Impact of Gambling: Economic Effects More Measurable Than Social Effects
(Letter Report, 04/27/2000, GAO/GGD-00-78).

Pursuant to a congressional request, GAO reviewed the National Gambling
Impact Study Commission's (NGISC) case study on gambling, focusing on:
(1) the economic effects of gambling, particularly on employment,
bankruptcy, and tax revenues and community investment; (2) the social
effects of gambling; (3) the prevalence of pathological gambling; and
(4) whether communities offer incentives to attract gambling
establishments.

GAO noted that: (1) according to NGISC, in 1996, the legalized gambling
industry employed over a half million people, primarily in casinos and
in the pari-mutuel industry; (2) NGISC did not report whether there was
a cause-effect relationship between gambling and bankruptcy for the
general population but found that a higher percentage of pathological
gamblers had filed bankruptcy than others in the general population; (3)
NGISC reported that the casino industry paid $2.9 billion in federal,
state, and local taxes in 1995; (4) Atlantic City casinos paid about
$319 million in gambling taxes to New Jersey and over $86 million in
property taxes to Atlantic City in 1998, representing about 80 percent
of total property taxes for the city's budget; (5) in 1998, the casinos
also paid $41.7 million in school taxes and $25 million in county
property taxes; (6) from 1985 through 1999, about $900 million of casino
community reinvestment funds had been earmarked for community investment
in Atlantic City, including housing, road improvements, and casino hotel
room expansion projects; (7) neither NGISC nor GAO's Atlantic City case
study was able to clearly identify the social effects of gambling for a
variety of reasons; (8) while data on family problems, crime, and
suicide are available, tracking systems generally do not collect data on
the causes of these incidents, so they cannot be linked to gambling; (9)
while studies have shown increases in social costs of pathological
gamblers, it is difficult to isolate whether gambling is the only factor
causing these problems because pathological gamblers often have other
behavior disorders; (10) NGISC reported on three studies completed in
1997 and 1998 that estimated the percentage of U.S. adults classified as
pathological gamblers ranged from 1.2 to 1.6 percent; (11) a NGISC
contractor estimated that about 2.5 million adults are pathological
gamblers and another 3 million adults should be considered problem
gamblers; (12) NGISC did not address whether communities offered
incentives to attract gambling establishments; (13) New Jersey and
Atlantic City officials said casinos do not generally receive subsidies
or tax incentives from the government, but New Jersey has allowed a
portion of casino funds initially mandated for community investment to
be used for casino hotel expansion and to purchase land for hotel
expansion; and (14) other funds are being used to help construct a
tunnel to connect downtown Atlantic City with another area used for
casino hotels and residences.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-00-78
     TITLE:  Impact of Gambling: Economic Effects More Measurable Than
	     Social Effects
      DATE:  04/27/2000
   SUBJECT:  Economic analysis
	     Behavioral sciences research
	     Bankruptcy
	     Taxes
	     Community development
	     Hotels and motels
IDENTIFIER:  Atlantic City (NJ)

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GAO/GGD-00-78

United States General Accounting Office
GAO

Report to the Honorable Frank R. Wolf, House of

Representatives

April 2000

GAO/GGD-00-78

IMPACT OF GAMBLING
Economic Effects More Measurable Than Social

Effects

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Contents
Page 141          GAO/GGD-00-78 Impact of Gambling
Letter                                                                      1
                                                                             
Appendix I                                                                 16
Economic Effects of
Gambling on Communities
                           Effects of Gambling on Employment               16
                           Effects of Gambling on Bankruptcy               21
                           Effects of Gambling on Tax Revenue and          23
                           Community Investment
                                                                             
Appendix II                                                                26
Social Effects of
Gambling on Communities
                           Effects of Gambling on Family Problems          26
                           Effects of Gambling on Suicide                  33
                           Effects of Gambling on Crime                    35
                                                                             
Appendix III                                                               43
Estimated Prevalence of
Pathological Gambling
                                                                             
Appendix IV                                                                48
Incentives to Attract
Gambling Establishments
                                                                             
Appendix V                                                                 51
Objectives, Background
on the National Gambling
Impact Study Commission,
and Scope and
Methodology
                           Objectives                                      51
                           NGISC Background                                51
                           Scope and Methodology                           53
                                                                             
Appendix VI                                                                56
Comments From the New
Jersey Casino Control
Commission
                                                                             
Appendix VII                                                               58
Comments From the Former
Chair of the Former
National Gambling Impact
Study Commission
                           GAO Comments                                    63
                                                                             
Appendix VIII                                                              66
GAO Contacts and Staff
Acknowledgments
                                                                             
Tables                     Table II.1: Opinions of Officials in            33
                           Nine Government and Community Social
                           Services Agencies on the Impact of
                           Casinos on Family Problems in the
                           Atlantic City Area
                           Table II.2: Total Crimes in the United          37
                           States, New Jersey, and Atlantic City
                           1977-1997
                           Table II.3: Property Crimes in the              38
                           United States, New Jersey, and
                           Atlantic City 1977-1997
                           Table II.4: Embezzlement Arrests in             39
                           the United States, New Jersey, and
                           Atlantic City 1977-1997
                           Table II.5: Prostitution Arrests in             40
                           the United States, New Jersey, and
                           Atlantic City 1977-1997
                           Table II.6: Drug Arrests in the United          41
                           States, New Jersey, and Atlantic City
                           1977-1997
                           Table III.1: Diagnostic Criteria for            43
                           Pathological Gambling
                           Table III.2:  Estimate of Adult                 45
                           Pathological and Problem Gambling
                           Prevalence in the United States
                           Table III.3:  Comparing the Estimated           45
                           Pathological Gambling Prevalence With
                           the Estimated Drug Abuse and Alcohol
                           Dependence in the United States
                           Table III.4:  Comparing the Estimated           47
                           Pathological Gambling Prevalence With
                           the Estimated Drug and Alcohol
                           Prevalence in New Jersey
                                                                             
Figures                    Figure 1: 1998 Gambling Industry Gross           5
                           Revenue
                           Figure I.1:  Trends in Private Sector           18
                           Jobs in Atlantic City 1977-1997
                           Figure I.2:  Trends in Welfare                  19
                           Caseload in the United States, New
                           Jersey, and Atlantic City 1977-1997
                           Figure I.3:  Trends in the                      20
                           Unemployment Rate in the United
                           States, New Jersey, and Atlantic City
                           1977-1998
                           Figure I.4:  Trends in Personal                 22
                           Bankruptcy Rates in the United
                           States, New Jersey, and Atlantic
                           County 1990-1998
                           Figure I.5:  Casino Gambling Taxes              24
                           Paid to New Jersey 1978-1998, in 1998
                           Dollars
                           Figure II.1:  Reported Number of                29
                           Domestic Violence Incidents for New
                           Jersey and Atlantic County 1983-1997
                           Figure II.2:  Trends in Substantiated           30
                           Child Abuse and Neglect Cases in New
                           Jersey and Atlantic County 1982-1996
                           Figure II.3:  Trends in Divorce Rate            31
                           in the United States, New Jersey, and
                           Atlantic County 1977, 1980, and 1990
                           Figure II.4:  Percent of Families With          32
                           Children Under 18 that Are Single-
                           Parent Families in the United States,
                           New Jersey, and Atlantic City 1970,
                           1980, and 1990
                           Figure II.5:  Suicides for the United           34
                           States, New Jersey, and Atlantic City
                           1970, 1980, and 1990
                                                                             

Abbreviations

ACIR      Advisory Commission on
Intergovernmental Relations
APA       American Psychiatric Association
CRDA      Casino Reinvestment Development
Authority
DSM-IV    Diagnostic and Statistical Manual of
Mental Disorders
FBI       Federal Bureau of Investigation
IGWB      International Gaming and Wagering
Business
NGISC     National Gambling Impact Study
Commission
NJCCC     New Jersey Casino Control Commission
NORC      National Opinion Research Center at the
University of Chicago
NRC       National Research Council of the
National Academy of Sciences
SJTA      South Jersey Transportation Authority
UCR       Uniform Crime Report

 IMPACT OF GAMBLING  Economic Effects More Measurable Than Social Effects          GAO/GGD-00-78

B-282745

Page 11           GAO/GGD-00-78 Impact of Gambling
     B-282745

April 27, 2000

The Honorable Frank R. Wolf
House of Representatives
 
 Dear Mr. Wolf:

     In 1999, 48 of the 50 states had some form of
legalized gambling. The estimated revenue from
legalized gambling totaled about $54.3 billion in
1998. As you requested, we have (1) examined the
June 1999 National Gambling Impact Study
Commission (NGISC) findings on the economic and
social effects of gambling on communities and
families and (2) explored the issues raised in the
NGISC study through a case study in Atlantic City,
NJ, a large destination gambling city where
gambling was legalized in 1977. As agreed with
you, we focused on

     (1) the economic effects of gambling,
particularly on employment, bankruptcy, and tax
revenues and community investment;

     (2) the social effects of gambling;

     (3) the prevalence of pathological gambling;1
and

     (4) whether communities offer incentives to
attract gambling establishments.

     To address these objectives, we reviewed
NGISC's and its research contractors' reports and
studied gambling effects in Atlantic City, NJ.
Congress created NGISC in 1996 to conduct a
comprehensive study of the social and economic
impacts of gambling in the United States. NGISC
conducted a study, which involved $2.5 million of
research. The research included two national
surveys of U.S. adults and youth, regarding
gambling behavior and attitudes; a survey of
patrons at 21 gambling facilities; case studies in
10 communities; and detailed analysis of a 100-
community sample to determine the economic impact
of casino gambling. NGISC issued its report in
June 1999.2

     For our case study of Atlantic City, we
visited Atlantic City and Trenton, NJ, and
interviewed New Jersey, Atlantic City, and
Atlantic County personnel involved in economic,
social, law enforcement, and regulatory areas, as
well as officials representing nonprofit social
agencies, unions, and casino gambling. We also
analyzed economic and social data provided by
federal, New Jersey, Atlantic City, and Atlantic
County agencies. The approach we used focused on
Atlantic City and did not measure the economic and
social effects associated with or related to
people who gamble in Atlantic City but do not live
in the area. According to a New Jersey official,
about two-thirds of Atlantic City's gamblers live
outside of New Jersey. Also, data for some of the
social indicators we studied were not readily
available for Atlantic City, and we used Atlantic
County data.

     According to U.S. Census data, Atlantic City
is the largest city in Atlantic County and in
1990, Atlantic City represented about 17 percent
of the Atlantic County population. According to
information provided by New Jersey officials,
about 80 percent of Atlantic City hotel casino
employees reside in Atlantic County. In addition,
for crime and suicide rates in Atlantic City, we
used an adjusted population base to include the
average daily number of visitors and nonresident
workers in Atlantic City because visitors become
part of the pool that may either commit suicide or
crimes or become victims of crime.

     We did our work from May 1999 to December
1999 in accordance with generally accepted
government auditing standards. Appendix V provides
further details about our objectives, scope, and
methodology. We requested comments on a draft of
this report from various officials in New Jersey,
the former Chairperson of NGISC, and the National
Opinion Research Center (NORC) at the University
of Chicago.

     Under a separate assignment that you
requested, we are also reviewing the economic and
social effects of convenience gambling (e.g.,
video gambling devices) on selected U.S.
communities and will report on the results of that
review when it is completed.

Results in Brief
Both NGISC and our case study of Atlantic City
were able to obtain data on many of the economic
effects of gambling, but neither could find data
to show a cause-effect relationship between
gambling and bankruptcies. According to NGISC, in
1996, the legalized gambling industry employed
over a half million people, primarily in casinos
and in the pari-mutuel industry. Almost 50,000
employees worked in Atlantic City casinos in 1999.
NGISC did not report whether there was a cause-
effect relationship between gambling and
bankruptcy for the general population but found
that a higher percentage of pathological gamblers
had filed bankruptcy than others in the general
population. The bankruptcy rate in Atlantic County
has increased more than in New Jersey and the
nation, but data were not available on the causes
of the increases.

NGISC reported that the casino industry paid $2.9
billion in federal, state, and local taxes in
1995. Atlantic City casinos paid about $319
million in gambling taxes to New Jersey and over
$86 million in property taxes to Atlantic City in
1998, representing about 80 percent of total
property taxes for the city's budget. In 1998, the
casinos also paid $41.7 million in school taxes
and $25 million in county property taxes. In
addition, from 1985 through June 1999, about $900
million of casino community reinvestment funds had
been earmarked for community investment in
Atlantic City, including housing, road
improvements, and casino hotel room expansion
projects. NGISC did not specifically address
community investment received from gambling
businesses.

Neither NGISC nor our Atlantic City case study was
able to clearly identify the social effects of
gambling for a variety of reasons. The amount of
high quality and relevant research on social
effects is extremely limited. While data on family
problems, crime, and suicide are available,
tracking systems generally do not collect data on
the causes of these incidents, so they cannot be
linked to gambling. Sometimes data were available
only at the county level, not for Atlantic City.
Further, while studies have shown increases in
social costs of pathological gamblers, it is
difficult to isolate whether gambling is the only
factor causing these problems because pathological
gamblers often have other behavior disorders.
While NGISC and our case study in Atlantic City
found some testimonial evidence that gambling,
particularly pathological gambling, has resulted
in increased family problems (such as domestic
violence, child abuse, and divorce), crime, and
suicides, NGISC reached no conclusions on whether
gambling increased family problems, crime, or
suicide for the general population. Similarly, we
found no conclusive evidence on whether or not
gambling caused increased social problems in
Atlantic City.

NGISC reported on three studies completed in 1997
and 1998 that estimated the percentage of U.S.
adults classified as pathological gamblers ranged
from 1.2 to 1.6 percent. A NGISC contractor, who
conducted one of the three studies, estimated that
about 2.5 million adults are pathological gamblers
and another 3 million adults should be considered
problem gamblers (individuals who have gambling
problems but do not meet the psychiatric criteria
for pathological gambling). The most recent study
covering New Jersey (Atlantic City was not
isolated) estimated that in 1990, 1.2 percent of
New Jersey residents were probable pathological
gamblers. We did not attempt to independently
verify the results or methodologies of these
studies.

NGISC reported that pathological and problem
gamblers in the United States cost society
approximately $5 billion per year and an
additional $40 billion in lifetime costs for
productivity reductions, social services, and
creditor losses. However, according to NGISC, the
estimates are based on a small number of tangible
consequences; and, as a result, the figures must
be taken as minimums.

NGISC did not address whether communities offered
incentives to attract gambling establishments. New
Jersey and Atlantic City officials said casinos do
not generally receive subsidies or tax incentives
from the government, but New Jersey has allowed a
portion of casino funds initially mandated for
community investment to be used for casino hotel
expansion ($175 million) and to purchase land for
hotel expansion ($807,000). Also, other funds
($330 million) are being used to help construct a
tunnel to connect downtown Atlantic City with
another area used for casino hotels and
residences.

Background
     Gambling, in one form or another, is now
legal in every state except Hawaii and Utah.3 A
NGISC contractor stated that about 86 percent of
Americans reported having gambled at least once
during their lifetime, and 63 percent reported
having gambled at least once in the previous year.
The percentage of Americans who gamble is
increasing. The 1976 Commission on the Review of
the National Policy Toward Gambling reported that
in 1975, 68 percent of Americans reported gambling
at least once during their lifetime, and 61
percent reported gambling at least once in the
previous year. According to the International
Gaming and Wagering Business

     (IGWB) magazine, gross revenues4 from
legalized gambling in the United States increased
from about $10.4 billion in 1982 ($16.1 billion in
1998 dollars) to about $54.3 billion in 1998.

     As shown in figure 1, the majority of gross
gambling revenue resulted from casinos (41
percent) and lotteries (31 percent).

Figure 1: 1998 Gambling Industry Gross Revenue

Note: Internet gambling revenue totaled about $651
million worldwide in1998, which is not included in
the total U.S. gambling revenues of $54.3 billion
in 1998.
aRevenues from casinos include those from Nevada
and New Jersey slot machines and table games,
other land-based casinos, riverboats, deepwater
cruise ships, cruises-to-nowhere, other commercial
gambling, and noncasino devices.
bRevenues from lotteries include those from video
and other lottery games.
cRevenues from tribal include those from tribal
casinos.
dRevenues from pari-mutuels include those from
horse and greyhound racing and jai alai.
eRevenues from legal bookmaking include sports
bookmaking, horse bookmaking, card rooms,
charitable bingo, and charitable games.
Source: International Gaming and Wagering
Business, August 1999.

Atlantic City
Before the legalization of casino gambling in
Atlantic City in 1977, the city's economy was
declining. During the first half of the century,
Atlantic City was one of the major convention
centers and seaside resorts in the United States.
However, during the 1950s, the city began to
experience a decline. The affordability and ease
of air travel and interstate highways drew
vacationers from Atlantic City to other areas and
the construction of convention centers in other
cities began to draw conventioneers away from the
city. The New Jersey Casino Control Commission
(NJCCC) reported that between 1966 and 1976,
almost 6,000 Atlantic City hotel rooms closed. The
city's population declined about 20 percent
between 1960 and 1970. When conventioneers began
to hold more conventions elsewhere and hotels
began to close, employment opportunities in
Atlantic City also began to diminish. Atlantic
City's unemployment rate increased from 10.6
percent in 1972 to 18.1 percent in 1977.
Nationwide, the unemployment rate increased from
5.6 percent in 1972 to 7.1 percent in 1977.

In an attempt to help revitalize Atlantic City's
economy, New Jersey (following voters' approval of
an amendment to the state constitution) enacted
the Casino Control Act in 1977 to authorize casino
gambling in hotels. The act included the following
statement:

"Legalized casino gaming has been approved by the
citizens of New Jersey as a unique tool of urban
redevelopment for Atlantic City. . .[and will]
attract new investment capital to New Jersey in
general and to Atlantic City in particular." 5

The first casino began operating in Atlantic City
in May 1978 and as of January 2000, the city had
12 casinos.

Economic Effects of Gambling on Communities
     NGISC and its contractors reported that
legalized gambling, especially in casinos, has
resulted in an increased number of jobs in
communities and decreased the unemployment rate
and unemployment insurance payments. According to
a study cited by NGISC, in 1996 the legalized
gambling industry employed more than half a
million people, with total salaries of more than
$15 billion. Information provided by New Jersey
officials showed that the casinos in Atlantic City
employed about 50,000 people. However, between
1977 and 1998, Atlantic City's unemployment rate
remained higher than New Jersey and national rates
(almost two times higher during some years).

     NGISC and its contractors did not report
whether there was a cause-effect relationship
between gambling and bankruptcy for the general
population. However, they found that a higher
percentage of individuals suffering from
pathological gambling had filed for bankruptcy
than others in the general population. During 1990
to 1998, the bankruptcy rate in Atlantic County,
NJ, was higher than New Jersey and national rates.
Between 1994 and 1998, while bankruptcies per
100,000 population for New Jersey increased from
282 to 555 (about a two-fold increase), the rate
for Atlantic County increased from 385 to 1,019
(about a three-fold increase)6 The national trend
was similar to New Jersey's trend. Government and
community officials said they did not know whether
gambling was a contributing factor.

     A study conducted for the gambling industry
and cited by NGISC estimated that the casino
industry paid $2.9 billion in federal, state, and
local taxes in 1995. NGISC also reported that
local officials in jurisdictions where casinos
were located testified to the increased revenues
and community improvements made possible with the
advent of gambling in their communities. One NGISC
contractor reported that net revenue (sales minus
prizes and operating costs) from state lotteries
totaled about $11 billion in 1997, representing
about 2 percent of the states' own-source general
revenue7.

     Atlantic City casinos dominated the city's
economy and in 1998, paid about $319 million in
gaming taxes to New Jersey and over $86 million in
property taxes to Atlantic City, about 80 percent
of total property taxes for the city's budget. In
1998, the casinos also paid $41.7 million in
school taxes and $25 million in county property
taxes. In addition, state legislation mandates
that the casinos invest in the community. From
1985 through June 1999, about $900 million of
casino funds had been earmarked for casino
community investment in Atlantic City, including
housing, casino hotel room expansion, and road
construction/improvements projects. NGISC did not
specifically address community investment derived
from gambling businesses. See appendix I for a
more detailed discussion on the economic impact of
gambling.

Social Effects of Gambling on Communities
     The social effects of gambling on communities
are more difficult to measure than the economic
effects, primarily because of limited quality data
on social effects, the complexity of identifying
and measuring social effects, and the difficulty
of establishing a cause-effect relationship
between gambling and social problems due to the
difficulty of isolating any one factor that causes
social problems. NGISC made no conclusion on
whether or not gambling has increased family
problems, crime, or suicide for the general
population.

     NGISC and our case study in Atlantic City
found mostly testimonial evidence that
pathological gambling has resulted in increased
crime and family problems (such as domestic
violence, child abuse, divorce, and homelessness).
However, because pathological gambling in many
cases is accompanied by other disorders, it is
difficult to determine whether gambling is the
only or primary factor causing these problems.

     However, an analysis (conducted by NORC and
reported in the NGISC report on the economic cost
associated with problem and pathological gambling)
isolated the effect of problem and pathological
gambling from other effects, such as drug and
alcohol abuse. NORC reported that while the annual
economic cost estimated for problem and
pathological gambling in 1998 was $5 billion, 1995
estimates were $110 billion for drug abuse and
$166.5 billion for alcohol abuse. According to
NGISC, NORC focused on a small number of tangible
consequences and, as a result, its figures on the
costs associated with problem and pathological
gambling must be taken as minimums.

We found no conclusive evidence on whether or not
gambling caused increased social problems in
Atlantic City. Data on family problems and suicide
prior to 1978 (the year the casinos began
operating in Atlantic City) were not readily
available for all indicators. However, while we
were not able to compare data for family problems
before and after the casinos began operating, some
family problems, including domestic violence
incidents, child abuse, divorce, single-parent
families, and suicide increased in some of the
years after casinos began operating and decreased
in other years. Some crime rates, including total
crime,8 property crime, embezzlement, and
prostitution increased immediately after casinos
began operating in Atlantic City. However,
increases based on Atlantic City's adjusted
population (adjusted to include visitors and
nonresident workers) were less than increases
based on the unadjusted population (Atlantic
City's residents only).9

Some of the officials we interviewed from 26
government, community, and private industry
organizations in New Jersey viewed the casinos as
contributing, at least in part, to the increases
in some social problems-with the exception of
suicides. However, other officials said the
casinos had no impact on the increased social
problems. See appendix II for a more detailed
discussion on the social effects of gambling.

Estimated Prevalence of Pathological Gambling
     NGISC reported on three studies completed in
1997 and 1998 that estimated the percentage of
U.S. adults classified as pathological gamblers
ranged from 1.2 to 1.6 percent. A NGISC
contractor, who conducted one of the three
studies, estimated that about 2.5 million adults
were pathological gamblers and another 3 million
adults should be considered problem gamblers
(individuals who have gambling problems but do not
meet the psychiatric criteria for pathological
gambling). The most recent study covering New
Jersey (Atlantic City was not isolated), issued in
1990, estimated that the percentage of New Jersey
residents classified as probable pathological
gamblers was 1.2 percent. See appendix III for a
more detailed discussion on the prevalence of
gambling disorders.

Incentives to Attract Gambling Establishments
NGISC did not address whether communities offered
incentives to attract gambling establishments.

According to New Jersey and Atlantic City
officials, the state and local governments have
not provided incentives to the casinos as a means
of enticing them to come to and/or remain in
Atlantic City. However, New Jersey has allowed a
portion of the casino obligations, initially
mandated for community investment, to be used for
casino hotel expansion and to purchase land for
hotel expansion. In addition, other funds are
being used to pay most of the cost of constructing
a tunnel in Atlantic City to connect downtown
Atlantic City with another local area used for
casino hotels and residential purposes. See
appendix IV for a more detailed discussion on
incentives to attract gambling interests.

Agency Comments
We requested comments on a draft of this report
from the Mayor of Atlantic City, NJ; the Chairman
of the NJCCC; the Director of New Jersey's
Division of Gaming Enforcement; the Chair of the
former NGISC; and the Senior Research Vice
President of NORC.

On February 15, 2000, the Senior Public
Information Assistant for New Jersey Division of
Gaming Enforcement orally stated that the Division
had no comments.

On February 18, 2000, the Chief of Staff for the
Mayor of Atlantic City, NJ orally stated that the
Mayor generally agreed with our report and thought
it was well done.

We received written comments from the Chairman of
NJCCC in a letter dated February 10, 2000, which
are reproduced in appendix VI. The Chairman said
that our draft report provided a thorough analysis
of the quantifiable impacts that casinos have had
on Atlantic City but that excluding the
surrounding Atlantic County metropolitan area
provides an incomplete picture of the overall
impacts of the casinos. The Chairman noted that
Atlantic County's unemployment rate decreased from
12.2 percent in 1976 to 7.8 percent in 1998, and
casinos paid over $41 million in school taxes and
another $25 million to support county government
in addition to the $86.6 million in property taxes
paid to the city. The Chairman agreed with our
conclusions that it is difficult to quantify some
of the perceived negative effects from casinos.
The Chairman also said that NJCCC believes the
positive effects casinos have generated outweigh
the perceived negative effects. While our report
focuses on Atlantic City, it also includes some
information on Atlantic County, including
information on bankruptcy and social indicators,
such as divorce rates and domestic violence. We
have, however, added the school taxes and other
information the Chairman provided to the report.

     We also received written comments from the
Senior Research Vice President of NORC in a letter
dated March 10, 2000. He stated that our draft
report was generally satisfactory and made two
observations. First, he questioned our conclusion
based on a localized methodology that economic
effects are more measurable than social effects.
He said that Atlantic City is a typical
"destination-style" gambling operation where, as
stated in the draft report, most of the gamblers
live outside of the gambling area and thus, a
substantial share of the economic benefits are
captured locally while the bulk of the social
costs are exported elsewhere-where the gamblers
actually reside. He said that this is a fact that
should be emphasized more in the report. We
modified the report to make this point clearer.
Secondly, he noted our statement in the draft
report that it is difficult to isolate whether
gambling is the only factor causing problems,
because pathological gamblers have other behavior
disorders-a situation termed comorbidity. In
addition, as NORC suggested, we acknowledged in
this report that NGISC addressed the problem of
comorbidity in its report.

We also received written comments from the Chair
of the former NGISC in a letter dated February 14,
2000, which is reproduced in appendix VII. The
Chair said that our conclusion that not enough
information is available to make a completely
informed decision regarding the true social effect
of the gambling industry is consistent with
NGISC's final report. She noted several areas
where she believed that we should add information
to our report for additional perspective and
context. We added such information to our report
if we had it or if it was readily available.
Appendix VII contains our additional responses to
her comments.

We are sending copies of this report to Senator
Fred Thompson, Chairman, and Senator Joseph I.
Lieberman, Ranking Minority Member, Senate
Committee on Governmental Affairs; Representative
Dan Burton, Chairman, and Representative Henry A.
Waxman, Ranking Minority Member, House Committee
on Government Reform; Senator Orrin Hatch,
Chairman, and Senator Patrick Leahy, Ranking
Minority Member, Senate Judiciary Committee;
Representative J. Henry Hyde, Chairman, and
Representative John Conyers, Jr., Ranking Minority
Member, House Judiciary Committee; and other
interested parties. Copies will be made available
to others upon request.

     If you have any questions regarding this
report, please call me or John Baldwin on (202)
512-8387. Key contributors to this report are
acknowledged in appendix VIII.

Sincerely yours,

Bernard L. Ungar
Director, Government Business
 Operations Issues
_______________________________
1 The American Psychiatric Association (APA)
defines pathological gambling as a pathological
disorder having the essential feature of
"persistent and recurrent maladaptive gambling
behavior.that disrupts personal, family, or
vocational pursuits."
2 The National Gambling Impact Study Commission
Final Report, June 18, 1999. We also reviewed
information in NGISC's contractors reports, some
of which was not included in NGISC's report.
3 Pari-mutuel horse-track racing is legal in
Tennessee, but the state had no racetracks in
operation as of December 1999. Hawaii permits
"social gambling"-certain noncommercial gambling
among adults. Haw. Rev. Stat.  712-1231.
4 Gross gambling revenues represent dollars
wagered minus payouts. As reported by the New
Jersey Casino Control Commission (NJCCC), casino
gross revenue is the amount of money that casinos
keep after all bets have been paid but before
operating costs, interest, depreciation, taxes,
and amortization are deducted.
5 N.J. Stat. Ann. 5:12-1.b.(4). The legislation
prohibits various persons with ties to the casino
industry from making contributions to candidates
seeking public office in New Jersey, any committee
of a political party in New Jersey, or any group
organized in support of any such candidate or
political party, N.J. Stat. Ann. 5:12-138.
6 According to an official of the Administrative
Office of the U.S. Courts, Atlantic County
bankruptcy filing data were not readily obtainable
until 1990. Thus, we were unable to show whether
the bankruptcy rate had changed after casinos
began operating in Atlantic City (in 1978).
7 As defined in a report by Clotfelter and Cook,
NGISC contractors, own-source general revenue
excludes intergovernmental grants as well as
special sources of revenue such as that generated
by utilities or liquor stores.
8 Total crime includes violent crime (murder,
forcible rape, robbery, and aggravated assault)
and property crimes (burglary, larceny-theft, and
motor vehicle theft).
9 While researchers disagree over whether to use
the adjusted or unadjusted population when
calculating crime rates, we believe that use of
the adjusted population is the more appropriate
method because, as some researchers have stated,
visitors become part of the pool that may either
commit or become victims of crime.

Appendix I
Economic Effects of Gambling on Communities
Page 18           GAO/GGD-00-78 Impact of Gambling
Legalized gambling, especially casino gambling,
has provided increased employment opportunities.
NGISC reported that in 1996, the legalized
gambling industry employed more than half a
million people in the United States. Casinos have
created about 50,000 jobs in Atlantic City.

Although NGISC contractors' findings revealed a
link between pathological gambling and increased
bankruptcy, NGISC did not report whether such a
link between the general population and gambling
was found. Since 1994, Atlantic County has had a
higher bankruptcy rate than New Jersey and
national bankruptcy rates. New Jersey and local
officials in the Atlantic City area said they did
not know why Atlantic County had a higher rate of
bankruptcy and did not know whether gambling was a
contributing factor.

NGISC cited a report conducted for the gambling
industry that indicated that federal, state, and
local tax revenues generated by casinos were about
$2.9 billion in 1995. NGISC contractors reported
that states also receive substantial revenue from
lotteries. NGISC did not report on how all of the
gambling revenues were used or how much community
investment was made with gambling revenues. Tax
revenue derived from the casinos in Atlantic City
increased from $10.7 million in 1978 ($22.6
million in 1998 dollars) to $319.3 million in
1998. In addition, from 1985 through June 1999,
over $900 million of casinos' community
reinvestment funds have been earmarked for
redevelopment projects in Atlantic City.

Effects of Gambling on Employment
NGISC reported that in 1996, the legalized
gambling industry employed more than half a
million people who earned more than $15 billion in
salaries. As reported by NGISC, because they are
highly labor intensive, the casino and pari-mutuel
gambling segments provide higher employment
potential than other gambling segments. NGISC
reported that in 1995, the casino industry
directly employed about 300,000 people, and pari-
mutuel employment has been estimated at 119,000
jobs.

According to the NGISC report, convenience
gambling, such as video poker machines meant to
attract the business of local residents, did not
offer the jobs and economic benefits found in
destination resort casinos, which bring in money
from outside the immediate community.

NGISC noted that most local and tribal government
officials from communities with casino gambling
testified that casinos had a positive economic
impact on their communities. NGISC also cited the
testimony of employees who said that, with the
introduction of casino gambling, they were able to
find better jobs with health and retirement
benefits.

In addition, in 1998, using a 100-community sample
that included 40 communities where casinos had
been introduced between 1980 and 1997, the
National Opinion Research Center at the University
of Chicago (NORC), an NGISC contractor, analyzed
data from 1980 to 1997 to determine the impact of
casinos on jobs and other economic indicators.
NORC reported that communities with a casino
within a 50-mile radius experienced a 1-percent
decrease in the unemployment rate, a 17-percent
decrease in per capita unemployment insurance
payments, and a 13-percent decrease in per capita
income maintenance (welfare) costs.

In 1998, NORC also interviewed officials from 10
randomly selected communities that were located
within a 50-mile radius of at least one major
casino (a casino having at least 500 gambling
devices) to obtain additional information on the
effects of casino gambling. While respondents in 5
of 9 communities cited new job opportunities as a
very positive advantage of casinos, respondents in
4 of the 9 communities indicated that unemployment
remained a problem. In addition, respondents in 6
of the 9 communities said that the casinos, for
the most part, provided low paying and/or part
time jobs with no benefits.

Another NGISC contractor, Adam Rose and
Associates, who reviewed 36 studies on the
economic impact of casino gambling, reported that
some researchers characterized casino jobs as
relatively low-skilled and low-paying service
jobs. However, the firm also noted that unionized
casino workers were 10 times more likely than the
national average to have health benefits paid for
in full and have pension benefits that exceed the
national average.

In Atlantic City, total jobs increased from about
21,000 in 1977, 1 year before casinos began
operating, to about 62,000 in 1997, as shown in
figure I.1. The increase in Atlantic City's
employment was driven by the hotel casinos.

Figure I.1:  Trends in Private Sector Jobs in
Atlantic City 1977-1997

Note: According to information provided by the New
Jersey Casino Control Commission, the number of
hotel casino jobs reflects full-time positions.
Source: New Jersey Department of Labor and New
Jersey Casino Control Commission.

Information provided by the New Jersey Casino
Control Commission (NJCCC) showed that as of July
1999, 48,704 employees (full and part time) worked
in Atlantic City's hotel casinos. Of the total
number of hotel casino employees, 38,861 (or about
80 percent) were residents of Atlantic County,
including about 11,000 Atlantic City residents (or
about 23 percent of the casino jobs).1 Both
government and community officials said jobs
produced by the hotel casinos partly contributed
to the steep decrease in the Atlantic City welfare
caseload during the early 1980s (as shown in
figure I.2).

Figure I.2:  Trends in Welfare Caseload in the
United States, New Jersey, and Atlantic City 1977-
1997

Note: In calculating welfare caseload per 10,000
population, we did not adjust Atlantic City's
population (to include visitors and nonresident
workers) because welfare recipients are local
residents only. Atlantic County officials said
that over the last 20 years, Atlantic City
residents have represented about 50 percent of the
county's welfare caseload.
Source: GAO analysis of data obtained from the
Atlantic County Department of Family and Community
Development, the Bureau of the Census, and the U.
S. Department of Health and Human Services.

Atlantic County officials said that the decrease
in the welfare caseload resulted mostly from
regulations established by federal and local
governments to reduce welfare rolls.

Although Atlantic City's unemployment rate
decreased from 18.1 percent in 1977 to 13.4
percent in 1998, the city's rate has remained
higher than New Jersey and national rates during
this time frame, as shown in figure I.3.

Figure I.3:  Trends in the Unemployment Rate in
the United States, New Jersey, and Atlantic City
1977-1998

Note: According to an official in New Jersey's
Department of Labor/Employment Commission, an
increase in the unemployment rate occurred between
1990 and 1992 because of the national recession.
Source: GAO analysis of data obtained from the
Bureau of Labor Statistics, U.S. Department of
Labor, and New Jersey Department of Labor.

Officials we interviewed in the Atlantic City area
said that unemployment in Atlantic City is still a
problem. They provided a variety of reasons for
the unemployment rate, including that (1) the more
prosperous middle class moved out of the city
leaving behind a younger and poorer population
whose work habits and substance abuse problems
contribute to their unemployment and (2) the
unemployment rate is indicative of Atlantic City's
economy remaining to some degree seasonal where
most unemployment occurs after the summer tourist
season ends. Some officials said that Atlantic
City's unemployment rate shows that casinos did
not and could not solve all of the city's
problems.

Several of the state and local government and
community representatives we interviewed in New
Jersey said that casinos had hurt small
businesses, with restaurants cited most often. An
Atlantic City official said that restaurants
suffered because the casinos established over 100
inhouse restaurants. NJCCC agreed and reported
that the noncasino eating and drinking
establishments had experienced tough competition
since the onset of casino gambling and that this
partially resulted from the former statutory
requirement that casino hotels establish
restaurants within their properties. State
officials said this requirement no longer exists.

We reviewed data that showed that in 1977 (before
casinos), there were 242 eating and drinking
establishments in Atlantic City. 2 In 1981 (3
years after casinos began operating), the number
had declined to 160, and by 1996 (19 years after
casinos began operating), the number had declined
to 142.3 One city official said that even though
the number of restaurants had decreased, the
decrease has not had a negative impact upon the
number of restaurant jobs, because the number of
employees working in casino restaurants is greater
than the number of persons who had been employed
by the now closed restaurants.

Effects of Gambling on Bankruptcy
While NGISC reported that community leaders
testified that personal indebtedness tended to
increase with legalized gambling, NORC's 1998
analysis of data on 100 communities between 1980
and 1997 showed no significant change in per
capita bankruptcy rates in communities where
casinos were introduced. However, NORC's 1998
national telephone survey of 2,417 adults
regarding gambling behavior and attitudes found
that 19.2 percent of the respondents who were
classified as lifetime pathological gamblers
reported filing bankruptcy, compared with 4.2
percent for nongamblers and 5.5 percent for low-
risk gamblers.

Personal bankruptcy data provided by the
Administrative Office of the U.S. Courts showed
that the bankruptcy rate for Atlantic County was
higher than the New Jersey and national rates
during the period 1990 to 1998, as shown in figure
I.4.

Figure I.4:  Trends in Personal Bankruptcy Rates
in the United States, New Jersey, and Atlantic
County 1990-1998

Note: Bankruptcy data for Atlantic City were not
readily available.

Source: GAO analysis of data obtained from the
Administrative Office of the U.S. Courts and the
Bureau of the Census.

Between 1994 and 1998, while the bankruptcy rate
per 100,000 population for New Jersey increased
from 282 to 555, the rate for Atlantic County
increased from 385 to 1,019. The national trend
was similar to New Jersey's trend. We were unable
to obtain data to show whether the bankruptcy rate
had increased after the casinos began operating in
Atlantic City (in 1978) because, according to an
official of the Administrative Office of the U. S.
Courts, Atlantic County bankruptcy filing data
before 1990 were not readily obtainable.

We asked officials in 16 of the 26 government
agencies and community and private industry
organizations we contacted in New Jersey about the
Atlantic County bankruptcy rate. Most of the
officials said they were not sure why the
bankruptcy rate in Atlantic County was much higher
than the New Jersey rate (nearly twice as high in
1998) and did not know whether gambling was a
contributing factor. An official, who had been
involved in Atlantic City's economic activities
for several years, said that some bankruptcies
occurred because of unwise business decisions made
by persons drawn to Atlantic City by the casinos.

Effects of Gambling on Tax Revenue and Community
Investment
NGISC reported that local officials in
jurisdictions where casinos were located testified
about the increased revenues and community
improvements made possible with the advent of
gambling in their communities. It also cited the
testimony of tribal members who said that, in
addition to new jobs, legalized gambling provided
their communities with improved hospitals,
clinics, schools, and the capital to invest in new
businesses.

NGISC also reported that an Arthur Anderson study
conducted for the American Gaming Association
reported that, in 1995, the casino industry paid a
total of $2.9 billion in taxes to federal, state,
and local jurisdictions.

Based on its review of economic impact studies for
NGISC, Adam Rose and Associates reported that
taxes from casino gambling typically more than pay
for government expenditures on roads, police
services, and fire protection needed to support
the casinos. The firm noted that it did not
consider social costs in its analysis and said
that social costs might be significant. The firm
also reported that casinos are subject to higher
levels of taxation than other enterprises in most
locations.

Another NGISC contractor, Clotfelter and Cook,
reported that in 1997, net revenue (sales minus
prizes and operating costs) from state lotteries
totaled about $11 billion. The contractors
reported that the average net revenue state
treasuries received from the average dollar
wagered on lotteries was 33 cents. The firm
reported that, in 1997, lottery revenue from the
38 state lotteries4 represented about 2.2 percent
of own-source general revenue5 compared with about
25 percent for state general sales taxes and 25
percent for state income taxes. According to
Clotfelter and Cook, 16 of the 38 states earmarked
all or part of lottery revenues for education, 10
allocated lottery revenue to a general fund, and
the other states used the lottery funds for a wide
range of purposes including parks and recreation,
tax relief, economic development, sports stadiums,
and police and fireman pensions.

New Jersey enacted legislation that set an 8
percent tax rate on Atlantic City's casinos' gross
gambling revenue and earmarked it for social
services programs to benefit senior citizens and
the disabled in New Jersey. As shown in figure
1.5, the annual gambling taxes paid by casinos
increased from $22.6 million in 1978 (in 1998
dollars) to $319.3 million in 1998.

Figure I.5:  Casino Gambling Taxes Paid to New
Jersey 1978-1998, in 1998 Dollars

Note: The dollars in this figure have been
adjusted to 1998 dollars. The index used to
convert 1978-1997 dollars to 1998 dollars was the
Chain-Type Price Index for GDP from the Department
of Commerce's Bureau of Economic Analysis.
Source: New Jersey Casino Control Commission.

Casinos also paid about $86.6 million in property
taxes to Atlantic City in 1998, which was about 80
percent of total property taxes for Atlantic
City's budget. In 1998, the casinos also paid
$41.7 million in school taxes and $25 million in
property taxes to the county. In addition,
information provided by New Jersey officials
showed that Atlantic City's property value
increased from $300 million in 1977 ($677 million
in 1998 dollars) to $6.7 billion in 1998, with
much of the increase reflecting the value of
casino properties. Information provided by New
Jersey officials showed that local real estate tax
rates decreased from $7.95 per $100 of assessed
valuation in 1977 ($17.94 per $100 in 1998
dollars) to $2.88 per $100 of assessed valuation
in 1998.

Other taxes and fees paid by casinos include
Atlantic City tourism promotion, parking, and
luxury taxes and fees for a total of about $40
million in 1998. Tax revenue generated by casinos
from insurance, state corporate taxes, and state
personal income tax totaled about $87 million in
1995.6 In addition, casinos invested in community
redevelopment projects, which are discussed below.

The casinos make investment in the community
through the Casino Reinvestment Development
Authority (CRDA). In 1984, New Jersey enacted
legislation that created CRDA and required casinos
to either pay 2.5 percent of their gross revenue
as a tax or invest 1.25 percent of their gross
revenue in obligation deposits to CRDA for
community investment throughout New Jersey.7 In
addition, New Jersey enacted legislation in 1993
that imposed a daily parking fee on motor vehicles
parked in facilities either owned or operated by
casinos. The fee as of July 1999 was $2.00; $1.50
of the fee is to be deposited into CRDA.

Information provided by CRDA shows that, from 1985
through June 1999, CRDA had earmarked about $900
million of casino reinvestment funds for community
development projects in Atlantic City.8 CRDA
groups community development projects into four
main categories: housing, nonhousing, casino hotel
room expansion, and Atlantic City corridor
projects. The greatest percentage (30.9) of the
casino funds have been earmarked for nonhousing
projects, which include such activities as road
construction/improvements, beautification
projects, and activities directed toward youth.

_______________________________
1 For the last 3 census years, 1970, 1980, and
1990, Atlantic City's residents represented about
27, 21, and 17 percent of Atlantic's County's
population, respectively.
2We reviewed data from Atlantic City's Yellow
Pages, the Bureau of the Census Zone Improvement
Plan (ZIP) code database that showed the number
and type of establishments by ZIP code, the U.S.
Postal Service listing of Atlantic City ZIP codes,
along with the Department of Commerce's standard
industry classification manual.
3 Our number of restaurants for 1981 and 1996
contained both casino and noncasino restaurants
because according to NJCCC, information on the
number of casino restaurants was not readily
available.
4The 38 state lotteries include 37 states and the
District of Columbia.
5As defined in Clotfelter and Cook report, own-
source general revenue excludes intergovernmental
grants as well as special sources of revenue, such
as that generated by utilities or liquor stores.
6According to a New Jersey official, the 1995 data
were the most current data available for these
taxes, and the insurance tax includes taxes
withheld from casino employees and the state
personal income tax referred to state income taxes
withheld from casino industry employees.
7 The casinos have the option to purchase CRDA
issued bonds or make direct investments in
projects. According to a CRDA official, the
casinos also may make donations for a CRDA
project. If a casino purchases bonds issued by or
offered through CRDA or makes other investments
approved by CRDA, the casino has the possibility
to receive the return of principal and a return on
its investment. However, neither the State of New
Jersey nor any political subdivision is authorized
to guarantee any return of principal or interest
on any purchase of bonds or approved eligible
investments. N. J. Stat. Ann. 5:12-144.1.i, N. J.
Stat. Ann. 5:12-162.i.
8A 15-member board governs CRDA and decides which
projects will be funded with casino reinvestment
funds. Board membership includes the Mayor of
Atlantic City, state personnel, and members from
the casino industry and the general public.

Appendix II
Social Effects of Gambling on Communities
Page 42           GAO/GGD-00-78 Impact of Gambling
Measuring the social effects of gambling upon
communities is difficult, primarily because of the
limited amount of quality data on the social
effects and the complexity of establishing a cause-
effect relationship between gambling and social
problems due to the difficulty of isolating
gambling from other factors, such as substance
abuse and personality disorders, that cause social
problems.

NGISC did not report whether gambling leads to an
increase in social costs, such as increased family
problems, crime, and suicide for the general
population. However, NGISC determined that
individuals suffering from pathological gambling
engaged in destructive family behavior, committed
more crime than other citizens, and had higher
suicide rates. While NGISC found that these social
problems are associated with pathological
gambling, quantifying these costs is difficult
because of hard-to-measure and hard-to-identify
damages or emotional costs, such as the impact of
addictive behaviors upon families. Also, because
people with gambling disorders often also have
other behavior problems, such as substance abuse,
social scientists have not been able to isolate
the amount of increased social costs caused by
gambling.

We found no conclusive evidence on whether or not
gambling increased social problems in Atlantic
City. Some family problems, including domestic
violence and child abuse; crime; and suicide
increased during some of the years after the
casinos began operating and decreased in others.
Some of the individuals we interviewed in New
Jersey viewed the casinos, at least partly, as
contributing to the increases-with the exception
of suicides. However, other officials said the
casinos had no impact on the increased social
problems.

Effects of Gambling on Family Problems
     NGISC stated that based on testimonial
accounts presented in its hearings, individuals
who suffer from problem or pathological gambling
engage in destructive family behavior, such as
domestic violence, divorce, and homelessness.
NGISC reported that one of its research
contractors, the National Research Council of the
National Academy of Sciences (NRC), cited two
studies showing that between one quarter and one
half of spouses of pathological gamblers had been
abused by their spouses. In addition, respondents
in 6 of the 10 communities located within a 50-
mile radius of a casino that were in NORC's case
studies reported their perception of an increase
in domestic violence after the opening of casinos.

NGISC also reported that children of individuals
suffering from pathological gambling are often
prone to suffer abuse and neglect. According to
the report, NGISC heard testimony of cases in
which parents or caretakers locked children in
cars for an extended period of time while they
gambled. NGISC discussed NRC's review of two
studies indicating that between 10 and 17 percent
of children of individuals suffering from
pathological gambling had been abused by those
parents. NORC also reported that in its 10-
community case study, 6 communities had one or
more respondents who said they had seen increases
in child neglect and attributed this increase, at
least in part, to parents leaving their children
alone at home or in casino lobbies and parking
lots while they gambled.

NGISC also reported that testimonial statements
were made indicating that pathological gambling
and divorce were frequently linked. In addition,
the NORC survey found that 53.5 percent of
identified pathological gamblers reported having
been divorced. This figure contrasts with the 18.2
percent of nongamblers and 29.8 percent of low-
risk gamblers who reported having been divorced.

Similarly, gambling disorders possibly contribute
to the homeless population. Three surveys of
homeless populations cited by NGISC (including one
conducted by the Atlantic City Rescue Mission)
reported that 18 to 33 percent of homeless
individuals cited gambling as a contributing
factor or cause of their homelessness. NGISC
cautioned that it remains unclear whether
homelessness is actually caused by gambling or
other factors related to addictive behavior.

Concerning a direct cost associated with the
pathological gambler, NGISC reported that in 1998,
NORC estimated that the annual average cost to
society for problem and pathological gamblers for
job loss, unemployment and welfare benefits, poor
physical and mental health, and gambling disorder
treatments were approximately $1,200 per
pathological gambler and $715 per problem gambler.
NGISC also stated that NORC further estimated that
the lifetime costs (bankruptcy, arrests,
imprisonment, legal fees for divorce, and so
forth) for problem gamblers were $5,130 per
gambler and $10,550 per pathological gambler. NORC
concluded that overall, pathological and problem
gamblers in the United States cost society
approximately $5 billion per year and an
additional $40 billion in lifetime costs for
productivity reductions, social services, and
creditor losses.

NORC's analyses on the economic costs associated
with problem and pathological gambling, reported
in NGISC's report, isolated the effect of problem
and pathological gambling net of other effects,
such as drug and alcohol abuse. NORC reported that
it compared economic cost estimates from its study
with measurable costs of other sources of
morbidity, mortality, and productivity loss and
found that while the annual economic cost
estimated for problem and pathological gambling in
1998 was $5 billion, 1995 estimates were $110
billion for drug abuse and $166.5 billion for
alcohol abuse. According to NGISC, NORC focused on
a small number of tangible consequences and, as a
result, its figures on problem and pathological
gambling must be taken as minimums.

NGISC concluded that determining the social impact
of gambling on the general population was
difficult because the amount of quality research
was extremely limited. In addition, NGISC reported
that pathological gambling often occurs in
conjunction with other behavioral problems,
including substance abuse, mood disorders, and
personality disorders-a joint occurrence, which is
termed comorbidity. Because of this, even when an
individual acknowledges that gambling contributed
to a particular family or social problem, it is
extremely difficult to determine exactly what
caused the problem. In addition, NGISC concluded
that while studies have attempted to quantify the
costs associated with pathological gambling, such
as costs of crime and abuse, many of the costs,
including the costs of emotional damage and long-
term impact on families, are hard to identify and
quantify.

We also were not able to clearly identify the
social effects of gambling on Atlantic City due to
the difficulty of isolating the effects of
gambling from other factors and finding conclusive
evidence on whether or not gambling increased
social problems. In addition, according to a New
Jersey official, about two-thirds of the gamblers
in Atlantic City reside outside of New Jersey.
Therefore, whatever the social costs are upon
gamblers who gamble in Atlantic City, the bulk of
the social costs is exported elsewhere-where the
gamblers actually reside.

Data on some family problems, such as domestic
violence, prior to 1978 in the Atlantic City area
were not readily available. Therefore, we were not
able to compare social problems before and after
casinos began operating in the city. However, as
discussed below, some family problems, including
domestic violence, child abuse, divorce, and
single-parent families increased in Atlantic
County in some years after the casinos began
operating and decreased in others.1 Also, the
incidents of family problems per 10,000 population
in Atlantic County have generally been higher than
New Jersey rates.

As shown in figure II.1, the reported number of
domestic violence incidents per 10,000 population
for Atlantic County has been higher than the rate
for New Jersey since 1983.2

Figure II.1:  Reported Number of Domestic Violence
Incidents for New Jersey and Atlantic County 1983-
1997

Note: According to a Department of Justice
official, national data on the reported number of
domestic violence incidents were not available;
national data are based on surveys and not actual
reported incidents. Also, domestic violence data
for Atlantic City were not readily available.
Source: GAO analysis of data obtained from New
Jersey State Police Department, Atlantic County
officials, and the Bureau of the Census.

While the reported number of domestic violence
incidents per 10,000 population in Atlantic County
increased from 45 in 1983 to 225 in 1997, the rate
increased from 33 to 102 in New Jersey during the
same time period. However, a state official
emphasized that yearly data may not be comparable
because the reporting system has been revised and
the post-1992 data include more categories of
domestic violence than the pre-1992 data.

As figure II.2 shows, with the exception of 1
year, between 1982 and 1996, substantiated child
abuse and neglect cases per 10,000 population in
Atlantic County have been higher than the number
of cases in New Jersey.

Figure II.2:  Trends in Substantiated Child Abuse
and Neglect Cases in New Jersey and Atlantic
County 1982-1996

Note: An official with New Jersey's Division of
Youth said that data for 1977 to 1981 were not
available. The state began collecting the data in
1982. Also, according to the National
Clearinghouse on Child Abuse and Neglect, a U.S.
Department of Health and Human Services
contractor, complete national data on
substantiated child abuse and neglect cases were
not available, because national reporting, which
began in 1990, is on a voluntary basis and all
states do not report certain data. Also,
substantiated child abuse data for Atlantic City
were not readily available.
Source: GAO analysis of data obtained from the New
Jersey Division of Youth and Family Services and
the Bureau of the Census.

     While substantiated child abuse and neglect
cases per 10,000 population in Atlantic County
increased from 19 in 1982 to 47 in 1987, they had
declined to 18 in 1996.

     Atlantic County's divorces per 10,000
population slightly increased from 30 in 1977 (1
year before the casinos began operating) to 44 in
1980 (2 years after the casinos began operating).
The county's rate was lower than the national rate
and higher than New Jersey's rate in 1977, 1980,
and 1990 as shown in figure II.3.

Figure II.3:  Trends in Divorce Rate in the United
States, New Jersey, and Atlantic County 1977,
1980, and 1990

Note: Divorce data for Atlantic City were not
readily available.
Source: GAO analysis of data obtained from the
Bureau of the Census.

     Also, as shown in figure II.4, the percent of
families with children under 18 who were single-
parent families in Atlantic City was higher than
both the state and national rates in 1970, 1980,
and 1990. The percentage in Atlantic City
increased from 41 percent in 1970 to 61 percent in
1980 and to 63 percent in 1990.

Figure II.4:  Percent of Families With Children
Under 18 that Are Single-Parent Families in the
United States, New Jersey, and Atlantic City 1970,
1980, and 1990

Note: We did not adjust the Atlantic City
population to include visitors and nonresident
workers because these data represented Atlantic
City's residents only. We looked at the single-
parent rates for Asbury Park and Long Branch, two
other New Jersey shoreline cities. Asbury Park's
rates were similar to Atlantic City's rates, and
Long Branch's rates were about twice the state and
U.S. rates. This indicates that factors other than
casinos may be contributing to the difference in
Atlantic City's single-parent rate compared with
New Jersey and U.S. single-parent rates.
Source: GAO analysis of data provided by the
Bureau of Census.

As table II.1 shows, while some officials said the
casinos had at least some impact on family
problems, other officials said the presence of the
casinos had no impact on social problems in
Atlantic City.

Table II.1: Opinions of Officials in Nine
Government and Community Social Services Agencies
on the Impact of Casinos on Family Problems in the
Atlantic City Area
                         Number of agencies
Family         Casino Casino Casino    No     Total
problems           s  s had  s had basis number of
              had no   some  great    to  agencies
              impact impact impact judge      with
                                         officials
                                        responding
Domestic           1      4      3     1         9
violence
Child abuse        1      3      2     2        8a
and neglect
Divorce            0      4      3     1        8a
Single-parent      0      4      3     1        8a
families
Homelessness       1      4      3     1         9
Note: Of the 26 agencies and organizations
included in our case study in the Atlantic City
area, nine were government and community agencies
that provided social services to Atlantic City
residents. We asked officials in those nine
agencies for their opinions on the impact, if any,
that the casinos in Atlantic City had on family
problems, such as domestic violence.
aThe official from one of the nine agencies did
not comment on the impact of the casinos on child
abuse, divorce, and single-parent families
Source: GAO analysis of comments made by officials
in the Atlantic City area.

Both government and community officials stated
that working in the casinos was very stressful and
had a negative impact on employees' personal
lives. For example, they said casino job security
is limited by the seasonal nature of many
positions; casino employees work in shifts and
many are on-call 24 hours; and employees have
difficulty maintaining consistent child care when
both parents work irregular hours. The officials
said stress originating from these factors
contributed to family problems.3

Concerning the impact of gambling on homelessness,
officials in seven of the nine government and
community agencies in our case study that provided
social services to Atlantic City residents said
that the casinos in Atlantic City had at least
some effects on homelessness. They commented that
(1) the casinos attract troubled, unskilled
persons to Atlantic City who are "looking for a
new life" and (2) because of the problems they
bring with them, they cannot obtain employment and
thus, in some cases, become homeless.

Effects of Gambling on Suicide
NGISC reported that the suicide rate among
pathological gamblers is higher than for any other
addictive disorder, but questioned whether a link
existed between gambling and suicide in general.
NGISC stated that it heard repeated testimony and
received various reports about suicide and
attempted suicide on the part of individuals
suffering from pathological gambling; however, the
reports' conclusions conflicted. According to
NGISC, while some of the reports concluded that
the magnitude of the link between gambling and
suicide may be understated, others questioned
whether a link even existed between suicide and
gambling.

While three suicides occurred in Atlantic City
casinos during the summer of 1999, Atlantic City
area community and government officials said that
the available data were insufficient to link
suicide and gambling. As shown in figure II.5, in
1970, the suicide rate in Atlantic City on the
basis of unadjusted population was higher than New
Jersey's rate but lower than the national rate.

Figure II.5:  Suicides for the United States, New
Jersey, and Atlantic City 1970, 1980, and 1990

Note 1: Suicide rates were calculated by dividing
the number of suicides that took place in each
area by the number of residents. When calculating
the suicide rate for 1970, we did not adjust
Atlantic City's population to include visitors and
nonresident workers because in 1970, Atlantic
City's Convention and Visitors Authority did not
collect visitors' information.
Note 2: In addition, because many Atlantic City
gamblers do not reside in Atlantic City, if
gambling-related suicides occur in other
geographic locations that may be related to
gambling in Atlantic City, they would not be
identified with Atlantic City. According to a New
Jersey official, about two-thirds of the gamblers
in Atlantic City casinos reside outside of New
Jersey.
Source: GAO analysis of data obtained from the
Bureau of the Census and South Jersey
Transportation Authority.

In 1980, Atlantic City's suicide rate was higher
than both the New Jersey and U.S. rates and in
1990, it was lower than the U.S. rate and slightly
higher than the New Jersey rate. After adjusting
Atlantic City's population data to include
visitors and nonresident workers, the rate dropped
below both New Jersey and the U.S rates for 1980
and 1990.

The majority of individuals in nine government and
community agencies that provided social services
to Atlantic City residents said they either had no
basis to judge or they did not believe that the
casinos had an impact on suicides.

Effects of Gambling on Crime
While NGISC and its contractors reported a linkage
between increased crime and pathological gambling,
NGISC concluded that, in general, existing data
were not sufficient to quantify or define the
relationship between gambling and crime. It
reported that although numerous studies have
explored the relationship between gambling and
crime, the reliability of many of these studies is
questionable. Some studies suggested that
increased crime rates in gambling jurisdictions
result from surges in tourist populations rather
than the introduction of gambling. Other studies
were limited to particular types of crime and/or
particular locations, thus prohibiting
generalization of their results.

The NORC study completed for NGISC found that
pathological gamblers had higher arrest and
imprisonment rates than nonpathological gamblers.
NRC's study completed for NGISC also found that
some persons with gambling disorders resort to
crime to pay debts and secure additional funds for
gambling. These findings were supplemented by
testimony before NGISC from and about pathological
gamblers who commit crimes to finance their
gambling habit.

Rates for some crimes increased in Atlantic City
after the casinos began operating in the city.
Both county and city officials we interviewed said
that the visitor population that casinos attract
to the area has increased some types of crime.

We examined the crime rates in the Atlantic City
area before and after the casinos began operating4
and compared the rates with both state and
national rates. Because New Jersey and local
government officials emphasized that any crime
data analysis should include in the population the
number of visitors Atlantic City receives daily,
we calculated crime rates with and without
adjustments to Atlantic City's population to
include the influx of visitors and nonresident
workers to the city. While we show crime rates
based on both the city's unadjusted population and
the city's adjusted population, we believe that
the more appropriate method is the method that
includes the adjusted population. We agree with
some researchers' comments that visitors become
part of the pool who may both commit and become
victims of crime and therefore should be added to
the resident population when calculating the crime
rate. In contrast, other researchers have stated
that calculating the crime rate using the
unadjusted population (local residents only)
provides a more complete picture of the impact of
crime on the local geographic area. They stated
that regardless of whether visitors are included
in the crime rate calculation, the actual increase
in the number of crimes affects the local area's
law enforcement costs.

     Our analysis of the FBI's Uniform Crime
Report (UCR) data showed that the total crime rate
initially increased in the years after casinos
began operating in Atlantic City (1978).5 As shown
in table II.2, the increase occurred when we used
either the unadjusted or adjusted population.

Table II.2: Total Crimes in the United States, New
Jersey, and Atlantic City 1977-1997
            Total crimes per 10,000 population
Year     United       New Atlantic City    Atlantic
         States    Jersey (based on the City (based
                            population          on
                           adjusted to  unadjusted
                               include population)
                          visitors and
                           nonresident
                              workers)
1977     507.76    511.39       695.89    1,006.00
1978     514.03    520.72       768.66    1,336.00
1979     556.55    582.06       798.62    1,678.00
1980     595.00    640.13      1079.29    3,109.37
1981     585.82    617.98       922.29    3,132.91
1982     560.36    567.61       986.85    3,863.68
1983     517.50    516.34       947.99    4,168.01
1984     503.13    485.55       763.01    3,537.48
1985     520.71    509.44       857.61    4,203.70
1986     548.04    524.13       850.56    4,179.05
1987     555.00    526.15       749.90    3,963.67
1988     566.42    529.53       833.44    4,593.15
1989     574.10    526.94       794.57    4,323.13
1990     582.03    544.72       800.75    4,107.04
1991     589.78    543.13       808.80    4,047.54
1992     566.02    506.44       721.22    3,597.11
1993     548.44    480.08       641.31    3,144.05
1994     537.35    466.09       509.63    2,555.94
1995     527.59    470.37       538.08    2,902.93
1996     508.66    433.29       525.89    2,874.49
1997     493.00    405.70       526.49    2,776.26
Note: While we show the crime rate based on both
the unadjusted and adjusted Atlantic City
population, we believe that the rate based on the
adjusted population to include visitors is the
more appropriate rate calculation method.
Source: GAO analysis of data obtained from the
FBI's UCR, South Jersey Transportation Authority,
and the Bureau of the Census.

A 1997 study sponsored by the American Gaming
Association said that while the number of reported
crimes in Atlantic City increased between 1978 and
1982, so did the number of police employees,
raising the possibility that reported crime
increased because more police employees were
available to uncover crimes.

While the Atlantic City unadjusted total crime
rates have been higher than the New Jersey and
U.S. rates during all of the years since 1977,
beginning in the early 1990s, all rates began an
overall decline. In 1997, Atlantic City's crime
rate based on the adjusted population was closer
to the New Jersey and U.S. rates, while the
unadjusted rate still remained higher than the
state and U.S. rates.

Officials in Atlantic City and Atlantic County
said that casinos have had some impact on property
crime. For example, according to an Atlantic
County official, the number of larceny cases
(nonviolent property crimes such as hotel room
theft) increased from 2,000 cases in 1977 (the
year before casinos began operating in Atlantic
City) to 8,000 in 1980 and 12,000 in 1985. As
shown in table II.3, the overall property crime
rate per unadjusted population began to increase
in 1978 and remained higher than the state and
national rates through 1997.

Table II.3: Property Crimes in the United States,
New Jersey, and Atlantic City 1977-1997
          Property crimes per 10,000 population
Year     United       New Atlantic City    Atlantic
         States    Jersey (based on the City (based
                            population          on
                           adjusted to  unadjusted
                               include population)
                          visitors and
                           nonresident
                              workers)
1977     460.17    472.18       624.42      902.68
1978     464.25    478.37       682.13     1185.59
1979     501.66    531.94       710.33     1492.48
1980     535.33    579.70       985.87     2840.26
1981     526.39    554.92       827.97     2812.51
1982     503.25    506.88       906.31     3548.34
1983     463.74    461.03       885.10     3891.49
1984     449.21    432.78       706.36     3274.86
1985     465.05    454.99       800.91     3925.78
1986     486.26    466.88       790.28     3882.88
1987     494.03    472.05       702.73     3714.35
1988     502.71    471.25       776.85     4281.28
1989     507.79    466.04       731.11     3977.84
1990     508.85    479.97       726.53     3726.37
1991     513.97    479.65       732.83     3667.40
1992     490.27    443.85       652.81     3255.94
1993     473.76    417.40       569.09     2789.98
1994     466.00    404.68       453.83     2276.10
1995     459.13    410.39       489.01     2638.19
1996     445.01    380.14       481.41     2631.35
1997     431.87    356.44       484.67     2555.72
Note: While we show the crime rate based on both
the unadjusted and adjusted Atlantic City
population, we believe that the rate based on the
adjusted population to include visitors is the
more appropriate rate calculation method.
Source: GAO analysis of data obtained from the
FBI's UCR, South Jersey Transportation Authority,
and the Bureau of the Census.

After adjusting the population data, Atlantic
City's property crime rate dropped considerably
but still remained higher than the state and
national rates until 1994, when it decreased to a
point closer to the New Jersey and U.S. rates.
According to a county law enforcement official,
the number of car thefts also increased when
casinos opened; however, after several years, the
number decreased due to the crime prevention
experience gained by local police and casino
employees.

Both county and city officials said that the
introduction of casino gambling had resulted in an
increase in white-collar crimes. One county
official said that the most likely reason for this
increase was that people lose money at casinos and
embezzle or steal money to recover their losses.
As table II.4 shows, an analysis of the UCR data
from 1977 to 1997 showed that embezzlement rates
increased in 1978 and 1979 after casinos began
operating in Atlantic City in 1978 and have been
lower than New Jersey and national rates in most
of the years since 1980.

Table II.4: Embezzlement Arrests in the United
States, New Jersey, and Atlantic City 1977-1997
                Embezzlement arrests per 10,000
                           population
Year               United  New Jersey     Atlantic
                   States                     City
1977                 0.36        0.58         0.23
1978                 0.38        0.55         0.92
1979                 0.40        0.52         0.94
1980                 0.42        0.25         0.00
1981                 0.42        0.17         0.00
1982                 0.39        0.16         0.00
1983                 0.38        0.21         0.26
1984                 0.40        0.23         0.00
1985                 0.48        0.15         0.00
1986                 0.52        0.18         0.27
1987                 0.53        0.29         0.55
1988                 0.61        0.22         4.36
1989                 0.65        0.20         0.85
1990                 0.61        0.20         0.00
1991                 0.55        0.15         0.00
1992                 0.55        0.16         0.00
1993                 0.51        0.10         0.00
1994                 0.56        0.12         0.00
1995                 0.57        0.09         0.00
1996                 0.60        0.12         2.44
1997                 0.65        0.15         0.00
Note: In calculating the embezzlement arrest rate,
we did not adjust Atlantic City's population to
include visitors and nonresident workers because
embezzlement cases are handled in the jurisdiction
in which they occur.
Source: GAO analysis of data obtained from the
FBI's UCR, South Jersey Transportation Authority,
and the Bureau of the Census.

Both city and county officials said that the
presence of casinos had a great impact on
prostitution. One official commented that the
casinos do not generally draw families, and this
creates an atmosphere conducive to prostitution.
Another official said the impact of the casinos on
prostitution is now decreasing. As shown in table
II.5, analysis of UCR prostitution data from 1977
to 1997 shows that the arrest rate for
prostitution crimes based on Atlantic City's
unadjusted population increased in some of the
years between 1977 and 1997 and remained higher
than the state and national levels.

Table II.5: Prostitution Arrests in the United
States, New Jersey, and Atlantic City 1977-1997
    Prostitution arrests per 10,000 population
Year      United New Jersey Atlantic City  Atlantic
          States               (based on      City
                                adjusted (based on
                           population to unadjusted
                                 include population
                            visitors and         )
                             nonresident
                                 wokers)
1977        4.34      1.44         14.26     20.89
1978        4.49      1.07         31.08     53.08
1979        4.49      1.03         20.73     42.61
1980        4.24      1.18         12.89     37.13
1981        5.07      1.34         15.67     55.52
1982        5.93      2.30         31.76    122.88
1983        5.94      2.27         23.88    100.27
1984        5.66      1.91         23.54    107.60
1985        5.53      3.15         36.35    169.33
1986        5.23      3.66         28.33    138.67
1987        4.99      2.31         16.82     88.89
1988        4.25      2.41         19.97    106.15
1989        4.42      2.56         14.12     76.58
1990        4.64      3.44         18.02     92.40
1991        4.53      3.33         21.20    105.69
1992        4.37      3.33         20.80    102.94
1993        4.43      3.99         19.55     96.97
1994        4.17      3.29         18.90     95.60
1995        4.46      2.97         12.93     69.38
1996        4.25      3.02         11.36     61.43
1997        4.19      3.91          9.59     52.08
Note: While we show the prostitution arrest rate
based on both the unadjusted and adjusted Atlantic
City population, we believe that the rate based on
the adjusted population to include visitors is the
more appropriate rate calculation method.
Source: GAO analysis of data obtained from the
FBI's Uniform Crime Report, New Jersey's South
Jersey Transportation Authority, and the Bureau of
the Census.

However, after adjusting Atlantic City's
population data, the prostitution arrest rate
moved much closer to the state and national rates
between 1977 and 1997 than the rates based on the
unadjusted population.

     UCR data on drug arrests showed that in 1977
(the year before casinos were established in
Atlantic City), the national, state, and city
rates were similar, as shown in table II.6.

Table II.6: Drug Arrests in the United States, New
Jersey, and Atlantic City 1977-1997
              Drug arrests per 10,000 population
Year     United New Jersey  Atlantic City  Atlantic
         States                (based on      City
                              population (based on
                            adjusted for unadjusted
                            visitors and population
                             nonresident         )
                                workers)
1977      30.52     40.47          29.95     43.88
1978      29.81     44.66          17.68     30.20
1979      26.44     36.70          21.08     43.31
1980      27.38     36.82          19.25     55.44
1981      28.90     42.33          35.37    125.31
1982      30.17     41.36          30.96    119.78
1983      30.74     41.13          38.89    163.26
1984      31.67     46.17          40.12    183.42
1985      35.20     48.50          43.91    204.54
1986      36.03     47.90          47.57    232.81
1987      40.09     56.13          43.72    231.05
1988      45.02     72.35          63.04    335.07
1989      53.88     88.16          60.26    326.80
1990      44.40     62.07          70.68    362.50
1991      42.25     55.97          65.02    324.14
1992      44.85     54.50          74.48    368.66
1993      46.97     55.16          65.62    325.53
1994      53.87     64.12          58.26    294.77
1995      59.80     70.72          60.18    322.98
1996      59.27     73.24          72.70    393.23
1997      63.79     77.87          71.48    388.19
Note: While we show the drug arrest rate based on
both the unadjusted and adjusted Atlantic City
population, we believe that the rate based on the
adjusted population to include visitors is the
more appropriate rate calculation method.
Source: GAO analysis of data obtained by the FBI's
UCR and the Bureau of the Census.

As table II.6 shows, between 1980 and 1997,
Atlantic City's drug arrests per 10,000 unadjusted
population experienced an overall increase and was
about five times higher than the state and
national rates during some years. When the
population is adjusted, the city's drug arrest
rate was closer to the state and national rates
and in some years, lower than the state and
national rates. Although an Atlantic County
official said the casinos in Atlantic City had not
had a material impact upon the amount of drug-
related crimes in the county, an Atlantic City
official said he believed that gambling had made a
direct impact on drug-related crimes.

Officials in the New Jersey Attorney General's
office said that the state has had no major
scandal or organized crime influence in the casino
industry. They attribute this in large part to the
strong controls and strict regulation that the
state enforces over the casino industry. They
described their system of regulating casino
gambling as being the best in the United States.

Some Atlantic City mayors have been charged with
and a number of them have been convicted of
corruption crimes both prior to and since the
introduction of legalized casino gambling. State
officials noted that two mayors have been charged
with corruption since casino gambling was
legalized. The public record indicated that one of
the two mayors pled guilty to federal corruption
charges; and the charges in that case, at least in
part, involved an attempt to make a favorable sale
of city land with casino development potential.
State officials also pointed out four money-
laundering cases involving casino employees.

The difficulty of directly attributing social
problems to problem gambling or to the presence of
casinos in Atlantic City was a recurrent theme in
response to questions about Atlantic City's
primary social problems. When asked to identify
the city's key social problems, several officials
said Atlantic City suffers from the same social
problems faced by other cities, such as drug use,
unemployment fueled by a transient population, and
a group of individuals who lack job skills.
Whether these problems would be better or worse
without the presence of casinos in Atlantic City
remains unknown.

_______________________________
1An official in an Atlantic County community
agency dealing with domestic violence said that
about 40 percent of the agency clientele were
Atlantic City residents. Officials from three
additional county agencies providing family
services said that Atlantic City residents
represented from 15 to 50 percent of the agencies'
clientele.
2Data for 1977 to 1982 were not available.
According to a state official, state legislation
on domestic violence was passed in 1981, and
counties began collecting statistics in 1983. We
used Atlantic County data because domestic
violence data for Atlantic City were not readily
available.
3Information from the New Jersey Casino Control
Commission shows that about 80 percent of total
casino employees live in Atlantic County, and
about 23 percent of the total employees reside in
Atlantic City.
4We used the Federal Bureau of Investigation (FBI)
Uniform Crime Report (UCR) to calculate the rate
of crime in Atlantic City, New Jersey, and the
United States. UCR includes reported incidences of
violent crime (murder, forcible rape, robbery, and
aggravated assault) and property crimes (burglary,
larceny-theft, and motor vehicle theft).
5 Total crime includes violent crimes (murder,
forcible rape, robbery, and aggravated assault)
and property crimes (burglary, larceny-theft, and
motor vehicle theft).

Appendix III
Estimated Prevalence of Pathological Gambling
Page 47           GAO/GGD-00-78 Impact of Gambling
Researchers looking at the prevalence of
pathological gambling in the United States and New
Jersey estimated that the percentage of
pathological gamblers ranged from 1.2 to 1.6
percent. The American Psychiatric Association
(APA) defines problem gambling as a pathological
disorder and includes it in APA's Diagnostic and
Statistical Manual of Mental Disorders (DSM-IV).
APA states that the essential feature of
pathological gambling is a "persistent and
recurrent maladaptive gambling behavior . . . that
disrupts personal, family, or vocational
pursuits." Individuals who meet at least five of
the criteria (shown in table III.1) that are used
to diagnose pathological gambling-Level 3 gambling
disorder-are diagnosed as having the disorder.

Table III.1: Diagnostic Criteria for Pathological
Gambling
Diagnostic 
criteria   Behavior pattern
Preoccupat Is preoccupied with gambling (e.g.,
ion        preoccupied with reliving past gambling
          experiences, handicapping or planning
          the next venture, or thinking of ways
          to get money with which to gamble)
Tolerance  Needs to gamble with increasing amounts
          of money in order to achieve the
          desired excitement
Withdrawal Is restless or irritable when
          attempting to cut down or stop gambling
Escape     Gambles as a way of escaping from
          problems or relieving dysphoric mood
          (e.g., feelings of helplessness, guilt,
          anxiety, or depression)
Chasing    After losing money gambling, often
          returns another day in order to get
          even ("chasing one's losses")
Lying      Lies to family members, therapists, or
          others to conceal the extent of
          involvement with gambling
Loss of    Has made repeated unsuccessful efforts
control    to control, cut back, or stop gambling
Illegal    Has committed illegal acts (e.g.,
acts       forgery, fraud, theft, or embezzlement)
          to finance gambling
Risked     Has jeopardized or lost a significant
significan relationship, job, or educational or
t          career opportunity because of gambling
relationsh
ip
Bailout    Has relied on others to provide money
          to relieve a desperate financial
          situation caused by gambling
Source: National Gambling Impact Study Commission
final report, June 1999 and American Psychiatric
Association information.

Some researchers classify individuals with
gambling problems who do not meet the psychiatric
criteria for a gambling disorder but who appear to
experience substantial difficulties related to
gambling as either "problem" or "potential
pathological" gamblers or individuals with a Level-
2 gambling disorder.1

Researchers estimate the prevalence of
pathological gambling by conducting surveys among
populations or within clinical settings and using
screening instruments to identify individuals with
gambling disorders. The screening instruments are
used to assign points based on answers to gambling
related questions, and individuals with scores at
certain levels are placed in various gambling
disorder categories. As noted by NGISC, prevalence
rates are stated in terms of time frames, either
"lifetime" (prevalence rate of individuals who
have at some time met the criteria for a gambling
disorder category) or "past-year" (prevalence rate
of individuals who met the criteria for a gambling
disorder category in the past year).2

NORC, an NGISC contractor, based its prevalence
results on a 1998 national telephone survey
supplemented with data from on-site interviews
with patrons of gambling establishments. In
addition, in December 1997, NGISC contracted the
National Research Council of the National Academy
of Sciences (NRC) to conduct a review of available
literature on the prevalence and nature of problem
and pathological gambling.

NGISC concluded that researchers have different
opinions on the definition and prevalence of
pathological gambling and reported the results of
four studies-three recent studies and one
published over 20 years ago. As shown in table
III.2, on the basis of the three most recent
studies, the estimated percentage of adults in the
United States classified as lifetime pathological
gamblers ranged from 1.2 percent to 1.6 percent,
and the percentage of lifetime problem gamblers
ranged from 1.5 percent to 3.9 percent.

Table III.2:  Estimate of Adult Pathological and
Problem Gambling Prevalence in the United States
                     Estimated percentage of adult
                 pathological and problem gamblers
           University   Harvard  National  National
                  of     Meta-  Research   Opinion
          Michigan (  analysis Council(19  Research
               1976)    (1997)      98)a Center(199
                                              8) a
Lifetime         0.8       1.6       1.5       1.2
pathologic
al
gamblers
Past year          b       1.1       0.9       0.6
pathologic
al
gamblers
Lifetime         2.3       3.8       3.9       1.5
"problem"
gamblers
Past year          b       2.8       2.0       0.7
"problem"
gamblers
aBoth the National Research Council of the
National Academy of Sciences (NRC) and the
National Opinion Research Center at the University
of Chicago (NORC) were contractors hired by NGISC
to conduct research on gambling behaviors.
bNGISC did not include a past year estimate for
the 1976 study.
Source: The National Gambling Impact Study
Commission Final Report, June 1999.

NORC estimated that about 2.5 million adults are
pathological gamblers and another 3 million adults
should be considered problem gamblers. NORC
further estimated that about 15 million adults are
at risk of becoming problem gamblers.

The NGISC report showed that in comparison to drug
and alcohol addictions, the percentage of gambling
addiction in the adult population was lower. As
table III.3 shows, while the estimated prevalence
of lifetime drug and alcohol addiction in the
adult population ranged from 6.2 percent to 13.8
percent respectively, the estimated prevalence of
lifetime adult pathological gamblers was about 1.6
percent.

Table III.3:  Comparing the Estimated Pathological
Gambling Prevalence With the Estimated Drug Abuse
and Alcohol Dependence in the United States
Type of disorder        Estimated   Estimated past
                 lifetime percent  year percent of
                        of adults           adults
Pathological                 1.6a              1.1
gambling
Drug                          6.2              2.5
abuse/dependence
Alcohol                      13.8              6.3
abuse/dependence
aWhen making this comparison, NGISC elected to use
prevalence rates derived from the 1997 Harvard
Meta-analysis study titled: Estimating the
Prevalence of Disordered Gambling Behavior in the
U. S. and Canada: A Meta-analysis, Harvard Medical
School Division of Addictions.
Source: The National Gambling Impact Study
Commission Final Report, June 1999.

NORC reported that pathological and problem
gamblers are much more likely than low-risk
gamblers to have been troubled by mental or
emotional problems, including manic symptoms and
depressive episodes and to have received mental
health care in the past year. NORC also concluded
that lifetime and past year at-risk, problem, and
pathological gamblers are more likely than low-
risk or nongamblers to have ever been alcohol or
drug dependent and to have used illicit drugs in
the past 12 months.

NGISC's contractors also conducted surveys on the
prevalence of pathological gambling among youth in
the United States. NORC estimated that on the
basis of a 1998 national survey of 534 U. S. youth
ages 16 to 17 that the combined rate of
pathological and problem gambling was 1.5 percent.
NRC reported that on the basis of its review of 16
studies of U. S. adolescent and college students
from 1988 to 1997, the estimated percentage of
lifetime adolescent pathological gamblers ranged
from 1.2 percent to 11.2 percent, with a median of
5.0 percent. The contractors cautioned that the
proportions reported in the adolescent and adult
studies are not always directly comparable because
different instruments were used to collect data.

The availability of gambling, specifically in
casinos, appears to be associated with increased
problem and pathological gambling. NORC reported
that on the basis of its combined 1998 patron and
national telephone survey results (that were
previously discussed), the availability of a
casino within 50 miles (versus 50 to 250 miles) is
associated with about double the prevalence of
problem and pathological gambling.

According to the Council of Compulsive Gamblers of
New Jersey, Inc., the most recent study on the
prevalence of pathological gamblers in New Jersey
was conducted in 1990. The study did not include a
separate rate for Atlantic City. It concluded that
1.2 percent of the New Jersey respondents may be
classified as probable pathological gamblers, 1.9
percent as potential pathological gamblers, and
5.8 percent as problem gamblers. The study noted
that to identify pathological gambling, it used
the criteria in the fourth edition of APA's
Diagnostic and Statistical Manual (DSM-IV).3

In our attempt to compare the rates of alcohol and
drug addiction in the Atlantic City area with the
pathological gambling rate, we reviewed data from
the New Jersey Department of Health. The most
current available information was 1995 data
covering Atlantic County and New Jersey-which
again provided no specific rate for Atlantic City.
As table III.4 shows, the estimated percentage of
New Jersey residents suffering from alcohol and
drug addictions was higher than the estimated
percentage of pathological gamblers in New Jersey.

Table III.4:  Comparing the Estimated Pathological
Gambling Prevalence With the Estimated Drug and
Alcohol Prevalence in New Jersey
Type of disorder    Estimated percent of New
                   Jersey residents
Probable                                       1.2
Pathological
gamblinga
Drug                                           3.9
abuse/dependenceb
Alcohol                                        7.7
abuse/dependencec
aIncludes New Jersey residents age 15 and older.
bIncludes New Jersey residents age 12 and older.
cIncludes New Jersey residents age 18 and older.
Source: The 1.2 percentage relating to
pathological gambling is derived from a report
entitled Pathological Gambling Prevalence in New
Jersey 1990 Final Report for New Jersey Department
of Higher Education Research on Pathological
Gambling: Epidemiological and Needs Assessment
Factors, November 1990. Both the 3.9 and 7.7
percentages relating to drug and alcohol abuse are
based on 1995 data provided by New Jersey
Department of Health and Senior Services, Division
of Alcoholism, Drug Abuse, and Addiction Services.

The 1990 study on pathological gambling in New
Jersey also noted that a 1987 study on the
prevalence of adolescents' gambling in New Jersey
reported a 5.7 percent probable pathological
prevalence rate for New Jersey teens.

On the basis of information provided by NJCCC, in
1999, 53,400 juveniles (under the age of 21) were
stopped and prevented from entering Atlantic City
casinos, 39,461 were escorted from the casinos,
337 were found gambling in the casinos, and 270
were taken into custody by New Jersey State
Police.

Information provided by NJCCC showed that from
1983 to 1999, fines imposed by NJCCC upon the
casinos for underage gambling totaled about
$335,250. According to a NJCCC official, annually,
the first $600,000 of all casino fines are
allocated to a fund for compulsive gambling
treatment and education, and the balance is placed
in the casino revenue fund to be used for senior
citizens and the disabled in New Jersey.

_______________________________
1 Some researchers have noted that the use of
various terms has contributed to confusion about
what constitutes Level-2 problem gambling.
2 NGISC noted that for measuring prevalence in the
general population, lifetime estimates may
overestimate prevalence because the estimates
include people who may have recently gone into
recovery and no longer manifest any symptoms; and
in contrast, past-year estimates may understate
prevalence because they do not include people who
continue to manifest pathological gambling
behaviors, but have refrained from such behavior
during the past year.
3 According to the 1990 study on the prevalence of
pathological gambling for New Jersey residents age
15 and older, the nine criteria established by APA
to identify gambling disorders were used; and a
score of four or more positive responses was
deemed "probable pathological;" a score of two or
three was deemed as "potential pathological;" and
because of the maladaptive behavior of each of the
nine criteria, a score of one positive response
was deemed as "problem" gambling.

Appendix IV
Incentives to Attract Gambling Establishments
Page 49           GAO/GGD-00-78 Impact of Gambling
NGISC did not address whether communities offered
incentives to attract gambling establishments.

According to New Jersey and Atlantic City
officials, casinos generally do not receive
subsidies or tax incentives from the government.
In fact, New Jersey officials pointed to taxes and
levies uniquely imposed on casinos that are not
imposed on other businesses in the state. In
addition to the usual corporate, property, or
other taxes imposed on businesses in New Jersey,
casinos must also pay an 8 percent gross revenue
tax to the state1 and invest 1.25 percent of their
gross revenue as obligation deposits in CRDA.2
(See appendix I for a description of CRDA.)
Furthermore, New Jersey laws specifically prohibit
casinos from receiving 5-year property tax
exemptions or abatements that may be granted to
other businesses, which are located in areas in
need of rehabilitation.3

Atlantic City casinos also pay for the costs of
their own regulation. The New Jersey Division of
Gaming Enforcement and NJCCC are state agencies
charged with regulating casinos in Atlantic City.
According to the Gaming Enforcement Division,
casino operators desiring to establish themselves
in Atlantic City must pay for the costs of
background investigations that the Gaming
Enforcement Division performs on prospective
licensees.

Additionally, once a casino has been established,
it must continue to pay for the costs of the
regulatory oversight of casino operations. For
example, the Division of Gaming Enforcement and
the NJCCC do not receive annual state
appropriations for their oversight activities. The
casinos pay the operating expenses of the two
agencies. For fiscal year 1998, the Enforcement
Division's budget was about $32 million and
NJCCC's was about $23 million, all of which was
funded by state levies on casino interests, on the
basis of information provided by New Jersey
officials.

As mentioned earlier, casinos are required to
either pay 2.5 percent of their gross revenue as a
tax or invest a percentage of their gross revenue
as obligation deposits in CRDA, and CRDA was
initially established to reinvest these funds into
Atlantic City and state community development
projects. State law has since authorized the use
of some casino reinvestment funds for projects
that provide for the expansion of casino hotel
rooms in Atlantic City. Specifically, in 1993, New
Jersey enacted a law4 authorizing CRDA to use $100
million of the funds for investment in hotel
development projects in Atlantic City undertaken
by casinos, "which result in the construction,
reconstruction or rehabilitation of at least 200
hotel rooms" in Atlantic City. According to a
state official, the funding was designed to
increase the rooms available in Atlantic City for
the new convention center. As a condition for
receiving the funds, the casinos were required to
agree to reserve the rooms at certain times for
convention business. In 1996, the state authorized
CRDA to invest another $75 million of the casino
reinvestment funds for further hotel room
construction/rehabilitation.5 Under that law,
funding provided to the casinos was limited to 27
percent of the hotel rooms' construction costs.

While state and local officials said casino owners
are not provided with free land for their casinos,
casino reinvestment funds have been used to
purchase land for a casino. According to a CRDA
official, CRDA used the funds to pay $807,000 for
land that it obtained under its eminent domain
authority (the forced sale of private property for
public use) and transferred it to a casino to use
for hotel expansion. As previously mentioned, the
use of the reinvestment funds for hotel expansion
was authorized by state law.

Atlantic City recently used the eminent domain
process to obtain land for casino development
purposes. According to an Atlantic City official,
in October 1999, the results of an eminent domain
court decision favored Atlantic City. City
officials said that while Atlantic City has been
granted title to the land, the actual payment to
the landowner for the land will be made by the
casino-not by Atlantic City.

Although state officials said casinos have not
received subsidies from the state, one recent
development has been challenged as providing a
state subsidy for a casino. The state is funding
two-thirds of the costs to construct a tunnel
pursuant to an agreement with a casino interest.
A. C. Holding Corporation, a Mirage Resorts
Incorporated company (Mirage), is planning to
construct a casino in the Atlantic City marina
district, contingent upon New Jersey agreeing to
construct a highway connecting the marina district
to the Atlantic City Expressway. In an agreement
with Mirage, the state, through the South Jersey
Transportation Authority (SJTA), has authorized
the construction of the Atlantic City/Brigantine
Connector. The connector, a little over 2 miles in
length, would unite the expressway with the bridge
to Brigantine, NJ, thus providing a means of
travel to the marina without the need to drive
through the city. The cost of the connector is
estimated to be $330 million. On the basis of
information provided by SJTA and CRDA, Mirage is
to finance one-third of this cost -$110
million-which is also to be used as a future
credit to satisfy Mirage's requirement to deposit
funds into the CRDA fund for community
reinvestment purposes. Of the remaining $220
million, $125 million is being funded by SJTA in
the form of bonds and $95 million is being funded
by the New Jersey Transportation Trust Fund
Authority.

The connector has generated nine lawsuits from a
contractor, a casino operator, and residents of
Atlantic City, partly because of the belief that
the tunnel is being erected solely for the benefit
of Mirage. SJTA argues that the tunnel would
benefit both the residents of Brigantine, NJ, as
well as Mirage and the two casinos that are
already in the marina district. According to a New
Jersey official, as of January 28, 2000, six of
the nine cases either had been dismissed, settled,
or resolved. Five of the court rulings have been
in favor of SJTA, and one case resulted in a
financial settlement paid by the casino. The
remaining three cases were still on appeal.

_______________________________
1 N.J. Stat. Ann. 5:12-144a.
2 N.J. Stat. Ann. 5:12-144.1.
3 N.J. Stat. Ann. 40A:21-4.
4 N.J. Stat. Ann. 5:12-173.8.
5 N.J. Stat. Ann. 5:12-173.8b.

Appendix V
Objectives, Background on the National Gambling
Impact Study Commission, and Scope and Methodology
Page 52           GAO/GGD-00-78 Impact of Gambling
Objectives
Our objectives were to determine the social and
economic effects of gambling on communities and
families focusing on

(1) the economic effects of gambling, particularly
on employment, bankruptcy, and tax revenues and
community investment;

(2) the social effects of gambling;

(3) the prevalence of pathological gambling; and

(4) whether communities offer incentives to
attract gambling establishments.

To accomplish objectives 1, 2, and 3, we examined
the final reports from the National Gambling
Impact Study Commission and its contractors and
conducted a case study in Atlantic City to
determine the social and economic impacts of
gambling. We selected Atlantic City for our case
study because it is a large destination gambling
location that-compared to Las Vegas,
Nevada-recently established gambling, which
enabled a before and after review of the effects
of gambling. Our work included a review of
information on gambling provided by federal, New
Jersey, Atlantic County, and Atlantic City
agencies; the gambling industry; and nonprofit
organizations.

NGISC Background
     NGISC was established by the National
Gambling Impact Study Commission Act (NGISC Act).1
The Act required the NGISC to conduct a
comprehensive study of the social and economic
impacts of gambling in the United States and
report its findings, conclusions, and
recommendations to the President, Congress, state
governors, and Native American tribal governments.
Pursuant to the Act, a nine-member commission was
formed, with three members (or commissioners)
appointed by the President, three by the Speaker
of the House of Representatives, and three by the
Majority Leader of the Senate.

     Guided by the NGISC Act and a research agenda
adopted in October 1997 covering 42 specific
policy questions, NGISC reported its findings on
June 18, 1999. During its 2-year study, the NGISC
held hearings and/or conducted site visits in
Atlantic City, NJ; Biloxi, MS; Boston, MA;
Chicago, IL; Las Vegas, NV; Ledyard, CT; New
Orleans, LA; San Diego, CA; Tempe, AZ; Virginia
Beach, VA; and Washington, D.C. These visits
included two tribal casinos. The NGISC also heard
testimony from federal and state officials;
community leaders; representatives of more than 50
Indian nations; and experts on state lotteries,
casinos, sports wagering, pari-mutuel, and other
forms of gambling.

NGISC spent about $2.5 million in contracts with
outside research organizations to collect data.
NGISC contracted with the National Opinion
Research Center at the University of Chicago
(NORC) to conduct four studies: (1) a database
analysis of economic and social indicators in 100
communities (with and without gambling), from 1980
to 1996; (2) case studies in 10 communities that
were within a 50-mile radius of at least one major
casino; (3) two nationally representative
telephone surveys of 2,417 adults and 534 youths,
regarding gambling behavior and attitudes; and (4)
an exit survey of 530 adult patrons of 21 gambling
facilities in eight states, regarding problem and
pathological gambling.

NGISC contracted with the National Research
Council (NRC) to review existing pathological
gambling literature and contracted with Adam Rose
and Associates to review published economic impact
studies on casino gambling.

In addition, NGISC contracted with Clotfelter and
Cook2 to develop a profile of typical lottery
players, perform an analysis of lottery marketing
strategies, and review some broad policy questions
regarding lotteries.

Finally, NGISC contracted with the Advisory
Commission on Intergovernmental Relations (ACIR)
to conduct a review and catalogue the laws and
regulations on commercial gambling and gambling on
Indian reservations.

NGISC's report contained a total of 76
recommendations to the President, Congress, the
federal government, state governments, tribal
governments, gambling regulators, and gambling
operators. In summary, NGISC's research covered
the following topics: regulation of gambling by
federal, state, local, and Native American
governments; an estimation of the prevalence and
costs of pathological and problem gambling; the
economic and social impacts of gambling on
individuals, families and communities; and an
assessment of the interstate and international
effects of gambling by electronic means, including
through the Internet. According to a General
Services Administration official, NGISC ceased
operation in August 1999.

Scope and Methodology
We examined NGISC's final report, its contractors'
research reports, and testimony and written
statements submitted to NGISC. We met with the
Commission's Executive Director and Research
Director and attended several Commission meetings
in 1999.

Our review of NGISC's work focused on the
conclusions stated in its final report and the
reports of its research contractors. We did not
replicate its work in an effort to verify its
conclusions. We also did not attempt to
independently verify the results or methodologies
of any of the studies cited in NGISC's report.

In conducting the Atlantic City case study, we
interviewed officials in 26 government agencies
and community and private industry organizations.
We judgmentally selected agencies whose missions
involved the social and economic issues addressed
in the request letter. Interviewees included New
Jersey, Atlantic County, and Atlantic City
personnel involved in social, economic, revenue
collection, law enforcement, and regulatory
efforts in the area as well as officials
representing unions, casinos, the banking
industry, and nonprofit organizations. Included in
the 26 agencies were nine government and community
organizations providing social services to
Atlantic City residents. We used data collection
instruments that contained both general questions
that we asked each interviewee and specific
questions pertaining to the subject area of which
the interviewee was involved.

In addition, we analyzed social and economic
statistics using data from the FBI's UCR and other
federal agencies and New Jersey, Atlantic County,
and Atlantic City agencies. For example, we
compared the crime rates in the Atlantic City area
before and after the introduction of legalized
casino gambling.3 We then compared these data with
crime trends in New Jersey and in the United
States during the same time period. We calculated
crime rates with and without adjustments for
visitors to Atlantic City. New Jersey and local
government officials emphasized that any crime
analysis should include in the population the
number of visitors Atlantic City receives daily.
We also asked Atlantic City and Atlantic County
law enforcement officials about their perception
of a relationship between crime and casino
gambling.

In some cases, data were not available
specifically for Atlantic City. In such cases, we
used the data covering the closest geographic area
to Atlantic City. In all cases, this was Atlantic
County-the county in which Atlantic City is
located. Census Bureau data show that since 1970,
Atlantic City has been the largest city in
Atlantic County. For the last 3 census years,
1970, 1980, and 1990, Atlantic City's residents
represented about 27, 21, and 17 percent of
Atlantic County's population respectively. While
historical national and state data were available
on a yearly basis for most of the social
indicators we reviewed, comparable data for
Atlantic City or Atlantic County were available
for census years only-1970, 1980, and 1990, and in
those cases, we analyzed data for only those
years.

As noted by NGISC, the amount of high quality and
relevant research on the social effects of
gambling is extremely limited. Both NGISC's and
our work in Atlantic City regarding the social
effects of gambling relied heavily on testimonial
evidence. Added to the lack of information was the
fact that individuals who suffer from pathological
gambling tend to suffer from other addictive
disorders, and this situation, called comorbidity,
further complicates the process of attributing
negative effects to any one cause.

Our response to objective 4, on whether
communities offer incentives to attract gambling
establishments, is based solely on our case-study
work in Atlantic City. The issue of subsidies and
incentives provided to the gambling industry was
not covered by NGISC. To accomplish objective 4,
we reviewed state and local legislation and
regulations related to Atlantic City casinos. We
also interviewed pertinent state and local
officials, including those of New Jersey's Casino
Control Commission and the Division of Gaming
Enforcement of the Department of Law and Public
Safety. As you requested, we limited our inquiry
in Atlantic City to legalized casino gambling.

We did our review between May 1999 and December
1999 in accordance with generally accepted
government auditing standards. We did our work in
Atlantic City, and Trenton, NJ and Washington,
D.C. We also attended one NGISC hearing held in
Virginia Beach, VA. We did not independently
verify the results and methodologies of gambling
prevalence reports or the accuracy of data we
obtained from various national, New Jersey,
Atlantic County, and Atlantic City databases, such
as the FBI's UCR and New Jersey's Department of
Labor employment information.

We contacted the following government agencies and
community and private industry organizations in
New Jersey:

ï¿½    Office of the Mayor, Atlantic City, NJ;
ï¿½    Office of the City Council, Atlantic City,
NJ;
ï¿½    Department of Health & Human Services,
Atlantic City, NJ;
ï¿½    Department of Revenue and Finance, Atlantic
City, NJ;
ï¿½    Police Department, Atlantic City, NJ;
ï¿½    Department of Planning and Development,
Atlantic City, NJ;
ï¿½    Greater Atlantic City Chamber of Commerce;
ï¿½    Office of the County Prosecutor, Atlantic
County, NJ;
ï¿½    Board of Taxation, Atlantic County, NJ;
ï¿½    Department of Regional Planning and
Development, Atlantic County, NJ;
ï¿½    Department of Family and Community
Development, Atlantic County, NJ;
ï¿½    Atlantic County Women's Center, Northfield,
NJ;
ï¿½    New Jersey Casino Control Commission;
ï¿½    New Jersey Division of Gaming Enforcement;
ï¿½    New Jersey Office of the State Treasurer,
Management and Budget Office;
ï¿½    New Jersey Department of Labor/Atlantic City
Employment Services;
ï¿½    New Jersey Department of Health and Senior
Services;
ï¿½    South Jersey Transportation Authority;
ï¿½    The Casino Reinvestment Development
Authority, Atlantic City, NJ ;
ï¿½    Former New Jersey State Legislator, Atlantic
City, NJ;
ï¿½    The Council of Compulsive Gambling of NJ,
Inc.;
ï¿½    Atlantic City Rescue Mission;
ï¿½    Family Service Association, Absecon, NJ;
ï¿½    AlantiCare Behavioral Health, Hammonton, NJ;
ï¿½    Clark Institute, Brigantine, NJ;
ï¿½    Community Presbyterian Church of
Brigantine, NJ;
ï¿½    Sun National Bank, Atlantic City, NJ;
ï¿½    Bally's Park Place, A Hilton Casino Resort,
Atlantic City, NJ; and
ï¿½    Hotel and Restaurant Workers Union, Local 54,
Atlantic City, NJ.
_______________________________
1 P.L. 104-169, 110 Stat. 1482, Aug. 3, 1996, 18
U.S.C. 1955 note.
2 Charles Clotfelter and Phillip Cook are Duke
University professors who have conducted research
studies on state lotteries.
3 We used the FBI's UCR to calculate the rate of
crime in Atlantic City, New Jersey, and the United
States. The UCR includes reported incidences of
violent crime (murder, forcible rape, robbery, and
aggravated assault) and property crimes (burglary,
larceny-theft, and motor vehicle theft).

Appendix VI
Comments From the New Jersey Casino Control
Commission
Page 57           GAO/GGD-00-78 Impact of Gambling

Appendix VII
Comments From the Former Chair of the Former
National Gambling Impact Study Commission
Page 64           GAO/GGD-00-78 Impact of Gambling
Note: GAO comments supplementing those in the
report text appear at the end of this appendix.

See comment 2.
See comment 1.

See comment 5.
See comment 4.
See comment 3.

See comment 7.
See comment 8.
See comment 6.

The following are GAO's comments on a letter dated
February 14, 2000, from the former Chair of NGISC
in which she noted several areas in our draft
report where she believed that we should add
information to provide additional perspective and
context.

GAO Comments
1. The Chair said our draft report did not appear
to include comments or conversations between us
and expert researchers originally contracted by
NGISC that would provide needed background and
analysis to the report. Our scope, in agreement
with the requester's office, was to examine the
contents of NGISC's and its contractors final
reports and summarize that work as part of our
study. Throughout our report, we reported relevant
information from both NGISC and its contractors.
For example, regarding the prevalence of
pathological gambling, we reported that the
National Opinion Research Center (NORC), a NGISC
contractor, found that the availability of a
casino within 50 miles (versus 50 to 250 miles) is
associated with about double the prevalence of
problem and pathological gambling. As another
example, we noted that Clotfelter and Cook, NGISC
contractors, reported that in 1997, total revenues
from the 38 state lotteries amounted to about 2.2
percent of the states' own-source general revenue
compared with 25 percent for state general sales
taxes and 25 percent for state income taxes. We
did not, however, include discussions with NGISC's
researchers in the scope of our review.

2. The Chair said that our draft report did not
provide adequate context, explanation, or
discussion of the significant data concerning
gambler types other than pathological gamblers.
The Chair further said the NORC report included
percentages of lifetime and past-year gamblers by
mental health, bankruptcy, crime, and other
problems for several categories other than
pathological gamblers and that this information is
relevant to any comparative assessment of
pathological gambling and social problems.

As the Chair said, our objective was to report on
the prevalence of pathological gambling. However,
our report also includes available information on
the prevalence of problem gamblers (those
individuals who have gambling problems but do not
meet the psychiatric criteria for pathological
gambling). Our report also includes discussions on
NORC's findings that (1) a higher percentage of
lifetime pathological gamblers reported filing
bankruptcy than low-risk gamblers and nongamblers
and (2) pathological gamblers had higher arrest
and imprisonment rates than nonpathological
gamblers. In response to the Chair's comments, we
added text to the letter and included a discussion
in appendix III on NORC's finding that lifetime
pathological and problem gamblers are more likely
than low-risk gamblers to have been troubled by
mental or emotional disorders. We also noted that
NORC reported that lifetime pathological, problem,
and at-risk gamblers are more likely than low-risk
or nongamblers to have been alcohol or drug
dependent. We also included NORC's estimate that
15 million adults are at risk of becoming problem
gamblers.

3. The Chair said that our draft report did not
fully mention the lifetime cost of problem and
pathological gambling. The Chair emphasized that
both annual and lifetime costs have significant
policy implications for policymakers and
taxpayers. Our report included NGISC's estimate of
the annual cost to society for a pathological and
a problem gambler. As suggested by the Chair, we
included in appendix II of the report NORC's
estimated lifetime cost per pathological and
problem gambler and NORC's overall estimated
annual cost to society for problem and
pathological gambling.

4. The Chair said that our draft report should use
both percentages of the population and actual
numbers when discussing the number of problem and
pathological gamblers. We modified appendix III of
this report to include NORC's estimated number of
pathological and problem gamblers.

5. The Chair said that our draft report did not
list the officials, agencies, and experts whom we
contacted, and thus the report is subject to being
labeled as biased. As is our policy, we conducted
this review in an objective manner, attempting to
obtain data and views from various available
sources and sides of the issue so we could present
a balanced and fair report of our results.
Generally, we do not however, list the names of
officials we contact in our reports. However, we
modified this report in the Objectives, Scope, and
Methodology section in appendix V to include the
names of the government agencies and community and
private industry organizations we contacted in New
Jersey.

6. The Chair said our draft report should include
information on adolescent gambling in Atlantic
City in terms of the number of youngsters removed
from casinos, the number taken into custody, the
fines imposed on casinos and allocation of
revenues collected from these and related fines,
and a detailed analysis of adolescent gambling.
The Chair said NGISC received testimony from the
Atlantic City Police Department that unattended
juveniles in casinos were a dilemma and an issue
of utmost importance.

The Atlantic City Police Department did not
mention the juvenile issue in our contacts with
the Department. However, we modified the report in
appendix III to include 1999 information provided
by NJCCC on the number of juveniles (under the age
of 21) stopped and prevented from entering
Atlantic City casinos, removed from the casinos,
found gambling in the casinos, and taken into
custody. We also included data on the fines
imposed on casinos because of juveniles found
gambling there. Regarding the Chair's suggestion
that we provide a detailed analysis of adolescent
gambling, our report includes some information on
this topic in New Jersey, but we did not do a
detailed review of adolescent gambling.

7. The Chair said that while our draft report
referenced three studies on homelessness that were
cited in the NGISC report, it omitted that NGISC
received testimony on the homelessness in Atlantic
City and suggested that we report information that
the Atlantic City Rescue Mission provided to
NGISC. As the Chair stated, we referenced three
studies on homelessness in our report including
the Atlantic City Rescue Mission study. We
modified our report in appendix II to show that
the Mission's study was one of the three studies
on homelessness.

     8. The Chair said our draft report section on
the economic impact of casinos on Atlantic City's
noncasino restaurants differed from information
received by NGISC. The Chair said that our 1996
data did not reconcile with 1998 data NGISC
received. The 1998 data cited by the Chair was
provided to NGISC in testimony and did not include
casino food and beverage establishments. The 1996
data we used was the most readily available
concrete data we found and included both casino
and noncasino establishments. According to NJCCC,
data on the number of casino restaurants were not
readily available. We added a footnote in appendix
I of our report to explain why our numbers and the
numbers cited by NGISC differed.

Appendix VIII
GAO Contacts and Staff Acknowledgments
Page 66           GAO/GGD-00-78 Impact of Gambling
GAO Contacts
Bernard Ungar, (202) 512-8387

John Baldwin, (202) 512-8387

Acknowledgments
In addition to those named above, Bradley Dubbs,
Laurie Ekstrand, Lynn Gibson, V. Bruce Goddard,
Lucy Hall, Michael Horton, Yesook Merrill, and
Michelle Sager made key contributions to this
report.

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