Indiana's state revenue stream has been strong in the current fiscal year, with the state collecting $550 million more dollars from July to December than was forecast. Sales tax collections are up. So too are corporate tax collections. The state is even taking in more in income tax than it expected. But one major revenue source – casino gaming – has not seen the same recovery as the rest of the state's economy.
A 2011 report from the Rockefeller Institute of Government sounds a familiar theme – only Nevada used more casino revenue in fiscal year 2010 to fund government than Indiana. At its height about four years ago, Indiana casinos stocked the state's general fund with more than $850 million each year. But in those intervening years there was a recession, gamblers stayed away from casinos and that number dropped to where it sits now – still about three-quarters of a billion dollars a year. But analysts say while the freefall may have slowed, it hasn't stopped.
"Gaming revenue, we thought about five or ten years ago was counter-cyclical – that the casinos would not be affected by any kind of recessions. Well we're finding out now that that's not the case," says Ed Feigenbaum, who writes about the state's gaming industry for his publication Indiana Gaming Insight. He says a new casino in the Chicago area and one in Cincinnati mean the state likely hasn't seen the worst of its drop in revenue.
Ohio is the state which most worries the man who wrote the current Indiana state budget – House Ways and Means Chairman Jeff Espich (R-Uniondale). Espich notes the state gets about $1 billion a year in gaming revenue when the state lottery and other sources are included, but he says a large chunk of that could be spent in neighboring states in the coming years.
"It's estimated that maximum impact – if everything bad, if you will, should happen to us – in terms of competition, we could lose about a quarter of that, or some $250 million a year could be lost in revenues," Espich says.
Espich says it's a problem he's aware of himself, but he's not sure other lawmakers have noticed.
"I don't think that the average legislator has come to accept it totally yet," he says.
But Feigenbaum takes the criticism a step further, saying "Legislators have been beaten over the head with this information for the past several years and have chosen to stick their heads further in the sand on this."
So has Indiana become too reliant on casino revenue?
"Oh, that's an easy statement that everybody would agree with," Espich says. "I mean we took what we could get, right? So long as we can withdraw gracefully, I don't think there's any permanent harm. If we insisted on continuing to spend at a level that we can't justify by income, then that would be irresponsible and I'd say we've become too dependent."
Both the Indiana Gaming Commission and the State Budget Agency declined comment for this story, though numbers from the Budget Agency show that while the state expected to take in almost $250 million from casinos and racinos from July to December of last year, $21 million of that never materialized.
Feigenbaum says casinos may ask for perks to help them prop up their businesses in the face of the new competition. But Espich says it's an argument he hears often.
"Farmers say the same thing, so do hospitals say that – ‘give me a break'. So do manufacturers say ‘if you just give me a break on my taxes or give me a credit for expanding, this'll create jobs.' Everybody says the same thing," the Ways and Means Chairman says.
Espich says he expects the state to rely less on casino revenue when work begins on the next budget a year from now. But because the Cincinnati casino isn't scheduled to open until about the time Indiana's next budget is being printed, the state's numbers - like those on many gaming floors in the state - are likely to be something of a crapshoot.
