Topeka Legislators writing the next state budget have a lot less gambling revenue than once thought.
Kansas economic forecasters say the state’s share of casino revenues for the next budget year will be around $23.5 million. When the expanded gambling law passed in 2007, supporters said four state-owned casinos and slot machines at three race tracks would generate $200 million a year.
But that was before two casino companies pulled out of the running, the tracks closed without slots and the economy went into a nosedive.
“It’s really going to compound the problem. This is additional bad news with everything we’ve heard,” Senate Ways and Means Committee Chairman Dwayne Umbarger said Wednesday.
The state faces a gloomy budget outlook when lawmakers convene Jan. 12. The latest economic forecast projects less revenue than previously anticipated for the current budget year, ending June 30, and revenues remaining flat in fiscal year 2010, which ends June 30, 2010.
“We are just going to have to keep our wits about us and roll up our sleeves. Things will turn around, but between now and then, we are going to have some difficult times,” said Umbarger, a Thayer Republican.
The current problems are more difficult than the last major budget crisis in 2003, partially because many one-time accounting procedures used to balance that budget aren’t available this year.
Legislators enacted expanded gambling in 2007 in part because they thought it would generate needed revenue for the state.
“Nobody should have been spending gaming revenue as a plan to fill a budget hole,” said Senate Majority Leader Derek Schmidt. “This isn’t the core of the budget problem. It is a footnote.”
Economic forecasters say Kansas faces a $141 million deficit at the end of the current fiscal year, and if left unchecked, it would grow to $1.02 billion by the end of the next fiscal year.
The state does stand to gain $30.5 million in privilege fees from the two casino companies still in the running. Once they clear background checks by the Kansas Racing and Gaming Commission next month, that money goes to the state.
The $23.5 million would be the state’s share of revenue next year from the casino operated by a partnership of Kansas Speedway and Baltimore based-Cordish Co. at Kansas City, Kan., and another at Dodge City, operated by Butler National Service Corp., of Olathe.
The speedway plans a $680 million facility with 3,000 slots and a 300-room hotel. The Dodge City casino would cost about $88 million and have 875 slots and a 124-room hotel.
By law, the state’s share is limited to debt reduction, infrastructure projects or lowering property taxes. Putting gambling money in those areas would free state revenue being used for those purposes.
The gambling revenue prospects started looking dim in September when Penn National Gaming Inc. walked away from its contract for a Cherokee County casino, saying it couldn’t compete with a nearby Oklahoma tribal casino.
It grew dimmer when Harrah’s Entertainment Inc. said Monday it was pulling out of Sumner County because of current economic conditions.
The Woodlands horse and dog track in Kansas City, Kan., closed in August after failing to agree on a contract for slots with the Kansas Lottery, which owns the gambling.
Camptown Greyhound Park in Frontenac has been closed since 2000 and negotiations with the Lottery ended in a stalemate. Sedgwick County voters rejected slots at Wichita Greyhound Park last year and it closed.
Track owners hope to persuade legislators to give them a larger percentage from the slots so they can afford to operate. But there’s not a lot of sentiment for revisiting gambling next year.
“It’s important we not get pulled off on a debate about gaming when the focus should be on how we are going to make this budget balance,” said Schmidt, an Independence Republican.
Gov. Kathleen Sebelius is preparing her proposed budget for fiscal 2010 and already has asked departments to cut spending by 3 percent in the current budget. She will present her proposals to legislators in January.
“Everything is on the table. The governor will do her best to protect schools, caseloads and debt service, but she’s looking at all options,” said Sebelius spokeswoman Nicole Corcoran.