United States. Congress. Senate. Committee on Gove.

S. 704--the Gambling Impact Study Commission : hearing before the Committee on Governmental Affairs, United States Senate, One Hundred Fourth Congress, first session ... November 2, 1995 online

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S. Hrg. 104-592

S. 704-THE GAMBLING IMPACT STUDY
COMMISSION

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BEFORE THE

COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE

ONE HUNDRED FOURTH CONGRESS

FIRST SESSION
ON

S. 704

TO ESTABLISH THE GAMBLING IMPACT STUDY COMMISSION



NOVEMBER 2, 1995



Printed for the use of the Committee on Governmental Affairs




my



U.S. GOVERNMENT PRINTING OFFICE
21-055CC WASHINGTON : 1996



For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-053602-2




S. Hrg. 104-592

S. 704-THE GAMBLING IMPACT STUDY
COMMISSION

Y 4, G 74/9; S, HRG. 104-592 ^^^=^^^

S. 704-The Ganbling Inpact Study Co...

BEFORE THE

COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE

ONE HUNDRED FOURTH CONGRESS

FIRST SESSION
ON

S. 704

TO ESTABLISH THE GAMBLING IMPACT STUDY COMMISSION



NOVEMBER 2, 1995



Printed for the use of the Committee on Governmental Affairs










"^.*'f^..,..



U.S. GOVERNMENT PRINTING OFFICE
21-055CC WASHINGTON : 1996



For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-053602-2



COMMITTEE ON GOVERNMENTAL AFFAIRS

TED STEVENS, Alaska, Chairman
WILLIAM V. ROTH, Jr., Delaware JOHN GLENN, Ohio

WILLIAM S. COHEN, Maine SAM NUNN, Georgia

FRED THOMPSON, Tennessee CARL LEVIN, Michigan

THAD COCHRAN, Mississippi DAVID PRYOR, Arkansas

JOHN McCain, Arizona JOSEPH I. LIEBERMAN, Connecticut

BOB SMITH, New Hampshire DANIEL K. AKAKA, Hawaii

HANK BROWN, Colorado BYRON L. DORGAN, North Dakota

Albert L. McDermott, Staff Director
Douglas S. Fuller, Counsel
Leonard Weiss, Minority Staff Director
Michal Sue Prosser, Chief Clerk

(H)



CONTENTS



Opening statements: Page

Senator Stevens 1

Senator McCain 3

Senator Glenn 4

Senator Lieberman 18

Senator Brown 19

Senator Cochran 70

Prepared statement:

Senator Dorgan 5

WITNESSES

Thursday, November 2, 1995

Hon. Paul Simon, a U.S. Senator from Illinois 6

Hon. Richard G. Lugar, a U.S. Senator from Indiana 12

Hon. Frank Wolf, a Representative in Congress from Virginia 15

Hon. Harry Reid, a U.S. Senator from Nevada 58

Hon. Richard H. Bryan, a U.S. Senator from Nevada 60

Hon. John Ensign, a Representative in Congress from Nevada 63

Robert Goodman, Director, United States Gambling Study 71

Rev. Tom Grey, Executive Director, National Coalition Against Legalized

Gambling 76

Timothy P. Ryan, Ph.D., Dean, College of Business Administration, Univer-
sity of New Orleans 81

Frank J. Fahrenkopf, Jr., President and Chief Executive Officer, American

Gaming Association 130

Richard G. Hill, Chairman, National Indian Gaming Association 149

William R. Eadington, Ph.D., Director, Institute for the Study of Gambling

and Commercial Gaming, University of Nevada 156

Alphabetical List of Witnesses

Bryan, Hon. Richard H.:

Testimony 60

Eadington, William R.:

Testimony 156

Prepared statement 158

Ensign, Hon. John:

Testimony 63

Prepared statement 64

Fahrenkopf, Frank J., Jr.:

Testimony 130

Prepared statement 133

Goodman, Robert:

Testimony 71

Prepared statement 74

Grey, Rev. Tom:

Testimony 76

Prepared statement 77

Hill, Richard G.:

Testimony 149

Prepared statement 152

Lugar, Hon. Richard G.:

Testimony 12

Prepared statement 13

(III)



IV

Page

Reid, Hon. Harry:

Testimony 58

Prepared statement 60

Ryan, Timothy P.:

Testimony 81

Prepared statement 84

Simon, Hon. Paul:

Testimony 6

Wolf, Hon. Frank:

Testimony 15

Prepared statement 17

APPENDIX

Congressman Frank A. LoBiondo, prepared statement 30

Bills. 704 165

Santa Ana Pueblo/Santa Ana Non-Profit Enterprise Board, Ken Pequin,

Chairman/Executive Director, SANE Board and Ernest Lujan, Governor,

San Ana Pueblo, prepared statement 172

Letter from E.O. Robinson, Jr., Sr. Vice-President and General Counsel,

Harrah's Entertainment, Inc. to Senator Stevens, dated November 7, 1995 .. 176
Gambling in America, Final Report of the Commission on the Review of

the National Policy Toward Gambling 178



S. 704— THE GAMBLING IMPACT STUDY
COMMISSION ACT



THURSDAY, NOVEMBER 2, 1995

U.S. Senate,
Committee on Governmental Affairs,

Washington, DC.

The Committee met, pursuant to notice, at 9:30 a.m., in room
342, Dirksen Senate Office Building, Hon. Ted Stevens, Chairman
of the Committee, presiding.

Present: Senators Stevens, Cochran, McCain, Brown, Glenn, and
Lieberman.

OPENING STATEMENT OF CHAIRMAN STEVENS

Chairman STEVENS. Let us start our opening comments. We will
wait for our colleagues who are not here, but when trains leave
late, more people miss trains, so let us keep our train on time.

We are going to hear today from Senators Simon and Lugar.
They are primary sponsors of the bill to create a Gambling Impact
Study Commission. We will also hear from Congressman Wolf, who
has introduced a similar bill in the House of Representatives, and
we are going to hear from other Senators and invited witnesses.

This bill would create a nine-member commission charged with
conducting a study into the social and economic effects of all forms
of legalized gambling in our Nation. I do believe the hearing is im-
portant. Gaming is more and more prevalent in our society. Since
1988, the number of States with legalized casinos has risen from
2 to 23. Some form of legalized gambling now exists in 48 States
plus the District of Columbia and Puerto Rico. Those figures in-
clude not only casinos but other gambling enterprises, such as lot-
teries and parimutuel betting.

We hold this hearing to help us determine whether more infor-
mation is necessary about the effects of gambling and whether the
proposed Federal commission is the best means of conducting the
study and gathering that information.

There have been other studies into the effects of gambling, in-
cluding the comprehensive study commissioned by Congress in
1973. That commission returned 3 years later with a 192-page re-
port entitled "Gambling In America: On the Status of Gambling
and its Effect."

In 1976, the commission report found that gambling can aggra-
vate social problems, such as crime and poverty. The study also
found that serious ethical and moral values may arise from gam-
bling, particularly when the government is the gambling entre-
preneur.

(1)



But that report also concluded, "The simple overriding premise
behind all the work of this commission is that a substantial major-
ity of Americans either practice or tacitly endorse gambling and
that gambling policy is the proper responsibility of the government
entity closest to the lives of the citizens, the State."

That commission submitted its report nearly 20 years ago. At
that time, casino gambling was legal in only one State, Nevada,
and State lotteries were in their infancies. Now, gambling is a $40
billion industry and still growing. The recent surges in legalized In-
dian gaming and riverboat casinos, together with the proliferation
of State lotteries and other legalized gaming facilities have dra-
matically changed the landscape of gambling in this country since
that report.

Because of the drastic changes in both the industry and the Na-
tion since 1976, it is reasonable for us to ask if another commission
is needed to take another look. With that in mind, the focus of this
hearing is on the questions posed by this bill, S. 704. I know we
have eloquent witnesses that we know personally on both sides of
this issue who feel strongly about gambling and its effects, but this
Committee is interested in the answer to two questions. Is the pro-
posed study necessary, and is a national commission the best way
to go about conducting the study? I can think of several other ways
to conduct that study.

We have four panels of witnesses. Each panel will be asked to
give their remarks and be followed by questions from the Commit-
tee Members. I do ask our Members to hold their questions for
each panel until after the members of the panel have finished their
remarks. The statements that you present to us will be placed in
the record. We are going to ask that you limit your oral testimony.
As a member of each panel, each witness is asked to use not more
than 5 minutes so there will be time enough for questions from the
Committee.

We are asking the Committee to hold their questions to the total
panel to not more than 10 minutes. We will take written submis-
sions, of course, and we will include them in the printed record if
the Committee decides to print the record.

Let me thank you gentlemen for coming, but let me emphasize
again — I see other Members of the Senate here — this is not a hear-
ing on gambling. I intend to stop any witness who starts using our
time talking about the effects of gambling. We want to know, do
you think this study is necessary and is this commission the way
to do it?

I hope that everyone will understand that we are all in con-
ference committees and working on reconciliation and a lot of other
things. I believe this is an important hearing, but we want to con-
duct it as efficiently as possible. I would be most pleased if you will
cooperate on this issue.

[The prepared statement of Senator Stevens follows:]

PREPARED STATEMENT OF SENATOR STEVENS

Today we will hear from Senators Simon and Lugar, the primary sponsors of this
bill, along with Congressman Wolf, who has introduced similar legislation in the
House of Representatives.

We'll also hear from members of the Nevada and New Jersey delegations, as well
as other invited witnesses.



S. 704 would create a nine-member commission charged with conducting a study
into the social and economic effects of all forms of legalized gambling in this coun-
try.

This hearing is important —

Gaming is more and more prevalent in our society. Since 1988, the number of
States with legalized casinos has risen from 2 to 23.

Some form of legalized gambling now exists in 48 States, plus the District of Co-
lumbia and Puerto Rico. This figure includes not only casinos, but other gambling
enterprises such as lotteries and parimutuel betting.

This hearing will help us determine whether more information is necessary about
the effects of gambling, and whether the proposed Federal commission is the best
means of conducting the study and gathering that information.

There have been other studies into the effects of gambling, including a com-
prehensive study commissioned by Congress in 1973. That commission returned 3
years later with a 192-page report, entitled "Gambling in America," on the status
of gambling and its effects.

The 1976 Commission Report found that gambling can aggravate social problems
such as crime and poverty. The study also found that serious ethical and moral is-
sues may arise from gambling, particularly when the government is the gambhng
entrepreneur.

But that report also concluded that "the simple, overriding premise behind all the
work of this Commission" is that a substantial majority of Americans either practice
or tacitly endorse gambling, and that "gambling policy is the proper responsibility
of the government entity closest to the lives of citizens — the State."

That commission submitted its report nearly 20 years ago. At that time, casino
gambling was legal in only one State, Nevada, and State lotteries were in their in-
fancy. Now, gambling is a $40 billion industiy, and still growing rapidly.

The recent surges in legalized Indian gaming and riverboat casinos, together with
the proliferation of State lotteries and other legalized gaming facilities, have dra-
matically changed the landscape of gambling in this country.

Because of the drastic changes both the industry and the Nation have undergone
since 1976, it's reasonable for us to ask if another commission needs to take a sec-
ond look.

With that in mind, the focus of this hearing is on the questions posed by S. 704.
I know we have eloquent witnesses on both sides of the issue who feel very strongly
about gambling and its effects.

But what this Committee is most interested in is the answer to the two main
questions raised by this bill —

(1) Is the proposed study necessary?

(2) Is a national commission the best way to go about conducting the study?

We have four panels of witnesses. Each panel will give their remarks, to be fol-
lowed by questions from the Committee.

I ask the Committee Members to hold their questions for each panel until after
all members of that panel have finished their remarks.

Witnesses are requested to limit their oral testimony to 5 minutes each, so there
will be enough time for questions from the Committee. Written submissions to the
record may be longer, however, and will be included in the printed record of the
hearing if one is printed.

I thank all of our witnesses for coming today, and I look forward to a productive
and informative hearing.

Senator Stevens. I know that the Ranking Member is here. Sen-
ator McCain has asked for time as he has to leave.

OPENING STATEMENT OF SENATOR McCAIN

Senator McCain. Thank you, Mr. Chairman.

I just want to briefly explain why I support the study called for
in this bill. Mr. Chairman, as Chairman and Vice Chairman of the
Senate Indian Affairs Committee, I have worked for many years on
the issue of Indian gaming and what is the appropriate regulatory
role of the Federal Government regarding Indian gaming.

In 1987, the U.S. Supreme Court recognized the right of Indian
tribes to conduct gaming on their lands under certain conditions.
In 1988, Congress attempted to balance the interests of State and
tribal governments by enacting the Indian Gaming Regulatory Act



with the support of State and tribal governments. The 1988 Act en-
courages tribal and State governments to negotiate tribal-State
compacts that outline their interdependent responsibilities for the
regulation of tribal gaming operations. It mandates that tribal gov-
ernments must spend gaming revenues for governmental purposes.

In the past few years, I have worked very closely with Senators
Inouye, Simon, Reid, and others on amendments to that Act. Ear-
lier this year, I introduced S. 487, which would put in place mini-
mum comprehensive Federal standards governing Indian gaming
and strengthen the enforcement powers of the National Indian
Gaming Commission. Our efforts have not yet resulted in a change
in the law, one of the greatest disappointments to me in recent
years. However, I remain committed to trying to bring tribal and
State governments to basic agreement on these issues.

Over these years of involvement in Indian gaming matters, Mr.
Chairman, I have come to see firsthand the controversial and com-
plex issues surrounding the growth of gaming throughout the Unit-
ed States. Gaming is having a growing impact on every sector of
our society, spilling across State and reservation boundaries.

Opponents charge that gaming undermines the institutions and
values that Americans hold dear. Supporters claim that gaming
serves an important role as valuable entertainment and economic
activity. Tribal and State governments assert that gaming is a vital
exercise of their sovereign right to raise governmental revenues.
Many non-profit organizations argue that gaming raises funds they
cannot otherwise raise for charitable purposes.

What is without dispute, of course, is that the players generally
lose money and the operators generally make money, be they for-
profit corporations. State or tribal governments, or charitable orga-
nizations. The question is whether the losses of the players cost so-
ciety more than what we gain as a whole.

On balance, I think the public would be well-served by a study
of the benefits and problems posed by the growth of gaming
throughout the United States if the commission established by S.
704 is balanced and its study well-reasoned. I believe its findings
and recommendations could prove valuable as this matter of great
controversy continues to be debated in the halls of Congress, in
tribal councils, and in the State capitals. Thank you, Mr. Chair-
man.

Chairman STEVENS. Thank you very much. Senator Glenn.

OPENING STATEMENT OF SENATOR GLENN

Senator Glenn. Thank you, Mr. Chairman.

I want to welcome our witnesses today. We will be examining a
need for the legislation. Gambling is an industry that has grown
rapidly. In 1976, the last time we studied the issue on a national
basis, legalized wagering in the United States totaled an estimated
$22 billion, while legalized gaming approached $3 billion. In 1994,
18 years later, legal wagering exceeds $482 billion while legal gam-
ing reached $40 billion. Those are enormous increases.

We have riverboats and land-based casino gambling in a number
of States, Indian tribes increasingly going to casinos and so on. We
all are aware of that.



One of the issues that I think is probably worth studying by a
commission is that the Internet is now rapidly becoming a way of
gambling. If you have a credit card, you can get on the Internet
and have a worldwide game of some kind. I suppose you could have
a picture of a wheel and a number comes up and you place your
bet. I do not know what this means for the future, but I think it
is worth looking at.

I usually do not just announce full support of something until we
have a hearing. I think that is the reason for a hearing. But my
opinion going in, at least, is that there would be nothing wrong
with looking at the growth of gambling and seeing if we need fur-
ther regulation of some kind or another.

I know this makes some people nervous, but I think that we
probably will go this route at the end of all our hearings. We have
not only this great increase nationwide, but we have State issues
involved with it. An increasing amount of State revenue comes
from that. I did not particularly favor our lottery when we put it
in back in Ohio, but I am told now that we get 4.6 percent of our
State funds from a lottery.

I always thought lotteries appealed to the wrong kind of people
for tax purposes. We do not find many multi-millionaires going out
and plunking down several hundred thousand dollars to buy lottery
tickets in the hopes of getting more money. It is the people that
should be spending the money on meat and potatoes and a new
coat for the kids for school that go out and hope to hit it on the
lottery, and maybe that is fine; I do not know. But I think it is
worthwhile looking at as to how that has expanded.

Indian issues are very complex. They trace back to treaties that
were signed by the U.S. Government and the Indian tribes back in
the 1800's. Those vary from one reservation to another, as Senator
McCain has alluded to in his concerns in that area.

My proclivity going in is to probably say, yes, we do need this
commission and to look at gambling again. Also, I was given some
figures which I will not put in the record right now as to the huge
increase in political contributions from some of these sources. That
is a whole other area that we might want to see if the commission
could look at, also. Thank you, Mr. Chairman.

Chairman STEVENS. Thank you very much.

I would like to submit for the record the prepared statement of
Senator Dorgan relating to this legislation.

[The prepared statement of Senator Dorgan follows:]

PREPARED STATEMENT OF SENATOR DORGAN

Mr. Chairman. I thank you for caUing this hearing on the Gambhng Impact Study
Commission Act, S. 704. For some time, I have been interested in the issues sur-
rounding gambhng and I look forward to hearing from our distinguished witnesses
today.

Throughout our Nation's history, gambhng has been alternately praised and
vilified. During the 18th century, lotteries and other forms of legal gambling were
prevalent until a wave of scandals created a moral backlash. Following the Civil
War, legal gambling returned to popularity until scandals again surfaced in the
early 20th century. New Mexico and Arizona were actually forced to prohibit gam-
bling as a condition for statehood. Then, in the 1930's, racetracks and bingo halls
became a familiar site on the American landscape. When State lotteries came on
to the scene in 1963, they helped to make gambling an even more respectable part
of the social fabric.



Today, we are facing a gambling boom like none other in history. In fact, Utah
and Hawaii are the only two States that do not allow any form of legalized gam-
bling. Thirty-seven States run lotteries and casinos operate in 23 States. Americans
now bet more than $300 billion legally every year. This is more than we annually
spend on national defense and more than 13 times what we spend on Aid to Fami-
lies with Dependent Children (AFDC).

This figure is staggering and leads me to ask myself a basic question: Just what
is the effect of all of this gambling on American taxpayers?

Currently, we really don't have a good answer. But if we enact the Gambling Im-
pact Study Commission Act, we will have at our disposal a comprehensive blue-rib-
bon report about all aspects of gambling in the United States. I'm not opposed to
legalized gambling, but I do believe we must fully understand the costs and benefits
of this growing industry and its impact on people. S. 704 will give policy makers
and the public the information needed to make responsible and informed decisions
abo;it the proper role of legalized gambling in our communities.

Chairman STEVENS. Our first witness today is Paul Simon. The
other two Members of that panel are Senator Lugar and Congress-
man Wolf. Gentlemen, it is nice to see you here. We appreciate
your courtesy in waiting for us to give our opening remarks.

Senator Simon.

TESTIMONY OF THE HONORABLE PAUL SIMON, A U.S.
SENATOR FROM ILLINOIS

Senator SiMON. Thank you very much, Mr. Chairman, Senator
McCain, and Senator Glenn. I am pleased to be introducing this
legislation with Senator Lugar and six other Members of the U.S.
Senate and Congressman Wolf over on the House side.

What we are asking for is very simple, a commission that will
last 18 months and have a $250,000 budget just to look at where
we are. Senator Glenn mentioned the Internet. How are we going
to handle when someone 2,000 miles away in another country says
you can sit down at your computer and use your American Express
card or Visa card and gamble? I frankly do not know. That is why
we should have a commission.

I am pleased, if I may, to enter into the record, Mr. Chairman,
a letter from President Clinton endorsing the idea of the commis-
sion. He says, "I have long shared your view about the need to con-
sider carefully all the effects of gambling and I support the estab-
lishment of a commission for this purpose." If I could enter that
into the record.

Chairman STEVENS. It will be entered. Thank you.

Senator SiMON. We do know some things. We know the exaggera-
tion that the gambling interests make when they come out and say,
oh, we will put this in Connecticut and you are going to do really
great. The Better Government Association of Illinois has just com-
pleted a very intensive study, and I would like to enter that into
the record, also. It is a 4- or 5-page, typewritten study in which
they devastate the idea that there are going to be huge economic
benefits.

[The letter fi-om President Clinton and The Better Government
Association of Illinois study follows:]



THE WHITE HOUSE

WASHINGTON

October 31, 1995



Dear Senator Simon:

I deeply appreciate your efforts to draw attention to the
growth of the gambling industry and its consequences. Too often,
public officials view gambling as a quick and easy way to raise
revenues, without focusing on gambling's hidden social, economic,
and political costs. I have long shared your view about the need
to consider carefully all of the effects of gambling, and I
support the establishment of a commission for this purpose.

My Administration is eager to work with you in designing such
a commission and ensuring that its work is completed in a timely
and effective manner. Your and Senator Lugar's bill, S. 704, and
Congressman Wolf's bill, H.R. 497, provide a very sound basis for
this process, which I hope will include further discussion of the
exact composition of the commission and the exact scope of its
duties and powers.

Again, I applaud your efforts to place this important matter
on the nation's agenda.

Sincerely,



/



The Honorable Paul Simon
United States Senate
Washington, D.C. 20510



Online LibraryUnited States. Congress. Senate. Committee on GoveS. 704--the Gambling Impact Study Commission : hearing before the Committee on Governmental Affairs, United States Senate, One Hundred Fourth Congress, first session ... November 2, 1995 → online text (page 1 of 59)