S. 704-THE GAMBLING IMPACT STUDY

COMMISSION ACT

THURSDAY, NOVEMBER 2, 1995

U.S. SENATE,

COMMITTEE ON GOVERNMENTAL AFFAIRS,
Washington, DC.

The Committee met, pursuant to notice, at 9:30 a.m., in room 342, Dirksen Senate Office Building, Hon. Ted Stevens, Chairman of the Committee, presiding.

Present: Senators Stevens, Cochran, McCain, Brown, Glenn, and Lieberman.

OPENING STATEMENT OF CHAIRMAN STEVENS

Chairman STEVENS. Let us start our opening comments. We will wait for our colleagues who are not here, but when trains leave late, more people miss trains, so let us keep our train on time.

We are going to hear today from Senators Simon and Lugar. They are primary sponsors of the bill to create a Gambling Impact Study Commission. We will also hear from Congressman Wolf, who has introduced a similar bill in the House of Representatives, and we are going to hear from other Senators and invited witnesses.

This bill would create a nine-member commission charged with conducting a study into the social and economic effects of all forms of legalized gambling in our Nation. I do believe the hearing is important. Gaming is more and more prevalent in our society. Since 1988, the number of States with legalized casinos has risen from 2 to 23. Some form of legalized gambling now exists in 48 States plus the District of Columbia and Puerto Rico. Those figures include not only casinos but other gambling enterprises, such as lotteries and parimutuel betting.

We hold this hearing to help us determine whether more information is necessary about the effects of gambling and whether the proposed Federal commission is the best means of conducting the study and gathering that information.

There have been other studies into the effects of gambling, including the comprehensive study commissioned by Congress in 1973. That commission returned 3 years later with a 192-page report entitled "Gambling In America: On the Status of Gambling and its Effect."

In 1976, the commission report found that gambling can aggravate social problems, such as crime and poverty. The study also found that serious ethical and moral values may arise from gambling, particularly when the government is the gambling entre

preneur.

(1)

But that report also concluded, "The simple overriding premise behind all the work of this commission is that a substantial majority of Americans either practice or tacitly endorse gambling and that gambling policy is the proper responsibility of the government entity closest to the lives of the citizens, the State."

That commission submitted its report nearly 20 years ago. At that time, casino gambling was legal in only one State, Nevada, and State lotteries were in their infancies. Now, gambling is a $40 billion industry and still growing. The recent surges in legalized Indian gaming and riverboat casinos, together with the proliferation of State lotteries and other legalized gaming facilities have dramatically changed the landscape of gambling in this country since that report.

Because of the drastic changes in both the industry and the Nation since 1976, it is reasonable for us to ask if another commission is needed to take another look. With that in mind, the focus of this hearing is on the questions posed by this bill, S. 704. I know we have eloquent witnesses that we know personally on both sides of this issue who feel strongly about gambling and its effects, but this Committee is interested in the answer to two questions. Is the proposed study necessary, and is a national commission the best way to go about conducting the study? I can think of several other ways to conduct that study.

We have four panels of witnesses. Each panel will be asked to give their remarks and be followed by questions from the Committee Members. I do ask our Members to hold their questions for each panel until after the members of the panel have finished their remarks. The statements that you present to us will be placed in the record. We are going to ask that you limit your oral testimony. As a member of each panel, each witness is asked to use not more than 5 minutes so there will be time enough for questions from the Committee.

We are asking the Committee to hold their questions to the total panel to not more than 10 minutes. We will take written submissions, of course, and we will include them in the printed record if the Committee decides to print the record.

Let me thank you gentlemen for coming, but let me emphasize again-I see other Members of the Senate here-this is not a hearing on gambling. I intend to stop any witness who starts using our time talking about the effects of gambling. We want to know, do you think this study is necessary and is this commission the way to do it?

I hope that everyone will understand that we are all in conference committees and working on reconciliation and a lot of other things. I believe this is an important hearing, but we want to conduct it as efficiently as possible. I would be most pleased if you will cooperate on this issue.

[The prepared statement of Senator Stevens follows:]

PREPARED STATEMENT OF SENATOR STEVENS

Today we will hear from Senators Simon and Lugar, the primary sponsors of this bill, along with Congressman Wolf, who has introduced similar legislation in the House of Representatives.

We'll also hear from members of the Nevada and New Jersey delegations, as well as other invited witnesses.

S. 704 would create a nine-member commission charged with conducting a study into the social and economic effects of all forms of legalized gambling in this country.

This hearing is important

Gaming is more and more prevalent in our society. Since 1988, the number of States with legalized casinos has risen from 2 to 23.

Some form of legalized gambling now exists in 48 States, plus the District of Columbia and Puerto Rico. This figure includes not only casinos, but other gambling enterprises such as lotteries and parimutuel betting.

This hearing will help us determine whether more information is necessary about the effects of gambling, and whether the proposed Federal commission is the best means of conducting the study and gathering that information.

There have been other studies into the effects of gambling, including a comprehensive study commissioned by Congress in 1973. That commission returned 3 years later with a 192-page report, entitled "Gambling in America," on the status of gambling and its effects.

The 1976 Commission Report found that gambling can aggravate social problems such as crime and poverty. The study also found that serious ethical and moral issues may arise from gambling, particularly when the government is the gambling entrepreneur.

But that report also concluded that "the simple, overriding premise behind all the work of this Commission" is that a substantial majority of Americans either practice or tacitly endorse gambling, and that “gambling policy is the proper responsibility of the government entity closest to the lives of citizens-the State.'

That commission submitted its report nearly 20 years ago. At that time, casino gambling was legal in only one State, Nevada, and State lotteries were in their infancy. Now, gambling is a $40 billion industry, and still growing rapidly.

The recent surges in legalized Indian gaming and riverboat casinos, together with the proliferation of State lotteries and other legalized gaming facilities, have dramatically changed the landscape of gambling in this country.

Because of the drastic changes both the industry and the Nation have undergone since 1976, it's reasonable for us to ask if another commission needs to take a second look.

With that in mind, the focus of this hearing is on the questions posed by S. 704. I know we have eloquent witnesses on both sides of the issue who feel very strongly about gambling and its effects.

But what this Committee is most interested in is the answer to the two main questions raised by this bill

(1) Is the proposed study necessary?

(2) Is a national commission the best way to go about conducting the study?

We have four panels of witnesses. Each panel will give their remarks, to be followed by questions from the Committee.

I ask the Committee Members to hold their questions for each panel until after all members of that panel have finished their remarks.

Witnesses are requested to limit their oral testimony to 5 minutes each, so there will be enough time for questions from the Committee. Written submissions to the record may be longer, however, and will be included in the printed record of the hearing if one is printed.

I thank all of our witnesses for coming today, and I look forward to a productive and informative hearing.

Senator STEVENS. I know that the Ranking Member is here. Senator McCain has asked for time as he has to leave.

OPENING STATEMENT OF SENATOR MCCAIN

Senator MCCAIN. Thank you, Mr. Chairman.

I just want to briefly explain why I support the study called for in this bill. Mr. Chairman, as Chairman and Vice Chairman of the Senate Indian Affairs Committee, I have worked for many years on the issue of Indian gaming and what is the appropriate regulatory role of the Federal Government regarding Indian gaming.

In 1987, the U.S. Supreme Court recognized the right of Indian tribes to conduct gaming on their lands under certain conditions. In 1988, Congress attempted to balance the interests of State and tribal governments by enacting the Indian Gaming Regulatory Act

with the support of State and tribal governments. The 1988 Act encourages tribal and State governments to negotiate tribal-State compacts that outline their interdependent responsibilities for the regulation of tribal gaming operations. It mandates that tribal governments must spend gaming revenues for governmental purposes. In the past few years, I have worked very closely with Senators Inouye, Simon, Reid, and others on amendments to that Act. Earlier this year, I introduced S. 487, which would put in place minimum comprehensive Federal standards governing Indian gaming and strengthen the enforcement powers of the National Indian Gaming Commission. Our efforts have not yet resulted in a change in the law, one of the greatest disappointments to me in recent years. However, I remain committed to trying to bring tribal and State governments to basic agreement on these issues.

Over these years of involvement in Indian gaming matters, Mr. Chairman, I have come to see firsthand the controversial and complex issues surrounding the growth of gaming throughout the United States. Gaming is having a growing impact on every sector of our society, spilling across State and reservation boundaries.

Opponents charge that gaming undermines the institutions and values that Americans hold dear. Supporters claim that gaming serves an important role as valuable entertainment and economic activity. Tribal and State governments assert that gaming is a vital exercise of their sovereign right to raise governmental revenues. Many non-profit organizations argue that gaming raises funds they cannot otherwise raise for charitable purposes.

What is without dispute, of course, is that the players generally lose money and the operators generally make money, be they forprofit corporations, State or tribal governments, or charitable organizations. The question is whether the losses of the players cost society more than what we gain as a whole.

On balance, I think the public would be well-served by a study of the benefits and problems posed by the growth of gaming throughout the United States if the commission established by S. 704 is balanced and its study well-reasoned. I believe its findings and recommendations could prove valuable as this matter of great controversy continues to be debated in the halls of Congress, in tribal councils, and in the State capitals. Thank you, Mr. Chair

man.

Chairman STEVENS. Thank you very much. Senator Glenn.

OPENING STATEMENT OF SENATOR GLENN

Senator GLENN. Thank you, Mr. Chairman.

I want to welcome our witnesses today. We will be examining a need for the legislation. Gambling is an industry that has grown rapidly. In 1976, the last time we studied the issue on a national basis, legalized wagering in the United States totaled an estimated $22 billion, while legalized gaming approached $3 billion. In 1994, 18 years later, legal wagering exceeds $482 billion while legal gaming reached $40 billion. Those are enormous increases.

We have riverboats and land-based casino gambling in a number of States, Indian tribes increasingly going to casinos and so on. We all are aware of that.

One of the issues that I think is probably worth studying by a commission is that the Internet is now rapidly becoming a way of gambling. If you have a credit card, you can get on the Internet and have a worldwide game of some kind. I suppose you could have a picture of a wheel and a number comes up and you place your bet. I do not know what this means for the future, but I think it is worth looking at.

I usually do not just announce full support of something until we have a hearing. I think that is the reason for a hearing. But my opinion going in, at least, is that there would be nothing wrong with looking at the growth of gambling and seeing if we need further regulation of some kind or another.

I know this makes some people nervous, but I think that we probably will go this route at the end of all our hearings. We have not only this great increase nationwide, but we have State issues involved with it. An increasing amount of State revenue comes from that. I did not particularly favor our lottery when we put it in back in Ohio, but I am told now that we get 4.6 percent of our State funds from a lottery.

I always thought lotteries appealed to the wrong kind of people for tax purposes. We do not find many multi-millionaires going out and plunking down several hundred thousand dollars to buy lottery tickets in the hopes of getting more money. It is the people that should be spending the money on meat and potatoes and a new coat for the kids for school that go out and hope to hit it on the lottery, and maybe that is fine; I do not know. But I think it is worthwhile looking at as to how that has expanded.

Indian issues are very complex. They trace back to treaties that were signed by the U.S. Government and the Indian tribes back in the 1800's. Those vary from one reservation to another, as Senator McCain has alluded to in his concerns in that area.

My proclivity going in is to probably say, yes, we do need this commission and to look at gambling again. Also, I was given some figures which I will not put in the record right now as to the huge increase in political contributions from some of these sources. That is a whole other area that we might want to see if the commission could look at, also. Thank you, Mr. Chairman.

Chairman STEVENS. Thank you very much.

I would like to submit for the record the prepared statement of Senator Dorgan relating to this legislation.

[The prepared statement of Senator Dorgan follows:]

PREPARED STATEMENT OF SENATOR DORGAN

Mr. Chairman. I thank you for calling this hearing on the Gambling Impact Study Commission Act, S. 704. For some time, I have been interested in the issues surrounding gambling and I look forward to hearing from our distinguished witnesses today.

Throughout our Nation's history, gambling has been alternately praised and vilified. During the 18th century, lotteries and other forms of legal gambling were prevalent until a wave of scandals created a moral backlash. Following the Civil War, legal gambling returned to popularity until scandals again surfaced in the early 20th century. New Mexico and Arizona were actually forced to prohibit gambling as a condition for statehood. Then, in the 1930's, racetracks and bingo halls became a familiar site on the American landscape. When State lotteries came on to the scene in 1963, they helped to make gambling an even more respectable part of the social fabric.