     crime related to gambling has increased, and analyzing the 
     competitive effect of the lottery on other forms of legal 
     gambling. In addition, the auditor is charged with deciding 
     if the division adequately protects the public with regard to 
     investigating complaints and assessing the performance of 
     lottery equipment contractors and licensed sales agents.
       The constitutional amendment gave authority to the General 
     Assembly to establish the lottery, so it fell to the 
     legislators to draft the enabling legislation (Colorado 
     Revised Statutes, 24-35-202). While the lawmakers were 
     drawing up the lottery statutes, they were also grappling 
     with a critical need for additional prison space. According 
     to the amendment, the lottery's net proceeds were to go to 
     the Conservation Trust Fund ``unless otherwise provided by 
     statute,'' so the General Assembly determined that lottery 
     proceeds were an appropriate source of revenue for 
     correctional facilities. Instead of all of the proceeds going 
     for local parks, recreational facilities and open space, a 
     large percentage was diverted to build more prison space and 
     to reimburse counties for housing inmates for whom the state 
     had no space. The Distribution of Lottery Proceeds chart 
     shows that the dollars going to capital construction for 
     prisons were significant, while those for the Conservation 
     Trust Fund and the Division of Parks and Recreation were held 
     down until the early 1990s.
       Adding electronic lotto games was seen as a way to generate 
     more money for correctional facilities, and in the mid-80s 
     legislators began to discuss adding lotto. One of the major 
     objections to this plan was that this money was for prison 
     construction only, and there was no funding mechanism in 
     place to operate the new prisons. Nevertheless, lotto was 
     added to the division in 1988, with its proceeds targeted for 
     correctional facilities. In 1991, an additional game, keno, 
     was added.
       Having the lottery proceeds siphoned off for prison needs 
     instigated supporters of what came to be known as Great 
     Outdoors Colorado (GOCO) to sponsor a ballot initiative in 
     the 1992 general election. It stated that lottery proceeds . 
     . . ``. . . shall be guaranteed and permanently dedicated to 
     the preservation, protection, enhancement and management of 
     the state's wildlife, park, river, trail and open space 
     heritage . . .'' (Source: Colorado Constitution, Article 
     XXVIL, Section 1)
       Colorado voters passed the constitutional amendment, which 
     established the State Board of the Great Outdoors Colorado 
     Trust Fund. The board is comprised of twelve public members, 
     two each from the state's six congressional districts, a 
     representative from the State Board of Parks and Outdoor 
     Recreation, one from the Colorado Wildlife Commission, and 
     the Executive Director of the Department of Natural 
     Resources. The public members are to reflect Colorado's 
     gender, ethnic and racial diversity, and they serve staggered 
     four-year terms. They are appointed by the Governor with the 
     state Senate's consent.
       The GOCO board is responsible for administering the trust 
     fund, conducting public hearings to obtain comments on grant 
     proposals and overseeing the professional staff. The 
     constitutional amendment stipulated that prison construction 
     projects then receiving funding from lottery proceeds would 
     be weaned from that source over a five-year span.
       Beginning in 1999, allocation of lottery proceeds will be 
     at the percentages spelled out in the amendment: 40% to the 
     Conservation Trust Fund, 10% to the Division of Parks and 
     Outdoor Recreation, and 50% to the Great Outdoor Colorado 
     Trust Fund. The GOCO portion is capped at $35 million, 
     adjusted for 1992 inflation, and any amount over that will be 
     added to the State's general funds. (Colorado Constitution, 
     Article XXVI Section 3)
       GOCO's share will be distributed equally to four area; the 
     Division of Wildlife, the Division of Parks and Outdoor 
     Recreation, competitive grants to non-profit land 
     conservation organizations, and competitive, matching grants 
     to local governments. Distribution to the GOCO Fund began in 
     1992-93 with $10.9 million, and by 1994-95, GOCO's portion 
     has grown to $23 million. In 1995, lottery and lotto 
     generated $100.6 million for the state, two-thirds of the 
     total gaming revenues.
       Lottery and lotto tickets can be purchased by anyone over 
     18 at licensed outlets, found primarily at convenience and 
     grocery stores. There are just under 2,600 outlets in the 
     state, and they are especially busy Wednesdays and 
     Staturdays, when the winning numbers for the lotto jackpot 
     are drawn. The largest non-lotto prize to date has been 
     $8,350,000, won by a Grand Junction man in 1986, while 
     lotto's largest jackpot, $27 million, was won by a Boulder 
     woman in 1992.


                             limited gaming

       In the 1990 general election Colorado voters approved a 
     constitutional amendment (Colorado Constitution, Article 
     XVIII, Section 9) that legalized limited gaming in the state 
     beginning October 1, 1991. A primary focus for the limited 
     gaming proceeds was to be historical preservation statewide, 
     and much of the basic framework was outlined in the 
     amendment. Responsibility for setting up a commission to 
     operate and oversee gaming activities was assigned to the 
     General Assembly. In their enabling legislation, the 
     lawmakers stated, ``Public confidence and trust can be 
     maintained only by strict regulation of all persons, 
     locations, practices, associations, and activities related to 
     the operation of licensed gaming establishments and the 
     manufacture or distribution of gaming devices and 
     equipment.'' (Source: Colorado Revised Statutes, 12-47.1-102)

[[Page E1285]]

       ``Limited gaming'' was defined as using slot machines or 
     playing card games (blackjack or poker) with a maximum single 
     bet of five dollars. The activity is restricted to just three 
     sites in the state: Central City, Black Hawk and Cripple 
     Creek. Two additional casinos are located in the southwestern 
     part of the state on Indian reservation land belonging to the 
     Ute Mountain Ute and the Southern Ute Tribes. While Colorado 
     has a compact with the two tribes pertaining to gaming 
     activities, their casinos are subject to taxation nor are 
     they required to report their revenues to the state.
       In the three mountain towns, however, gaming is so tightly 
     controlled that even the casino structures must conform to 
     pre-World War I designs so that their architectural styles 
     fit in with the existing buildings. Gaming establishments are 
     confined to the commercial districts of the three towns and 
     cannot operate between 2:00 a.m. and 8:00 a.m.
       The Limited Gaming Control Commission in the Division of 
     Gaming falls under the aegis of the Department of Revenue. 
     Commission members are appointed by the Governor and 
     confirmed by the state Senate. The five members cannot 
     include more than three from one political party, and no two 
     members can live in the same congressional district, which 
     means that five of Colorado's six congressional districts 
     have a representative on the commission. The commission must 
     include a law enforcement officer, a practicing attorney with 
     experience in regulatory law, a certified public accountant 
     or public accountant with corporate finance experience, a 
     management-level business person, and a registered voter who 
     is not employed in any of the preceding professions. Members 
     serve staggered four-year terms and are compensated in a 
     similar manner as the Lottery Commission, though there is a 
     maximum limit of $10,000 per member per year. Five types of 
     licenses, which must be renewed annually, are issued by the 
     commission. Slot machine manufacturers, distributors and 
     operators pay $1,000 per license, while the cost for a retail 
     gaming license is $250. A person in charge of all gaming 
     activities at a casino, known as a key employee, pays $150 
     for an initial license, $100 for a renewal. Support employees 
     pay $100 for original licenses, $75 for renewals.
       In addition to overseeing gaming activities, the commission 
     is required to set the gaming tax rate on an annual basis. 
     Currently in effect is a four-tiered system under which the 
     licensees pay percentages of their adjusted gross proceeds 
     into the Limited Gaming Fund. From that fund, the state 
     Treasurer pays all commission expenses and all costs of 
     running the Division of Gaming. No state general fund-money 
     is used to finance any portion of limited gaming, and other 
     than keeping a required balance in the account, the Treasurer 
     distributes the remainder in the fund at the end of each 
     fiscal year.
       Distribution of the Limited Gaming Fund is established by 
     the General Assembly (Colorado Revised Statutes, 12-47.1-
     701). In addition, the General Assembly has the discretion to 
     further designate portions from the general funds's 50% 
     share. For fiscal year 1994-95, the lawmakers allocated 
     portions to the Tourism Promotion Fund, the Municipal Impact 
     Fund, the Contiguous County Fund and the Colorado Department 
     of Transportation.
       There had been concern that local government entities were 
     ill-equipped to handle the projected increase in crime and 
     traffic control. Some citizens worried that their towns would 
     struggle to deliver some of the most basic necessities, 
     including an adequate water supply, even with the increased 
     money coming their way.
       The Contiguous County Impact Fund is a response to the 
     increased governmental services associated with gaming, 
     including additional law enforcement and social services. 
     Money is distributed to the eight counties immediately 
     surrounding Gilpin and Teller Counties and also to the three 
     counties in southwest Colorado bordering the Indian gaming 
     areas.
       Lawmakers have set aside 2.4% from the general fund 
     allotment for the state Highway Fund beginning in fiscal year 
     1995-96 and continuing each year thereafter. This fund 
     transfer is to help offset the increased cost of road 
     maintenance due to limited gaming.
       The amount earmarked for the state Historical Fund is 
     apportioned in a 20/80 split, with 20% going to the three 
     towns in proportion to their gaming revenues and 80% to other 
     historical preservation and restoration projects throughout 
     the state. (Source Colorado Division of Gaming, Gaming in 
     Colorado--Factbook & 1995 Abstract)


                             looking ahead

       Every year during the legislative session, state lawmakers 
     consider new bills related to the gaming industry. In the 
     1996 session these proposals ran the gamut from prohibiting 
     anyone under 21 from being in gaming areas to establishing a 
     Compulsive Gambling Prevention Program. One bill authorizes 
     the use of portable, hand-held electronic bingo minders that 
     will aid persons with disabilities.
       A bill expanding simulcast coverage of horse races to 
     additional off-track betting sites became law, while one 
     establishing a fee, payable by owners of racing animals, to 
     cover random drug testing of the animals did not. This 
     function is currently being provided by the Department of 
     Revenue at a cost in 1994-95 of nearly $300,000 from the 
     general fund. A resolution was proposed to earmark $7 million 
     or at least 25% of GOCO's annual lottery proceeds for 
     construction and maintenance of highway rest areas. This 
     resolution was not adopted by the lawmakers, nor was another 
     that would have increased the maximum allowable bet in 
     limited gaming establishments from $5 to $100. It would also 
     have permitted additional games, including craps, roulette 
     and baccarat. Similar measures will likely be introduced in 
     future years. Immediately after limited gaming began in the 
     three mountain towns, numerous other communities tried to 
     gain approval to expand this revenue source to their towns. 
     As yet, none has been successful, but the debate continues 
     over the merits of this seemingly ``easy'' source of money. 
     Some critics question whether the historical significance of 
     the gaming towns is being gradually obscured. If this is so, 
     is the revenue brought in a worthwhile tradeoff?
       An editorial in the April 14, 1996, Rocky Mountain News was 
     less than enthusiastic about the expansion of and dependence 
     on gambling as a public revenue source. It stated, ``the main 
     reason for this growth is that states and communities have 
     locked onto gambling as a quick-fix * * * at a time of 
     widespread anti-tax sentiment.'' It also pointed out that the 
     poor gamble more than the affluent, citing a Maryland study 
     which showed people with annual incomes over $50,000 spent 
     $2.57 a week on lottery tickets, while those earning less 
     than $10,000 spent $7.30.
       While some may think using gambling as a revenue source is 
     questionable public policy, an article in the April 16, 1996, 
     issue of The Denver Post pointed out that, according to a 
     recent survey, Colorado residents visit casinos twice as 
     often as the national average. With the popularity of the 
     gaming industry growing so quickly, the article predicts that 
     casinos will pass spectator sports this year and become 
     second only to movies as a form of entertainment in the 
     United States.
       Pros and cons of the gaming industry are argued in many 
     forums, and a consensus opinion will possibly never be 
     achieved. It is apparent, though, that those empowered to 
     implement gaming in Colorado have done so with a great deal 
     of regulatory control. As the industry continues to develop, 
     it appears certain that all of the interested parties will be 
     monitoring it closely.

                          ____________________