I just want to ask one question, and that is on this issue of a study, has there ever been a study in the State of Nevada-you may have already touched on this-on the effects of gaming or some of the issues that are being raised by the first panel of witnesses? Has there ever been a study like that?

Senator REID. Yes.

Senator COCHRAN. Could we have a copy of it?

Senator REID. We will give you a list of all those, in addition to the 200 that are not Nevada studies.

Senator COCHRAN. There are 200 different studies, that is what you are saying?

Senator REID. Not in Nevada, but there are over 200 studiesSenator COCHRAN. All around the country?

Senator REID. That is right, in the last few years on the effects of gaming. You are going to hear some-there is one gentleman from the University of Nevada who will testify. There are some people who disagree with him. We have people in our university system that teach gaming and the effects of it.

Mr. ENSIGN. Senator, one of the people that I had read about or had read some of the studies a few years ago that talked about State-sponsored gaming, that was the University of Nevada-Reno. I mean, this was a person that was commenting of how they do it in Britain, where they do not allow it to be advertised and you have to control-and the gaming industry can be a very good industry, can be a nice entertainment industry, can be a lot of very positive things and job creation and all that if it is done properly. The State of Nevada does it properly and that is an example to use. If you need a study, just look at the way the State of Nevada does it. We do not have a lottery and we control and we regulate very effectively at the State level the gaming industry.

Senator COCHRAN. Thank you very much.

Chairman STEVENS. Thank you gentlemen very much. I appreciate it.

Senator BROWN. Thank you very much, Mr. Chairman.

Chairman STEVENS. Our next panel is Robert Goodman, Director of the U.S. Gambling Study; Tom Grey, Executive Director, National Coalition Against Legalized Gambling; and Dr. Tim Ryan, Dean of the College of Business Administration, University of New Orleans.

Gentlemen, we appreciate your courtesy. I think you heard my comments at the beginning, so I would appreciate it if you would abide by the time limitations we have. We are already losing Members, and we regret that.

Dr. Robert Goodman first, please.

TESTIMONY OF ROBERT GOODMAN, DIRECTOR, U.S.

GAMBLING STUDY

Mr. GOODMAN. Senator Stevens and Members of the Committee, I thank you for your invitation to testify before you this morning. My name is Robert Goodman. I am Lemelson Professor of Environmental Design and Planning at Hampshire College in Amherst, Massachusetts.

I was the Director of the U.S. Gambling Study at the University of Massachusetts, funded by the Aspen Institute and the Ford

Foundation. I am also the author of several books on planning and economic development and a recently released book, The Luck Business. I have also testified before State legislators and the Congress on issues of legalized gambling and economic development.

My testimony this morning will cover two main points: Why a study of the national impacts of the gambling industry is necessary at this time, and why such a study should appropriately be carried out by a Federal commission.

The simple reason for a national study now, as you have heard this morning, is the unprecedented transformation of legalized gambling during the last 5 years into one of the Nation's leading industries. I will not go through all the statistics on it, just to say that between 1988 and 1994, total yearly casino revenues nationally nearly doubled, from $8 billion to about $15 billion. Dozens of States and cities around the country are currently attempting to use or considering the use of legalized gambling as a major form of economic development.

Our modest research survey has been described as the first national and comprehensive study of the gambling industry since the mid-1970's. While we were gratified by the public attention paid to our research, I have been the first to say that it is hardly comprehensive. It continues to be the case that no comprehensive national study of this phenomenon has taken place.

There are at least six reasons why the Federal Government is the appropriate forum for studying this expansion. First, while illegal gambling was once a State or local problem which was appropriately controlled by the police power of the States, the new legalized gambling is carried out by major corporate enterprises which operate across State lines in interstate commerce. The control and regulation of interstate commerce is one of the core constitutional responsibilities of the Federal Government. No State or private organization is in a position to carry out this function.

Without a baseline study to determine the nature of the industry and how it operates in interstate commerce, it is impossible for any of the branches of the Federal Government to make intelligent decisions about the interstate commerce implications of the expansion of legalized gambling.

Second, there is increasingly intense competition among the States to attract each other's gambling dollars across State lines. Expansion has occurred in a kind of copycat manner, often not because of a genuine desire by the States to expand their gambling industry but simply to protect local consumer dollars from migrating across State borders. The result appears to be an inadvertent expansion of gambling which generates increased problem gambling, greater costs to the criminal justice system, and diverts dollars from other businesses in the consumer economy. Only the Federal Government is in a position disinterestedly to examine this competition among the States and make recommendations for future public policy.

Third, a major element in this most recent expansion of legalized gambling has been Indian gambling enterprises. This has taken the form not only of rapidly-spreading gambling on Indian reservations themselves under the compacting process of the Indian Gaming Regulatory Act of 1988, but also there have been increasing efforts

to locate Indian gambling enterprises on non-reservation land, such as the Wampanoag's proposal to build a casino complex in New Bedford, Massachusetts.

And equally important, the argument being heard in many States, cities, and towns across the country is that legalized gambling should be expanded there in order to compete with tribal-run gambling. Issues of policy that impact Native American tribes are uniquely the responsibility of the Federal Government and only the Federal Government can set the terms for and adjust the relationships between the tribes and States.

Fourth, the fact that legalized gambling revenues are now approximately $40 billion annually means that financial resources are being diverted both from savings and from other potential investment opportunities, which may have a serious adverse effect on savings rates and sources of private investment capital, with significant consequences for the overall health of the American economy.

The expansion of legalized gambling is symptomatic of a troubling national shift away from productive enterprises, which strengthen America's position in the global economy. These developments can ultimately threaten national security and therefore must be of concern to the Federal Government.

Fifth, there is currently the potential for enormous future growth of at-home gambling through the media of either television, telephone, or Internet connections. You have talked about that this morning. This poses a challenge to which only the Federal Government can respond as the exclusive regulator of the airwaves. As one gambling executive put it, where you can see it, you can bet it.

Sixth, the Federal Government has an obligation to study the large national and in some cases even multinational corporations such as Promus, G-Tech, and IGT, which dominate the legalized gambling industry. The Federal Government has an obligation to investigate their corporate practices in such areas as securities regulation, antitrust, corruption, and in an industry characterized by frequent large cash transactions, compliance with the reporting and regulatory requirements which concern cash transactions in order to combat money laundering activities.

Moreover, the recent activities in Louisiana involving organized crime with sectors of the gambling industry presents a clear example of the need for a national study of the impacts of gambling expansion.

An additional consideration is the relationship between gambling and sports teams. There is the recent example of ITT, a major corporation involved in the ownership of sports teams, which acquired a major casino gambling venture. Such business activities could create a possible conflict of interest with Federal policy against sports betting and against the intersection of sports and gambling. In conclusion, the competition among the States to expand their legalized gambling industries has intensified, leading to a situation in which powerful forces may be setting into motion often unanticipated effects on the national economy. It is therefore crucial that the Congress, as the people's representative charged with the constitutional duty to regulate commerce and with the Indian tribes

and among the States and to ensure the national security, study this situation.

I thank you. I would like to add one point if I could, Mr. Chairman. I was just given testimony this morning that some of the other experts will bring before you and I noticed at least-I did not have the chance to examine it in detail, but I noticed at least in two of the testimonies, one a reference, a criticism of specifics of our research at the U.S. Gambling Study, and another indicating these 200 studies which you referred to before. I would be happy, if you feel it is appropriate, to respond to both the criticism and to talk some about those 200 studies. Thank you very much.

Chairman STEVENS. If you could give it to us in writing, we will be pleased to take it.

Mr. GOODMAN. We would be happy to do that.

[The prepared statement of Mr. Goodman follows:]

PREPARED STATEMENT OF ROBERT GOODMAN

Senator Stevens, and Members of the Committee, I thank you for your invitation to testify before you this morning. My name is Robert Goodman, and I am Lemelson Professor of Environmental Design and Planning at Hampshire College in Amherst, MA. I was the director of the U.S. Gambling Study at the University of Massachusetts, Amherst, which was funded by The Aspen Institute and the Ford Foundation, and resulted in the report "Legalized Gambling as a Strategy for Economic Development," published in 1994. I am also the author of several books on planning and economic development (After the Planners and The Last Entrepreneurs) and of the recently-released, The Luck Business: The Devastating Consequences and Broken Promises of America's Gambling Explosion (The Free Press, 1995). I have spoken in numerous States and cities around the country and testified before State legislatures and Congress on the issues of legalized gambling and economic development. My testimony this morning will cover two main points: Why a study of the national impacts of the gambling industry is necessary at this time; and why such a study should appropriately be carried out by a Federal commission.

The simple reason for a national study now is the rapid and unprecedented transformation of legalized gambling, during the last 5 years, into one of the Nation's leading industries. As recently as 1988, casino gambling was legal in only two States: Nevada and New Jersey. Six years later, in 1994, casinos were either authorized or operating in 23 States and are currently proposed in many others. From 1988 to 1994, total yearly casino revenues nationally nearly doubled-from $8 billion to about $15 billion. The number of American households visiting casinos also doubled, from 46 million in 1990 to 92 million in 1993.

By 1993, Americans spent nearly $400 billion a year on all forms of legalized gambling, a figure which had grown at an average annual rate of almost 15 percent a year between 1992 and 1994. During the early 1990's, revenues in the gambling industry were climbing about 21⁄2 times faster than those in the Nation's manufacturing industries.

Dozens of States and cities around the country are currently attempting to use, or considering the use of, legalized gambling as a major form of economic development. It is used for revenue, job creation, and a host of other problems-including, as a remedy for Chicago's overbuilt hotel business; as a substitute for Gary, Indiana's devastated steel factories and Detroit's automotive industry; to counterbalance the effects of declining oil prices in Louisiana; to replace vanishing jobs in Connecticut's defense industry; and to provide work for idle New England fishermen.

Our modest survey has been described as the first national and comprehensive study of the gambling industry since the mid-1970's. While we were gratified by the public attention paid to our research, I have been the first to say it is hardly comprehensive. It continues to be the case that no comprehensive national study of this phenomenon has taken place.

There are at least six reasons why the Federal Government is the appropriate forum for studying this expansion.

First, while illegal gambling was once a State or local problem which was appropriately controlled by the police power of the States, the new legalized gambling is carried out by major corporate enterprises which operate across State lines in interstate commerce. The control and regulation of interstate commerce is one of the core

constitutional responsibilities of the Federal Government; no State or private organization is in a position to carry out this function. Without a base line study to determine the nature of the industry and how it operates in interstate commerce, it is impossible for any of the branches of the Federal Government to make intelligent decisions about the interstate commerce implications of the expansion of legalized gambling.

་

Second, there is increasingly intense competition among States to attract each other's gambling dollars across State lines; expansion has occurred in a copy-cat manner often not because of a genuine desire by the States to expand their gambling industry, but simply to protect local consumer dollars from migrating across State borders. The result appears to be an inadvertent expansion in gambling, which generates increased problem gambling behavior, greater costs to the criminal justice system, and diverts dollars from other business activities in the consumer economy. Only the Federal Government is in a position disinterestedly to examine this competition among the States and make recommendations for future public policy.

Three, a major element in this most recent wave of legalized gambling expansion has been Indian gambling. This has taken the form not only of rapidly spreading gambling ventures on Indian reservations themselves, under the compacting process authorized by the Indian Gaming Regulatory Act of 1988, but also there have been increasing efforts to locate Indian gambling enterprises on non-reservation land, such as the Wampanoag's proposal to build a casino complex in New Bedford, MA. And, equally important, the argument being heard in States, cities and towns across the country is that legalized gambling should be expanded there in order to compete with Indian gambling.

Examples of this include New Mexico, where previously illegal gambling was permitted in 1994 because New Mexico's tribes had already initiated gambling enterprises, and California and New York State, where the casino industry is arguing for gambling expansion on the grounds that Indian tribes already have initiated gambling. Issues of policy that impact Native American tribes are uniquely the responsibility of the Federal Government, and only the Federal Government can set the terms for and adjust the relationships between the tribes and the States.

Four, the fact that legalized gambling revenues are now approximately $40 billion annually means that financial resources are being diverted both from savings and from other potential investment opportunities, which may have a serious adverse effect on savings rate and sources of private investment capital, with significant consequences for the overall health of the American economy. The expansion of legalized gambling is symptomatic of a troubling national shift away from productive enterprises which strengthen America's position in the global economy. These developments can ultimately threaten national security, and therefore must be of concern to the Federal Government.

Five, there is currently the potential for enormous future growth of at-home gambling through the media of either television, telephone or Internet connections, which poses a challenge to which only the Federal Government can respond as the exclusive regulator of the airwaves. As one gambling industry executive put it, "Where you can see it, you can bet it."

Six, the Federal Government has an obligation to study the large national and, in some cases, even multi-national, corporations such as Promus, G-Tech and International Gaming Technology (IGT) which dominate the legalized gambling industry, to investigate their corporate practices in such areas as securities regulation, antitrust, corruption, and-in an industry characterized by frequent large cash transactions-compliance with the reporting and regulatory requirements which concern cash transactions, in order to combat money laundering activities. Moreover, the recent activities in Louisiana, involving organized crime with sectors of the gambling industry, presents a clear example of the need for a national study of the impacts of gambling expansion.

An additional consideration is the relationship between gambling and sports teams. There is the recent example of ITT, a major corporation involved in the ownership of sports teams, which acquired a major casino gambling venture. Such business activities could create a possible conflict of interest with Federal policy against sports betting and against the intersection of sports and gambling.

In conclusion, the competition among the States to expand their legalized gambling industries has intensified, leading to a situation in which powerful forces may be setting into motion often unanticipated effects on the national economy. It is therefore crucial that the Congress, as the people's representative charged with the constitutional duty to regulate commerce with the Indian tribes and among the States and to ensure the national security, study this situation.