The bus trips to nearby casinos don’t flow like they used to.
“We’ve had to cut back on trips. Ridership is definitely down,” said Amy Babcock of Green River Lines in Peru. “Even five years ago we used to be running twice a week, every Monday and Wednesday. Now we’re twice a month.”
Babcock said there are a number of contributing factors to rider regression. Video gaming isn’t entirely to blame, but it is part of the issue.
Since September 2012, video gambling in Illinois has taken a foothold in the Illinois Valley economy. More than $145 million has been played during that time in La Salle, Bureau and Putnam counties. About 40 percent of that money stays local with another 25 percent going towards the state. Last year, for the first time ever, video gaming revenue exceeded riverboat casino revenue in Illinois.
Illinois’ riverboat casinos have been hurting since video gaming started. Illinois Valley residents no longer need to travel at least an hour to play the slots, resulting in a drop in casino gate receipts.
How does that affect Illinois Valley residents living more than 50 miles from the nearest casino? It hurts education funding.
Where the revenues go
The state collects hundreds of millions of dollars in gambling revenue each year, but riverboat and video gaming revenues go to different accounts.
“The aspect that may be troubling to some is the destination of these gaming tax dollars. The majority of the tax revenues from casinos are eventually transferred to the Education Assistance Fund. The majority of tax revenues from video gaming are deposited into the Capital Projects Fund. Therefore, if video gaming causes a reduction in revenues from riverboats, tax dollars are effectively being shifted from the Education Assistance Fund to the Capital Projects Fund ... Whether this funding shift is positive or negative is, of course, open to policy debate,” stated a 2017 report from the Commission on Government Forecasting and Accountability on Wagering in Illinois.
The Education Assistance Fund is revenue that can be used for educational purposes from the elementary level to higher education. The Capital Projects Fund is mainly used to pay off Illinois’ bond payments.
The state’s cut of casino revenues first go towards paying the operational expenses of the state gaming board.
“The (casino) revenue that is left is transferred into the Education Assistance Fund,” said Tom Swoik, executive director of the Illinois Casino Gaming Association. “None of the video gaming revenue goes towards education.”
The Illinois Gaming Board’s expenses account for about $45 million each year. However, the casino revenue also pays for the operations of the video gaming board, which has been an annual expense of around $17 to $19 million of that $45 million over the past five years. So, essentially the casinos are paying for the expenses of an industry that is taking business from them, and when the casinos get less revenue, so does the state.
“When the revenues go down, casinos go into lower tax brackets and education ends up getting less revenue,” Swoik said.
Casinos are taxed at different rates based on how much revenue is coming in. The more a casino makes, the more the state can tax. But the state’s cut for video gaming is a flat rate. The state takes 25 percent with another 5 percent going to local municipalities.
A decade of hurt
Illinois riverboat casinos saw revenue growth until they hit a tipping point around 2007. At the time, the nation was on the brink of a recession, and Illinois had just enacted a new tobacco law set to take effect Jan. 1, 2008.
“2008 was our big hit when the smoking ban came in,” said Swoik.
Revenues crashed for the next few years. The state went from seeing $685 million in education assistance in 2007 to $324 million in 2011. Things started to turn around in 2012 and 2013. Illinois added Rivers Casino in Des Plaines, which has been the state’s top performer for years. But the uptick in revenue didn’t last long.
“We were just starting to go up around 2011 and that’s when video gambling came in,” Swoik said.
It’s been hampering any casino growth ever since. Illinois casinos are limited to 1,200 gaming positions such as slot machines or table games. Those account for about 12,000 gaming positions in Illinois’ ten casinos.
There were 28,565 video gaming terminals active in Illinois as of February.
“That’s like an additional 24 casinos that have opened in Illinois since 2011,” Swoik said.
He added that when including video gaming terminals, Illinois now has more gaming positions than the city of Las Vegas.
The big picture in education
Education revenue from casinos is down about $400 million from where it was 10 years ago.
But that doesn’t mean schools are seeing that $400 million loss each year. State Sen. Sue Rezin (R-Morris) said educational funding has actually gone up in the past few years.
“We have added back record amounts of funding in education,” she said. “It’s fair to say we’ve added more than $1 billion back into education in the past three years.”
Peru Elementary superintendent Mark Cross commended Rezin’s efforts to increase education funding but also acknowledged that any increase now is making up for years of underfunding. “We have years and hundreds and hundreds of millions of dollars to catch up to where we need to be,” he said.
Because education funding in Illinois relies on a multitude of revenues, a loss in one place means it can be supplemented with funds from another account.
For instance, a recent income tax increase is help bringing in additional revenue for the state.
“We have seen a small uptick in revenues,” Rezin said. “And after the big crash we had in 2007, we’ve seen the economy and property rates slowly come back.”
However, Rezin said she would prefer to see revenues come from economic growth and not from adding to the tax burden Illinois residents already face.
“In order to create revenue a government needs to be a willing partner in the private sector,” she said.
Brett Herrmann can be reached at (815) 220-6933 or firstname.lastname@example.org. Follow him on Twitter @NT_SpringValley.