The misleading pitch for Question 7

Give the new television ad asking voters to approve Maryland's Question 7 credit for one thing: It is spot on in accusing the opposition of being bankrolled by an out-of-state gambling company worried about losing revenue at its marquee location in West Virginia. Of course, the ad doesn't mention that the group who sponsored it — For Maryland Jobs & Schools Inc. — is a front for the gambling giant MGM, which stands to reap hundreds of millions if voters allow a sixth casino in Prince George's County. Fortunes will be spent on back-and-forth advertisements in the coming weeks because even greater fortunes stand to be gained or lost with the outcome of November's vote. The truth, inevitably, will be the loser.

The latest pro-casino ad focuses on the purported benefits to taxpayers of expanding Maryland's gambling program, but it does so selectively. It claims that approving Question 7 will create 4,000 permanent jobs, based on a study commissioned by casino advocates. No doubt Question 7 has the potential to create some jobs, at least in the short term. Trade unions are strongly in favor of it because of the construction jobs that would be created if MGM and the developers of National Harbor follow through with their promises of an $800 million resort casino. And table games, which would be made legal if Question 7 passes, create many more jobs than slots-only casinos.

However, the ultimate effect on Maryland's economy is hard to judge. We don't know whether adding a third mega-casino in the Baltimore-Washington corridor would over-saturate the market, but we have already seen signs that the appetite for gambling in Maryland is not infinite. Hollywood Casino in Perryville — owned by Penn National, the same people spending millions on the anti-Question 7 ads — has seen a major drop in revenue since Maryland Live opened at Arundel Mills. And even Maryland Live's revenue is settling down from its stratospheric first weeks. The Maryland Lottery Commission reports that total revenue there dropped by about $3 million from July to August, a difference of almost $70 per machine per day. We have no idea what will happen when a Baltimore casino opens a little more than a dozen miles away, much less what the effect would be of a casino at National Harbor. The promise of new jobs in Prince George's County may seem less attractive if the new casino simply takes them away from someplace else.

From there, the ad's claims get dicier. It reports that the Department of Legislative Services has estimated that Question 7 will produce hundreds of millions for Maryland schools. Eventually, it could add up to that much, but not soon and not just because of the Prince George's casino. DLS figured that the new casino in Prince George's would add just $48 million to the education trust fund in fiscal 2017, a figure that is expected to grow to $66 million a year when it is fully operational in 2019. The state-wide legalization of table games, which is also part of the referendum, would add $50 million, eventually increasing to $55 million. But much of the benefit to the state's slots program that the legislature authorized — $74 million in fiscal 2017 and $76 million in 2019 — comes from changes that go into effect regardless of the public vote.

Those estimates, however, do not take into account the possiblity that the state lottery commission could approve further reductions in the slots tax rate, changes that could wipe out much of the projected gains.

Moreover, nothing in the law says that the state is actually required to spend more on education than it would have otherwise. More money in the education trust fund can mean — and heretofore always has meant — that less general fund money is sent to the schools, freeing it up for other purposes. That's what happened with the lottery, keno and slots, and that's what would happen if Question 7 passes.

But what's really rich is the ad's claim that Question 7 would save taxpayers money by ending subsidies for casino owners. What it is apparently referring to is the provision in the law that would make the casinos, rather than the state, responsible for purchasing slot machines. That's a no-brainer, given that the casinos can get a better deal than the state, and it doesn't require voter approval. But calling it an end to a subsidy is blatantly misleading; the casinos would be compensated for the responsibility through lower slots tax rates.

In reality, Question 7 is a massive giveaway to the casino owners at the public expense. It guarantees steep tax cuts for most of the state's casinos and allows the possibility for even greater reductions in the future. The Department of Legislative Services estimates that the casino owners stand to reap a $525 million windfall if Question 7 passes.

The opposition's ads are, indeed, being financed by an out-of-state casino company that doesn't have Maryland taxpayers' interests at heart, and they aren't exactly paragons of truth either. But they are right about one thing: Question 7 is a bad deal for Maryland.

Note: An earlier version of this editorial used outdated state revenue projections. The Sun regrets the error.

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