As school systems face deficits, some ask: "What happened to the casino money?" (Baltimore Sun video)
In the seven years since the first of Maryland's six casinos opened, they have pumped $1.7 billion into the state's Education Trust Fund — the financial windfall that advocates for gambling promised would go to the state's public schools.
But over that time, casino funds have not gone to bolster school budgets more than what the state already was required to spend — and some jurisdictions, including Baltimore, have suffered funding cuts.
That's because the state officials who approved casino gambling in 2008 — Gov. Martin O'Malley and his Democratic allies in the General Assembly — didn't require that school aid keep pace with the growth in gambling.
State budget analysts say the money from the casino-fueled Education Trust Fund is, in fact, going to schools, helping to pay for rising costs. But that stream has allowed the governor and lawmakers to take money that once went to schools and redirect it to pay salaries, fund roadwork and support other government programs and services.
"While gambling was sold as a way to bring in more money for education, it really hasn't been putting more money in schools," said Benjamin Orr, director of the Maryland Center on Economic Policy. "We've essentially invested the same amount of money in our schools that we would have with or without legalized gambling."
That's most pronounced in Baltimore, where the Horseshoe Casino has generated more than $200 million for the Education Trust Fund since it opened in 2014.
Baltimore public schools have received less state money — not more — than they did before the casino opened. The system is dealing with a $129 million budget gap this year, and stands to lose $42 million in aid next year under the state budget proposed last week by Gov. Larry Hogan.
When the General Assembly was considering casino gambling in 2009, Del. Curt Anderson sponsored a bill that would have forced state officials to use the trust fund money to increase funding for education. It died in committee.
Anderson, a Baltimore Democrat who chairs the city's House delegation, listened to the lobbyists and lawmakers who said gambling would benefit schools. He was always skeptical.
"I voted against the casinos because I feared all the promises they made would not be kept," he said. "The money is going into the Education Trust Fund, but it's being siphoned off on the other end.
"Even back in 2009, we knew they were going to do the Okey-Doke on us. We knew how the game was played.
"They promise a lot, they get the bill passed, and they never deliver on the promises."
Gov. Robert L. Ehrlich Jr., a Republican, pushed to bring casino gambling to Maryland to generate more revenue for the state. But the Democratic-controlled General Assembly didn't pass the measure until O'Malley, Ehrlich's Democratic successor, championed the cause and backed the idea of letting the voters decide at the ballot box.
O'Malley promised that "hundreds of millions" of dollars from taxes on slot machines and other gambling would go to the state's public schools. When pressed by critics, his administration acknowledged that the revenue wouldn't necessarily go to additional money on top of what was required by the state's school-funding formula.
Neither O'Malley nor Maryland Senate President Thomas V. Mike Miller responded to requests for comment.
Alexandra Hughes, chief of staff to House Speaker Michael E. Busch, argued the casino money has given governors plenty of revenue to put in the budget for schools.
"Education funding is the top priority of the House — and has been the biggest sticking point with the governor over the past two years," she said. "The legislature passed a revenue stream to keep pace with the annual increase in education funding."
She said Hogan is sitting on a fund balance of more than $200 million, at least a portion of which he could allocate to schools.
School funding was a focal point of pro-gambling ads that ran in 2008, before the state's voters approved five slots-only casinos, and again in 2012, before they approved expanding to table games and a new casino in Prince George's County.
In one commercial, advocates said casinos would pump hundreds of millions of dollars "directly into our schools."
Another, featuring then-Baltimore Mayor Stephanie Rawlings-Blake and Baltimore Ravens star Jonathan Ogden, said expanding gambling would lead to "millions for our schools."
A third threatened that schools would "lose hundreds of millions" in cash to other states if gambling was not expanded.
In fact, budget analysts say, school funding has been driven almost entirely by a state funding formula that awards aid to local districts based on their size and wealth. The law that authorized casino gambling did not require the state to spend more on education than it would have otherwise.
Before casinos opened in 2011, Maryland spent 21 percent of its $31 billion general fund revenue on public schools. In 2017, with revenues at $42 billion, the state spends just 18 percent of its general fund on public schools. The casino money allowed general funds to be spent elsewhere.
A spokesman for Hogan, a Republican, said the legislature created the school funding formula and the Education Trust Fund.
With the opening of the MGM National Harbor casino and resort, Maryland casinos generated a record $133.5 million in revenue during December, the Maryland Lottery and Gaming Control Agency reported today.
Former Del. Heather Mizeur, a Democrat who opposed casino gambling when she was in the General Assembly, said it's now "up to the legislature to try to fix the governor's poor budget decisions."
"Governor Hogan's budget does exactly what I had feared most when I was working against the casino ballot initiative — it does a bait-and-switch on the public, breaking a promise that was made by the initiative's supporters," Mizeur said. "The new money that's in the Maryland Education Trust Fund isn't being used as supplemental revenue to boost education spending. Rather, it's supplanting holes in the general budget."
Hogan met with lawmakers from Baltimore recently, Mayer said, and offered to move more money to the city if they can find other areas in the budget to cut.
"We cannot spend money we don't have," Mayer said. He said lawmakers have the rest of the annual session, which ends April 10, to find ways to pay for what's important to them.
"The governor is not going to raise taxes, and he's not going to increase debt," Mayer said.
Casinos contributed $50 million to the state's Education Trust Fund in 2011, and $94 million the next year. During these years, proponents of casino gambling said the state was still struggling to recover from the recession.
They say the casino money helped the state avoid what could have been deep cuts to schools.
State legislative analysts say casino money allowed Maryland to keep pace with education funding formulas even in tough fiscal times.
By 2015, the casinos were generating more than $350 million for the Education Trust Fund. This year, they're on pace to contribute more than $500 million.
The casinos are projected to have contributed more than $2 billion to the trust fund by the end of the fiscal year. Maryland Live casino in Anne Arundel County has itself already contributed more than $1 billion.
Still, nine school districts — in Baltimore City and in Carroll, Calvert, Garrett, Harford, Kent, Queen Anne's, Talbot and Worcester counties — are facing cuts in state aid this year.
State Comptroller Peter Franchot opposed casino gambling in Maryland.
MGM National Harbor boosted the casino's advantage at some blackjack tables under a new regulatory regime that gives Maryland casinos more flexibility to determine their own rules governing such things as payouts and wagers for blackjack, roulette, poker and other table games.
"People ask me often around the state, 'What happened to the casino money?'" he said. "And I don't have a good answer for them. It just disappears into the general fund."
He remembers proponents speaking about the benefits of "slots for tots."
"It was a fiscal fairy tale from the start," he said.
Casinos still are having a substantial impact on the state's economy.
In addition to the $1.7 billion for the Education Trust Fund, casinos have generated $266 million for horse racing, $177 million for local community impact grants and $47 million for small and minority-owned businesses.
They also employ hundreds of Marylanders. Horseshoe Casino Baltimore, for instance, is one of the largest employers in the city.
"We're very pleased with the performance of our casino partners," said Gordon Medenica, director of the Maryland Lottery and Gaming Control Agency. "The Education Trust Fund has grown every year. We expect the funding to the Education Trust Fund will continue to increase."
Having generated $2.2 billion in revenue for the state, casinos are now some of the largest taxpayers in Maryland. But proponents note that they don't decide where the proceeds go.
Bebe Verdery, director of the Education Reform Project of the ACLU of Maryland, said casino revenue should be doing more for education in the state.
"Maryland school funding falls over $1 billion short of what the education formula says students need," she said. "Casino operators are receiving higher-than-expected, record profits.
"In this time of fiscal distress for Baltimore and other schools, why can't part of the solution be casinos sharing more of their excess profits?"