October 18, 2004

Researchers link casinos with bankruptcy, crime

Full Report

California communities with Indian casinos showed a noticeable increase in personal bankruptcies and violent crimes compared to those without casinos over the last decade, according to a working paper by researchers at Sacramento State.

The researchers also linked the casinos to a decrease in unemployment and an increase in tax revenue, though they speculate that much of the revenue is spent on increased policing. Findings are from county-level data on local tax revenues, bankruptcies, employment and crime from 1990 to 2000. The study controls for a variety of factors.

“We looked at the bad and good things people have said casinos bring,” says Sacramento State student John Ortiz, who conducted the study with economics professor Sean Corcoran. “There are bankruptcies and additional crime, but there is also increased employment and revenue. So it’s hard to make a sweeping generalization whether, on balance, casinos are good or bad for communities.”

Ortiz says the significant local revenue increases following a casino opening come primarily from tobacco and hotel taxes. And he says the link between casinos and personal bankruptcy rates, especially Chapter 7, was “highly significant.”

California, which is now second only to Nevada in casino gambling, has a pair of initiatives related to gambling on the November ballot. Each could potentially double the size of existing casinos.

Proposition 68 would allow some non-tribal businesses to expand casino operations in the state and pay a 33 percent tax unless Native American tribes agreed to pay a 25 percent tax on gambling revenue, while Proposition 70 would give tribes exclusive and expanded rights to casino-style gambling in exchange for paying the state corporate tax.

Ortiz worked in the California gambling industry before enrolling at Sacramento State. He completed the study through the University’s McNair Scholar’s Program.

Ortiz and Corcoran plan additional studies on topics such as casino effects at the city, rather than county, level, and on how casinos have affected American Indian tribes. Ortiz also plans further study on data hinting that the number of gambling tables at casinos may lead to more social problems than the number of slot machines.

More information is available by contacting economics professor Sean Corcoran at 278-7653 or corcoran@csus.edu.

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