IMPACT OF

GAMBLING

Economic Effects

More Measurable

Than Social Effects

United States General Accounting Office

GAO Report to the Honorable Frank R. Wolf,

House of Representatives

April 2000

GAO/GGD-00-78

United States General Accounting Office General Government Division

Washington, D.C. 20548

Page 1 GAO/GGD-00-78 Impact of Gambling

B-282745

April 27, 2000

The Honorable Frank R. Wolf

House of Representatives

Dear Mr. Wolf:

In 1999, 48 of the 50 states had some form of legalized gambling. The

estimated revenue from legalized gambling totaled about $54.3 billion in

1998. As you requested, we have (1) examined the June 1999 National

Gambling Impact Study Commission (NGISC) findings on the economic

and social effects of gambling on communities and families and (2)

explored the issues raised in the NGISC study through a case study in

Atlantic City, NJ, a large destination gambling city where gambling was

legalized in 1977. As agreed with you, we focused on

(1) the economic effects of gambling, particularly on employment,

bankruptcy, and tax revenues and community investment;

(2) the social effects of gambling;

(3) the prevalence of pathological gambling;1

 and

(4) whether communities offer incentives to attract gambling

establishments.

To address these objectives, we reviewed NGISC’s and its research

contractors’ reports and studied gambling effects in Atlantic City, NJ.

Congress created NGISC in 1996 to conduct a comprehensive study of the

social and economic impacts of gambling in the United States. NGISC

conducted a study, which involved $2.5 million of research. The research

included two national surveys of U.S. adults and youth, regarding gambling

behavior and attitudes; a survey of patrons at 21 gambling facilities; case

studies in 10 communities; and detailed analysis of a 100-community

 1

 The American Psychiatric Association (APA) defines pathological gambling as a pathological disorder

having the essential feature of “persistent and recurrent maladaptive gambling behavior...that disrupts

personal, family, or vocational pursuits.”
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Page 2 GAO/GGD-00-78 Impact of Gambling

sample to determine the economic impact of casino gambling. NGISC

issued its report in June 1999.2

For our case study of Atlantic City, we visited Atlantic City and Trenton,

NJ, and interviewed New Jersey, Atlantic City, and Atlantic County

personnel involved in economic, social, law enforcement, and regulatory

areas, as well as officials representing nonprofit social agencies, unions,

and casino gambling. We also analyzed economic and social data provided

by federal, New Jersey, Atlantic City, and Atlantic County agencies. The

approach we used focused on Atlantic City and did not measure the

economic and social effects associated with or related to people who

gamble in Atlantic City but do not live in the area. According to a New

Jersey official, about two-thirds of Atlantic City’s gamblers live outside of

New Jersey. Also, data for some of the social indicators we studied were

not readily available for Atlantic City, and we used Atlantic County data.

According to U.S. Census data, Atlantic City is the largest city in Atlantic

County and in 1990, Atlantic City represented about 17 percent of the

Atlantic County population. According to information provided by New

Jersey officials, about 80 percent of Atlantic City hotel casino employees

reside in Atlantic County. In addition, for crime and suicide rates in

Atlantic City, we used an adjusted population base to include the average

daily number of visitors and nonresident workers in Atlantic City because

visitors become part of the pool that may either commit suicide or crimes

or become victims of crime.

We did our work from May 1999 to December 1999 in accordance with

generally accepted government auditing standards. Appendix V provides

further details about our objectives, scope, and methodology. We

requested comments on a draft of this report from various officials in New

Jersey, the former Chairperson of NGISC, and the National Opinion

Research Center (NORC) at the University of Chicago.

Under a separate assignment that you requested, we are also reviewing the

economic and social effects of convenience gambling (e.g., video gambling

devices) on selected U.S. communities and will report on the results of

that review when it is completed.

Both NGISC and our case study of Atlantic City were able to obtain data

on many of the economic effects of gambling, but neither could find data

 

2

 The National Gambling Impact Study Commission Final Report, June 18, 1999. We also reviewed

information in NGISC’s contractors reports, some of which was not included in NGISC’s report.

Results in Brief
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Page 3 GAO/GGD-00-78 Impact of Gambling

to show a cause-effect relationship between gambling and bankruptcies.

According to NGISC, in 1996, the legalized gambling industry employed

over a half million people, primarily in casinos and in the pari-mutuel

industry. Almost 50,000 employees worked in Atlantic City casinos in 1999.

NGISC did not report whether there was a cause-effect relationship

between gambling and bankruptcy for the general population but found

that a higher percentage of pathological gamblers had filed bankruptcy

than others in the general population. The bankruptcy rate in Atlantic

County has increased more than in New Jersey and the nation, but data

were not available on the causes of the increases.

NGISC reported that the casino industry paid $2.9 billion in federal, state,

and local taxes in 1995. Atlantic City casinos paid about $319 million in

gambling taxes to New Jersey and over $86 million in property taxes to

Atlantic City in 1998, representing about 80 percent of total property taxes

for the city’s budget. In 1998, the casinos also paid $41.7 million in school

taxes and $25 million in county property taxes. In addition, from 1985

through June 1999, about $900 million of casino community reinvestment

funds had been earmarked for community investment in Atlantic City,

including housing, road improvements, and casino hotel room expansion

projects. NGISC did not specifically address community investment

received from gambling businesses.

Neither NGISC nor our Atlantic City case study was able to clearly identify

the social effects of gambling for a variety of reasons. The amount of high

quality and relevant research on social effects is extremely limited. While

data on family problems, crime, and suicide are available, tracking systems

generally do not collect data on the causes of these incidents, so they

cannot be linked to gambling. Sometimes data were available only at the

county level, not for Atlantic City. Further, while studies have shown

increases in social costs of pathological gamblers, it is difficult to isolate

whether gambling is the only factor causing these problems because

pathological gamblers often have other behavior disorders. While NGISC

and our case study in Atlantic City found some testimonial evidence that

gambling, particularly pathological gambling, has resulted in increased

family problems (such as domestic violence, child abuse, and divorce),

crime, and suicides, NGISC reached no conclusions on whether gambling

increased family problems, crime, or suicide for the general population.

Similarly, we found no conclusive evidence on whether or not gambling

caused increased social problems in Atlantic City.

NGISC reported on three studies completed in 1997 and 1998 that

estimated the percentage of U.S. adults classified as pathological gamblers
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Page 4 GAO/GGD-00-78 Impact of Gambling

ranged from 1.2 to 1.6 percent. A NGISC contractor, who conducted one of

the three studies, estimated that about 2.5 million adults are pathological

gamblers and another 3 million adults should be considered problem

gamblers (individuals who have gambling problems but do not meet the

psychiatric criteria for pathological gambling). The most recent study

covering New Jersey (Atlantic City was not isolated) estimated that in

1990, 1.2 percent of New Jersey residents were probable pathological

gamblers. We did not attempt to independently verify the results or

methodologies of these studies.

NGISC reported that pathological and problem gamblers in the United

States cost society approximately $5 billion per year and an additional $40

billion in lifetime costs for productivity reductions, social services, and

creditor losses. However, according to NGISC, the estimates are based on

a small number of tangible consequences; and, as a result, the figures must

be taken as minimums.

NGISC did not address whether communities offered incentives to attract

gambling establishments. New Jersey and Atlantic City officials said

casinos do not generally receive subsidies or tax incentives from the

government, but New Jersey has allowed a portion of casino funds initially

mandated for community investment to be used for casino hotel expansion

($175 million) and to purchase land for hotel expansion ($807,000). Also,

other funds ($330 million) are being used to help construct a tunnel to

connect downtown Atlantic City with another area used for casino hotels

and residences.

Gambling, in one form or another, is now legal in every state except

Hawaii and Utah.3

 A NGISC contractor stated that about 86 percent of

Americans reported having gambled at least once during their lifetime, and

63 percent reported having gambled at least once in the previous year. The

percentage of Americans who gamble is increasing. The 1976 Commission

on the Review of the National Policy Toward Gambling reported that in

1975, 68 percent of Americans reported gambling at least once during their

lifetime, and 61 percent reported gambling at least once in the previous

year. According to the International Gaming and Wagering Business

 3

 Pari-mutuel horse-track racing is legal in Tennessee, but the state had no racetracks in operation as of

December 1999. Hawaii permits “social gambling”—certain noncommercial gambling among adults.

Haw. Rev. Stat. § 712-1231.

Background
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Page 5 GAO/GGD-00-78 Impact of Gambling

(IGWB) magazine, gross revenues4 from legalized gambling in the United

States increased from about $10.4 billion in 1982 ($16.1 billion in 1998

dollars) to about $54.3 billion in 1998.

As shown in figure 1, the majority of gross gambling revenue resulted from

casinos (41 percent) and lotteries (31 percent).

Note: Internet gambling revenue totaled about $651 million worldwide in1998, which is not included in

the total U.S. gambling revenues of $54.3 billion in 1998.

a

Revenues from casinos include those from Nevada and New Jersey slot machines and table games,

other land-based casinos, riverboats, deepwater cruise ships, cruises-to-nowhere, other commercial

gambling, and noncasino devices.

b

Revenues from lotteries include those from video and other lottery games.

c

Revenues from tribal include those from tribal casinos.

d

Revenues from pari-mutuels include those from horse and greyhound racing and jai alai.

e

Revenues from legal bookmaking include sports bookmaking, horse bookmaking, card rooms,

charitable bingo, and charitable games.

Source: International Gaming and Wagering Business, August 1999.

 

4

 Gross gambling revenues represent dollars wagered minus payouts. As reported by the New Jersey

Casino Control Commission (NJCCC), casino gross revenue is the amount of money that casinos keep

after all bets have been paid but before operating costs, interest, depreciation, taxes, and amortization

are deducted.

Figure 1: 1998 Gambling Industry Gross

Revenue
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Page 6 GAO/GGD-00-78 Impact of Gambling

Before the legalization of casino gambling in Atlantic City in 1977, the

city’s economy was declining. During the first half of the century, Atlantic

City was one of the major convention centers and seaside resorts in the

United States. However, during the 1950s, the city began to experience a

decline. The affordability and ease of air travel and interstate highways

drew vacationers from Atlantic City to other areas and the construction of

convention centers in other cities began to draw conventioneers away

from the city. The New Jersey Casino Control Commission (NJCCC)

reported that between 1966 and 1976, almost 6,000 Atlantic City hotel

rooms closed. The city’s population declined about 20 percent between

1960 and 1970. When conventioneers began to hold more conventions

elsewhere and hotels began to close, employment opportunities in Atlantic

City also began to diminish. Atlantic City’s unemployment rate increased

from 10.6 percent in 1972 to 18.1 percent in 1977. Nationwide, the

unemployment rate increased from 5.6 percent in 1972 to 7.1 percent in

1977.

In an attempt to help revitalize Atlantic City’s economy, New Jersey

(following voters’ approval of an amendment to the state constitution)

enacted the Casino Control Act in 1977 to authorize casino gambling in

hotels. The act included the following statement:

“Legalized casino gaming has been approved by the citizens of New Jersey

as a unique tool of urban redevelopment for Atlantic City. . .[and will]

attract new investment capital to New Jersey in general and to Atlantic

City in particular.” 5

The first casino began operating in Atlantic City in May 1978 and as of

January 2000, the city had 12 casinos.

NGISC and its contractors reported that legalized gambling, especially in

casinos, has resulted in an increased number of jobs in communities and

decreased the unemployment rate and unemployment insurance payments.

According to a study cited by NGISC, in 1996 the legalized gambling

industry employed more than half a million people, with total salaries of

more than $15 billion. Information provided by New Jersey officials

showed that the casinos in Atlantic City employed about 50,000 people.

However, between 1977 and 1998, Atlantic City’s unemployment rate

 

5

 N.J. Stat. Ann. 5:12-1.b.(4). The legislation prohibits various persons with ties to the casino industry

from making contributions to candidates seeking public office in New Jersey, any committee of a

political party in New Jersey, or any group organized in support of any such candidate or political

party, N.J. Stat. Ann. 5:12-138.

Atlantic City

Economic Effects of

Gambling on

Communities
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Page 7 GAO/GGD-00-78 Impact of Gambling

remained higher than New Jersey and national rates (almost two times

higher during some years).

NGISC and its contractors did not report whether there was a cause-effect

relationship between gambling and bankruptcy for the general population.

However, they found that a higher percentage of individuals suffering from

pathological gambling had filed for bankruptcy than others in the general

population. During 1990 to 1998, the bankruptcy rate in Atlantic County,

NJ, was higher than New Jersey and national rates. Between 1994 and

1998, while bankruptcies per 100,000 population for New Jersey increased

from 282 to 555 (about a two-fold increase), the rate for Atlantic County

increased from 385 to 1,019 (about a three-fold increase)6

 The national

trend was similar to New Jersey’s trend. Government and community

officials said they did not know whether gambling was a contributing

factor.

A study conducted for the gambling industry and cited by NGISC estimated

that the casino industry paid $2.9 billion in federal, state, and local taxes in

1995. NGISC also reported that local officials in jurisdictions where

casinos were located testified to the increased revenues and community

improvements made possible with the advent of gambling in their

communities. One NGISC contractor reported that net revenue (sales

minus prizes and operating costs) from state lotteries totaled about $11

billion in 1997, representing about 2 percent of the states’ own-source

general revenue7

.

Atlantic City casinos dominated the city’s economy and in 1998, paid about

$319 million in gaming taxes to New Jersey and over $86 million in

property taxes to Atlantic City, about 80 percent of total property taxes for

the city’s budget. In 1998, the casinos also paid $41.7 million in school

taxes and $25 million in county property taxes. In addition, state legislation

mandates that the casinos invest in the community. From 1985 through

June 1999, about $900 million of casino funds had been earmarked for

casino community investment in Atlantic City, including housing, casino

hotel room expansion, and road construction/improvements projects.

NGISC did not specifically address community investment derived from

 

6

 According to an official of the Administrative Office of the U.S. Courts, Atlantic County bankruptcy

filing data were not readily obtainable until 1990. Thus, we were unable to show whether the

bankruptcy rate had changed after casinos began operating in Atlantic City (in 1978).

7

 As defined in a report by Clotfelter and Cook, NGISC contractors, own-source general revenue

excludes intergovernmental grants as well as special sources of revenue such as that generated by

utilities or liquor stores.
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Page 8 GAO/GGD-00-78 Impact of Gambling

gambling businesses. See appendix I for a more detailed discussion on the

economic impact of gambling.

The social effects of gambling on communities are more difficult to

measure than the economic effects, primarily because of limited quality

data on social effects, the complexity of identifying and measuring social

effects, and the difficulty of establishing a cause-effect relationship

between gambling and social problems due to the difficulty of isolating any

one factor that causes social problems. NGISC made no conclusion on

whether or not gambling has increased family problems, crime, or suicide

for the general population.

NGISC and our case study in Atlantic City found mostly testimonial

evidence that pathological gambling has resulted in increased crime and

family problems (such as domestic violence, child abuse, divorce, and

homelessness). However, because pathological gambling in many cases is

accompanied by other disorders, it is difficult to determine whether

gambling is the only or primary factor causing these problems.

However, an analysis (conducted by NORC and reported in the NGISC

report on the economic cost associated with problem and pathological

gambling) isolated the effect of problem and pathological gambling from

other effects, such as drug and alcohol abuse. NORC reported that while

the annual economic cost estimated for problem and pathological

gambling in 1998 was $5 billion, 1995 estimates were $110 billion for drug

abuse and $166.5 billion for alcohol abuse. According to NGISC, NORC

focused on a small number of tangible consequences and, as a result, its

figures on the costs associated with problem and pathological gambling

must be taken as minimums.

We found no conclusive evidence on whether or not gambling caused

increased social problems in Atlantic City. Data on family problems and

suicide prior to 1978 (the year the casinos began operating in Atlantic City)

were not readily available for all indicators. However, while we were not

able to compare data for family problems before and after the casinos

began operating, some family problems, including domestic violence

incidents, child abuse, divorce, single-parent families, and suicide

increased in some of the years after casinos began operating and

decreased in other years. Some crime rates, including total crime,8

property crime, embezzlement, and prostitution increased immediately

 

8

 Total crime includes violent crime (murder, forcible rape, robbery, and aggravated assault) and

property crimes (burglary, larceny-theft, and motor vehicle theft).

Social Effects of

Gambling on

Communities
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Page 9 GAO/GGD-00-78 Impact of Gambling

after casinos began operating in Atlantic City. However, increases based

on Atlantic City’s adjusted population (adjusted to include visitors and

nonresident workers) were less than increases based on the unadjusted

population (Atlantic City’s residents only).9

Some of the officials we interviewed from 26 government, community, and

private industry organizations in New Jersey viewed the casinos as

contributing, at least in part, to the increases in some social problems—

with the exception of suicides. However, other officials said the casinos

had no impact on the increased social problems. See appendix II for a

more detailed discussion on the social effects of gambling.

NGISC reported on three studies completed in 1997 and 1998 that

estimated the percentage of U.S. adults classified as pathological gamblers

ranged from 1.2 to 1.6 percent. A NGISC contractor, who conducted one of

the three studies, estimated that about 2.5 million adults were pathological

gamblers and another 3 million adults should be considered problem

gamblers (individuals who have gambling problems but do not meet the

psychiatric criteria for pathological gambling). The most recent study

covering New Jersey (Atlantic City was not isolated), issued in 1990,

estimated that the percentage of New Jersey residents classified as

probable pathological gamblers was 1.2 percent. See appendix III for a

more detailed discussion on the prevalence of gambling disorders.

NGISC did not address whether communities offered incentives to attract

gambling establishments.

According to New Jersey and Atlantic City officials, the state and local

governments have not provided incentives to the casinos as a means of

enticing them to come to and/or remain in Atlantic City. However, New

Jersey has allowed a portion of the casino obligations, initially mandated

for community investment, to be used for casino hotel expansion and to

purchase land for hotel expansion. In addition, other funds are being used

to pay most of the cost of constructing a tunnel in Atlantic City to connect

downtown Atlantic City with another local area used for casino hotels and

residential purposes. See appendix IV for a more detailed discussion on

incentives to attract gambling interests.

 

9

 While researchers disagree over whether to use the adjusted or unadjusted population when

calculating crime rates, we believe that use of the adjusted population is the more appropriate method

because, as some researchers have stated, visitors become part of the pool that may either commit or

become victims of crime.

Estimated Prevalence

of Pathological

Gambling

Incentives to Attract

Gambling

Establishments
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Page 10 GAO/GGD-00-78 Impact of Gambling

We requested comments on a draft of this report from the Mayor of

Atlantic City, NJ; the Chairman of the NJCCC; the Director of New Jersey’s

Division of Gaming Enforcement; the Chair of the former NGISC; and the

Senior Research Vice President of NORC.

On February 15, 2000, the Senior Public Information Assistant for New

Jersey Division of Gaming Enforcement orally stated that the Division had

no comments.

On February 18, 2000, the Chief of Staff for the Mayor of Atlantic City, NJ

orally stated that the Mayor generally agreed with our report and thought it

was well done.

We received written comments from the Chairman of NJCCC in a letter

dated February 10, 2000, which are reproduced in appendix VI. The

Chairman said that our draft report provided a thorough analysis of the

quantifiable impacts that casinos have had on Atlantic City but that

excluding the surrounding Atlantic County metropolitan area provides an

incomplete picture of the overall impacts of the casinos. The Chairman

noted that Atlantic County’s unemployment rate decreased from 12.2

percent in 1976 to 7.8 percent in 1998, and casinos paid over $41 million in

school taxes and another $25 million to support county government in

addition to the $86.6 million in property taxes paid to the city. The

Chairman agreed with our conclusions that it is difficult to quantify some

of the perceived negative effects from casinos. The Chairman also said that

NJCCC believes the positive effects casinos have generated outweigh the

perceived negative effects. While our report focuses on Atlantic City, it

also includes some information on Atlantic County, including information

on bankruptcy and social indicators, such as divorce rates and domestic

violence. We have, however, added the school taxes and other information

the Chairman provided to the report.

We also received written comments from the Senior Research Vice

President of NORC in a letter dated March 10, 2000. He stated that our

draft report was generally satisfactory and made two observations. First,

he questioned our conclusion based on a localized methodology that

economic effects are more measurable than social effects. He said that

Atlantic City is a typical “destination-style” gambling operation where, as

stated in the draft report, most of the gamblers live outside of the gambling

area and thus, a substantial share of the economic benefits are captured

locally while the bulk of the social costs are exported elsewhere—where

the gamblers actually reside. He said that this is a fact that should be

emphasized more in the report. We modified the report to make this point

Agency Comments
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Page 11 GAO/GGD-00-78 Impact of Gambling

clearer. Secondly, he noted our statement in the draft report that it is

difficult to isolate whether gambling is the only factor causing problems,

because pathological gamblers have other behavior disorders—a situation

termed comorbidity. In addition, as NORC suggested, we acknowledged in

this report that NGISC addressed the problem of comorbidity in its report.

We also received written comments from the Chair of the former NGISC in

a letter dated February 14, 2000, which is reproduced in appendix VII. The

Chair said that our conclusion that not enough information is available to

make a completely informed decision regarding the true social effect of the

gambling industry is consistent with NGISC’s final report. She noted

several areas where she believed that we should add information to our

report for additional perspective and context. We added such information

to our report if we had it or if it was readily available. Appendix VII

contains our additional responses to her comments.

We are sending copies of this report to Senator Fred Thompson, Chairman,

and Senator Joseph I. Lieberman, Ranking Minority Member, Senate

Committee on Governmental Affairs; Representative Dan Burton,

Chairman, and Representative Henry A. Waxman, Ranking Minority

Member, House Committee on Government Reform; Senator Orrin Hatch,

Chairman, and Senator Patrick Leahy, Ranking Minority Member, Senate

Judiciary Committee; Representative J. Henry Hyde, Chairman, and

Representative John Conyers, Jr., Ranking Minority Member, House

Judiciary Committee; and other interested parties. Copies will be made

available to others upon request.

If you have any questions regarding this report, please call me or John

Baldwin on (202) 512-8387. Key contributors to this report are

acknowledged in appendix VIII.

Sincerely yours,

Bernard L. Ungar

Director, Government Business

Operations Issues
Page 12 GAO/GGD-00-78 Impact of Gambling

Contents

1 Letter

16

Effects of Gambling on Employment 16

Effects of Gambling on Bankruptcy 21

Effects of Gambling on Tax Revenue and Community

Investment

23

Appendix I

Economic Effects of

Gambling on

Communities

26

Effects of Gambling on Family Problems 26

Effects of Gambling on Suicide 33

Effects of Gambling on Crime 35

Appendix II

Social Effects of

Gambling on

Communities

Appendix III 43

Estimated Prevalence

of Pathological

Gambling

Appendix IV 48

Incentives to Attract

Gambling

Establishments

51

Objectives 51

NGISC Background 51

Scope and Methodology 53

Appendix V

Objectives,

Background on the

National Gambling

Impact Study

Commission, and

Scope and

Methodology
Contents

Page 13 GAO/GGD-00-78 Impact of Gambling

Appendix VI 56

Comments From the

New Jersey Casino

Control Commission

58

GAO Comments 63 Appendix VII

Comments From the

Former Chair of the

Former National

Gambling Impact

Study Commission

Appendix VIII 66

GAO Contacts and

Staff

Acknowledgments

Table II.1: Opinions of Officials in Nine Government and

Community Social Services Agencies on the Impact of

Casinos on Family Problems in the Atlantic City Area

33

Table II.2: Total Crimes in the United States, New Jersey,

and Atlantic City 1977-1997

37

Table II.3: Property Crimes in the United States, New

Jersey, and Atlantic City 1977-1997

38

Table II.4: Embezzlement Arrests in the United States,

New Jersey, and Atlantic City 1977-1997

39

Table II.5: Prostitution Arrests in the United States, New

Jersey, and Atlantic City 1977-1997

40

Table II.6: Drug Arrests in the United States, New Jersey,

and Atlantic City 1977-1997

41

Table III.1: Diagnostic Criteria for Pathological Gambling 43

Table III.2: Estimate of Adult Pathological and Problem

Gambling Prevalence in the United States

45

Tables

Table III.3: Comparing the Estimated Pathological

Gambling Prevalence With the Estimated Drug Abuse

and Alcohol Dependence in the United States

45
Contents

Page 14 GAO/GGD-00-78 Impact of Gambling

Table III.4: Comparing the Estimated Pathological

Gambling Prevalence With the Estimated Drug and

Alcohol Prevalence in New Jersey

47

Figure 1: 1998 Gambling Industry Gross Revenue 5

Figure I.1: Trends in Private Sector Jobs in Atlantic City

1977-1997

18

Figure I.2: Trends in Welfare Caseload in the United

States, New Jersey, and Atlantic City 1977-1997

19

Figure I.3: Trends in the Unemployment Rate in the

United States, New Jersey, and Atlantic City 1977-1998

20

Figure I.4: Trends in Personal Bankruptcy Rates in the

United States, New Jersey, and Atlantic County 1990-

1998

22

Figure I.5: Casino Gambling Taxes Paid to New Jersey

1978-1998, in 1998 Dollars

24

Figure II.1: Reported Number of Domestic Violence

Incidents for New Jersey and Atlantic County 1983-

1997

29

Figure II.2: Trends in Substantiated Child Abuse and

Neglect Cases in New Jersey and Atlantic County 1982-

1996

30

Figure II.3: Trends in Divorce Rate in the United States,

New Jersey, and Atlantic County 1977, 1980, and 1990

31

Figure II.4: Percent of Families With Children Under 18

that Are Single-Parent Families in the United States,

New Jersey, and Atlantic City 1970, 1980, and 1990

32

Figure II.5: Suicides for the United States, New Jersey,

and Atlantic City 1970, 1980, and 1990

34

Figures

Abbreviations

ACIR Advisory Commission on Intergovernmental Relations

APA American Psychiatric Association

CRDA Casino Reinvestment Development Authority

DSM-IV Diagnostic and Statistical Manual of Mental Disorders

FBI Federal Bureau of Investigation

IGWB International Gaming and Wagering Business

NGISC National Gambling Impact Study Commission
Contents

Page 15 GAO/GGD-00-78 Impact of Gambling

NJCCC New Jersey Casino Control Commission

NORC National Opinion Research Center at the University of Chicago

NRC National Research Council of the National Academy of Sciences

SJTA South Jersey Transportation Authority

UCR Uniform Crime Report
Appendix I

Economic Effects of Gambling on

Communities

Page 16 GAO/GGD-00-78 Impact of Gambling

Legalized gambling, especially casino gambling, has provided increased

employment opportunities. NGISC reported that in 1996, the legalized

gambling industry employed more than half a million people in the United

States. Casinos have created about 50,000 jobs in Atlantic City.

Although NGISC contractors’ findings revealed a link between pathological

gambling and increased bankruptcy, NGISC did not report whether such a

link between the general population and gambling was found. Since 1994,

Atlantic County has had a higher bankruptcy rate than New Jersey and

national bankruptcy rates. New Jersey and local officials in the Atlantic

City area said they did not know why Atlantic County had a higher rate of

bankruptcy and did not know whether gambling was a contributing factor.

NGISC cited a report conducted for the gambling industry that indicated

that federal, state, and local tax revenues generated by casinos were about

$2.9 billion in 1995. NGISC contractors reported that states also receive

substantial revenue from lotteries. NGISC did not report on how all of the

gambling revenues were used or how much community investment was

made with gambling revenues. Tax revenue derived from the casinos in

Atlantic City increased from $10.7 million in 1978 ($22.6 million in 1998

dollars) to $319.3 million in 1998. In addition, from 1985 through June 1999,

over $900 million of casinos’ community reinvestment funds have been

earmarked for redevelopment projects in Atlantic City.

NGISC reported that in 1996, the legalized gambling industry employed

more than half a million people who earned more than $15 billion in

salaries. As reported by NGISC, because they are highly labor intensive,

the casino and pari-mutuel gambling segments provide higher employment

potential than other gambling segments. NGISC reported that in 1995, the

casino industry directly employed about 300,000 people, and pari-mutuel

employment has been estimated at 119,000 jobs.

According to the NGISC report, convenience gambling, such as video

poker machines meant to attract the business of local residents, did not

offer the jobs and economic benefits found in destination resort casinos,

which bring in money from outside the immediate community.

NGISC noted that most local and tribal government officials from

communities with casino gambling testified that casinos had a positive

economic impact on their communities. NGISC also cited the testimony of

employees who said that, with the introduction of casino gambling, they

were able to find better jobs with health and retirement benefits.

Effects of Gambling on

Employment
Appendix I

Economic Effects of Gambling on Communities

Page 17 GAO/GGD-00-78 Impact of Gambling

In addition, in 1998, using a 100-community sample that included 40

communities where casinos had been introduced between 1980 and 1997,

the National Opinion Research Center at the University of Chicago

(NORC), an NGISC contractor, analyzed data from 1980 to 1997 to

determine the impact of casinos on jobs and other economic indicators.

NORC reported that communities with a casino within a 50-mile radius

experienced a 1-percent decrease in the unemployment rate, a 17-percent

decrease in per capita unemployment insurance payments, and a 13-

percent decrease in per capita income maintenance (welfare) costs.

In 1998, NORC also interviewed officials from 10 randomly selected

communities that were located within a 50-mile radius of at least one

major casino (a casino having at least 500 gambling devices) to obtain

additional information on the effects of casino gambling. While

respondents in 5 of 9 communities cited new job opportunities as a very

positive advantage of casinos, respondents in 4 of the 9 communities

indicated that unemployment remained a problem. In addition,

respondents in 6 of the 9 communities said that the casinos, for the most

part, provided low paying and/or part time jobs with no benefits.

Another NGISC contractor, Adam Rose and Associates, who reviewed 36

studies on the economic impact of casino gambling, reported that some

researchers characterized casino jobs as relatively low-skilled and lowpaying service jobs. However, the firm also noted that unionized casino

workers were 10 times more likely than the national average to have health

benefits paid for in full and have pension benefits that exceed the national

average.

In Atlantic City, total jobs increased from about 21,000 in 1977, 1 year

before casinos began operating, to about 62,000 in 1997, as shown in figure

I.1. The increase in Atlantic City’s employment was driven by the hotel

casinos.
Appendix I

Economic Effects of Gambling on Communities

Page 18 GAO/GGD-00-78 Impact of Gambling

Note: According to information provided by the New Jersey Casino Control Commission, the number

of hotel casino jobs reflects full-time positions.

Source: New Jersey Department of Labor and New Jersey Casino Control Commission.

Information provided by the New Jersey Casino Control Commission

(NJCCC) showed that as of July 1999, 48,704 employees (full and part

time) worked in Atlantic City’s hotel casinos. Of the total number of hotel

casino employees, 38,861 (or about 80 percent) were residents of Atlantic

County, including about 11,000 Atlantic City residents (or about 23 percent

of the casino jobs).1

 Both government and community officials said jobs

produced by the hotel casinos partly contributed to the steep decrease in

the Atlantic City welfare caseload during the early 1980s (as shown in

figure I.2).

 

1

 For the last 3 census years, 1970, 1980, and 1990, Atlantic City’s residents represented about 27, 21,

and 17 percent of Atlantic’s County’s population, respectively.

Figure I.1: Trends in Private Sector Jobs in Atlantic City 1977-1997
Appendix I

Economic Effects of Gambling on Communities

Page 19 GAO/GGD-00-78 Impact of Gambling

Note: In calculating welfare caseload per 10,000 population, we did not adjust Atlantic City’s

population (to include visitors and nonresident workers) because welfare recipients are local residents

only. Atlantic County officials said that over the last 20 years, Atlantic City residents have represented

about 50 percent of the county’s welfare caseload.

Source: GAO analysis of data obtained from the Atlantic County Department of Family and

Community Development, the Bureau of the Census, and the U. S. Department of Health and Human

Services.

Atlantic County officials said that the decrease in the welfare caseload

resulted mostly from regulations established by federal and local

governments to reduce welfare rolls.

Although Atlantic City’s unemployment rate decreased from 18.1 percent

in 1977 to 13.4 percent in 1998, the city’s rate has remained higher than

New Jersey and national rates during this time frame, as shown in figure

I.3.

Figure I.2: Trends in Welfare Caseload in the United States, New Jersey, and Atlantic City 1977-1997
Appendix I

Economic Effects of Gambling on Communities

Page 20 GAO/GGD-00-78 Impact of Gambling

Note: According to an official in New Jersey’s Department of Labor/Employment Commission, an

increase in the unemployment rate occurred between 1990 and 1992 because of the national

recession.

Source: GAO analysis of data obtained from the Bureau of Labor Statistics, U.S. Department of

Labor, and New Jersey Department of Labor.

Officials we interviewed in the Atlantic City area said that unemployment

in Atlantic City is still a problem. They provided a variety of reasons for the

unemployment rate, including that (1) the more prosperous middle class

moved out of the city leaving behind a younger and poorer population

whose work habits and substance abuse problems contribute to their

unemployment and (2) the unemployment rate is indicative of Atlantic

City’s economy remaining to some degree seasonal where most

unemployment occurs after the summer tourist season ends. Some

officials said that Atlantic City’s unemployment rate shows that casinos

did not and could not solve all of the city’s problems.

Figure I.3: Trends in the Unemployment Rate in the United States, New Jersey, and Atlantic City 1977-1998
Appendix I

Economic Effects of Gambling on Communities

Page 21 GAO/GGD-00-78 Impact of Gambling

Several of the state and local government and community representatives

we interviewed in New Jersey said that casinos had hurt small businesses,

with restaurants cited most often. An Atlantic City official said that

restaurants suffered because the casinos established over 100 inhouse

restaurants. NJCCC agreed and reported that the noncasino eating and

drinking establishments had experienced tough competition since the

onset of casino gambling and that this partially resulted from the former

statutory requirement that casino hotels establish restaurants within their

properties. State officials said this requirement no longer exists.

We reviewed data that showed that in 1977 (before casinos), there were

242 eating and drinking establishments in Atlantic City. 2 In 1981 (3 years

after casinos began operating), the number had declined to 160, and by

1996 (19 years after casinos began operating), the number had declined to

142.3

 One city official said that even though the number of restaurants had

decreased, the decrease has not had a negative impact upon the number of

restaurant jobs, because the number of employees working in casino

restaurants is greater than the number of persons who had been employed

by the now closed restaurants.

While NGISC reported that community leaders testified that personal

indebtedness tended to increase with legalized gambling, NORC’s 1998

analysis of data on 100 communities between 1980 and 1997 showed no

significant change in per capita bankruptcy rates in communities where

casinos were introduced. However, NORC’s 1998 national telephone

survey of 2,417 adults regarding gambling behavior and attitudes found

that 19.2 percent of the respondents who were classified as lifetime

pathological gamblers reported filing bankruptcy, compared with 4.2

percent for nongamblers and 5.5 percent for low-risk gamblers.

Personal bankruptcy data provided by the Administrative Office of the U.S.

Courts showed that the bankruptcy rate for Atlantic County was higher

than the New Jersey and national rates during the period 1990 to 1998, as

shown in figure I.4.

 

2

We reviewed data from Atlantic City’s Yellow Pages, the Bureau of the Census Zone Improvement Plan

(ZIP) code database that showed the number and type of establishments by ZIP code, the U.S. Postal

Service listing of Atlantic City ZIP codes, along with the Department of Commerce’s standard industry

classification manual.

3

 Our number of restaurants for 1981 and 1996 contained both casino and noncasino restaurants

because according to NJCCC, information on the number of casino restaurants was not readily

available.

Effects of Gambling on

Bankruptcy
Appendix I

Economic Effects of Gambling on Communities

Page 22 GAO/GGD-00-78 Impact of Gambling

Note: Bankruptcy data for Atlantic City were not readily available.

Source: GAO analysis of data obtained from the Administrative Office of the U.S. Courts and the

Bureau of the Census.

Between 1994 and 1998, while the bankruptcy rate per 100,000 population

for New Jersey increased from 282 to 555, the rate for Atlantic County

increased from 385 to 1,019. The national trend was similar to New

Jersey’s trend. We were unable to obtain data to show whether the

bankruptcy rate had increased after the casinos began operating in

Atlantic City (in 1978) because, according to an official of the

Administrative Office of the U. S. Courts, Atlantic County bankruptcy filing

data before 1990 were not readily obtainable.

We asked officials in 16 of the 26 government agencies and community and

private industry organizations we contacted in New Jersey about the

Atlantic County bankruptcy rate. Most of the officials said they were not

sure why the bankruptcy rate in Atlantic County was much higher than the

Figure I.4: Trends in Personal

Bankruptcy Rates in the United States,

New Jersey, and Atlantic County 1990-

1998
Appendix I

Economic Effects of Gambling on Communities

Page 23 GAO/GGD-00-78 Impact of Gambling

New Jersey rate (nearly twice as high in 1998) and did not know whether

gambling was a contributing factor. An official, who had been involved in

Atlantic City’s economic activities for several years, said that some

bankruptcies occurred because of unwise business decisions made by

persons drawn to Atlantic City by the casinos.

NGISC reported that local officials in jurisdictions where casinos were

located testified about the increased revenues and community

improvements made possible with the advent of gambling in their

communities. It also cited the testimony of tribal members who said that,

in addition to new jobs, legalized gambling provided their communities

with improved hospitals, clinics, schools, and the capital to invest in new

businesses.

NGISC also reported that an Arthur Anderson study conducted for the

American Gaming Association reported that, in 1995, the casino industry

paid a total of $2.9 billion in taxes to federal, state, and local jurisdictions.

Based on its review of economic impact studies for NGISC, Adam Rose

and Associates reported that taxes from casino gambling typically more

than pay for government expenditures on roads, police services, and fire

protection needed to support the casinos. The firm noted that it did not

consider social costs in its analysis and said that social costs might be

significant. The firm also reported that casinos are subject to higher levels

of taxation than other enterprises in most locations.

Another NGISC contractor, Clotfelter and Cook, reported that in 1997, net

revenue (sales minus prizes and operating costs) from state lotteries

totaled about $11 billion. The contractors reported that the average net

revenue state treasuries received from the average dollar wagered on

lotteries was 33 cents. The firm reported that, in 1997, lottery revenue from

the 38 state lotteries4

 represented about 2.2 percent of own-source general

revenue5

 compared with about 25 percent for state general sales taxes and

25 percent for state income taxes. According to Clotfelter and Cook, 16 of

the 38 states earmarked all or part of lottery revenues for education, 10

allocated lottery revenue to a general fund, and the other states used the

lottery funds for a wide range of purposes including parks and recreation,

tax relief, economic development, sports stadiums, and police and fireman

pensions.

 4

The 38 state lotteries include 37 states and the District of Columbia.

5

As defined in Clotfelter and Cook report, own-source general revenue excludes intergovernmental

grants as well as special sources of revenue, such as that generated by utilities or liquor stores.

Effects of Gambling on

Tax Revenue and

Community

Investment
Appendix I

Economic Effects of Gambling on Communities

Page 24 GAO/GGD-00-78 Impact of Gambling

New Jersey enacted legislation that set an 8 percent tax rate on Atlantic

City’s casinos’ gross gambling revenue and earmarked it for social services

programs to benefit senior citizens and the disabled in New Jersey. As

shown in figure 1.5, the annual gambling taxes paid by casinos increased

from $22.6 million in 1978 (in 1998 dollars) to $319.3 million in 1998.

Note: The dollars in this figure have been adjusted to 1998 dollars. The index used to convert 1978-

1997 dollars to 1998 dollars was the Chain-Type Price Index for GDP from the Department of

Commerce’s Bureau of Economic Analysis.

Source: New Jersey Casino Control Commission.

Casinos also paid about $86.6 million in property taxes to Atlantic City in

1998, which was about 80 percent of total property taxes for Atlantic City’s

budget. In 1998, the casinos also paid $41.7 million in school taxes and $25

million in property taxes to the county. In addition, information provided

by New Jersey officials showed that Atlantic City’s property value

increased from $300 million in 1977 ($677 million in 1998 dollars) to $6.7

billion in 1998, with much of the increase reflecting the value of casino

properties. Information provided by New Jersey officials showed that local

real estate tax rates decreased from $7.95 per $100 of assessed valuation in

1977 ($17.94 per $100 in 1998 dollars) to $2.88 per $100 of assessed

valuation in 1998.

Figure I.5: Casino Gambling Taxes Paid to New Jersey 1978-1998, in 1998 Dollars
Appendix I

Economic Effects of Gambling on Communities

Page 25 GAO/GGD-00-78 Impact of Gambling

Other taxes and fees paid by casinos include Atlantic City tourism

promotion, parking, and luxury taxes and fees for a total of about $40

million in 1998. Tax revenue generated by casinos from insurance, state

corporate taxes, and state personal income tax totaled about $87 million in

1995.6

 In addition, casinos invested in community redevelopment projects,

which are discussed below.

The casinos make investment in the community through the Casino

Reinvestment Development Authority (CRDA). In 1984, New Jersey

enacted legislation that created CRDA and required casinos to either pay

2.5 percent of their gross revenue as a tax or invest 1.25 percent of their

gross revenue in obligation deposits to CRDA for community investment

throughout New Jersey.7

 In addition, New Jersey enacted legislation in

1993 that imposed a daily parking fee on motor vehicles parked in facilities

either owned or operated by casinos. The fee as of July 1999 was $2.00;

$1.50 of the fee is to be deposited into CRDA.

Information provided by CRDA shows that, from 1985 through June 1999,

CRDA had earmarked about $900 million of casino reinvestment funds for

community development projects in Atlantic City.8 CRDA groups

community development projects into four main categories: housing,

nonhousing, casino hotel room expansion, and Atlantic City corridor

projects. The greatest percentage (30.9) of the casino funds have been

earmarked for nonhousing projects, which include such activities as road

construction/improvements, beautification projects, and activities directed

toward youth.

 6

According to a New Jersey official, the 1995 data were the most current data available for these taxes,

and the insurance tax includes taxes withheld from casino employees and the state personal income

tax referred to state income taxes withheld from casino industry employees.

7

 The casinos have the option to purchase CRDA issued bonds or make direct investments in projects.

According to a CRDA official, the casinos also may make donations for a CRDA project. If a casino

purchases bonds issued by or offered through CRDA or makes other investments approved by CRDA,

the casino has the possibility to receive the return of principal and a return on its investment. However,

neither the State of New Jersey nor any political subdivision is authorized to guarantee any return of

principal or interest on any purchase of bonds or approved eligible investments. N. J. Stat. Ann. 5:12-

144.1.i, N. J. Stat. Ann. 5:12-162.i.

8

A 15-member board governs CRDA and decides which projects will be funded with casino

reinvestment funds. Board membership includes the Mayor of Atlantic City, state personnel, and

members from the casino industry and the general public.
Appendix II

Social Effects of Gambling on Communities

Page 26 GAO/GGD-00-78 Impact of Gambling

Measuring the social effects of gambling upon communities is difficult,

primarily because of the limited amount of quality data on the social

effects and the complexity of establishing a cause-effect relationship

between gambling and social problems due to the difficulty of isolating

gambling from other factors, such as substance abuse and personality

disorders, that cause social problems.

NGISC did not report whether gambling leads to an increase in social

costs, such as increased family problems, crime, and suicide for the

general population. However, NGISC determined that individuals suffering

from pathological gambling engaged in destructive family behavior,

committed more crime than other citizens, and had higher suicide rates.

While NGISC found that these social problems are associated with

pathological gambling, quantifying these costs is difficult because of hardto-measure and hard-to-identify damages or emotional costs, such as the

impact of addictive behaviors upon families. Also, because people with

gambling disorders often also have other behavior problems, such as

substance abuse, social scientists have not been able to isolate the amount

of increased social costs caused by gambling.

We found no conclusive evidence on whether or not gambling increased

social problems in Atlantic City. Some family problems, including domestic

violence and child abuse; crime; and suicide increased during some of the

years after the casinos began operating and decreased in others. Some of

the individuals we interviewed in New Jersey viewed the casinos, at least

partly, as contributing to the increases—with the exception of suicides.

However, other officials said the casinos had no impact on the increased

social problems.

NGISC stated that based on testimonial accounts presented in its hearings,

individuals who suffer from problem or pathological gambling engage in

destructive family behavior, such as domestic violence, divorce, and

homelessness. NGISC reported that one of its research contractors, the

National Research Council of the National Academy of Sciences (NRC),

cited two studies showing that between one quarter and one half of

spouses of pathological gamblers had been abused by their spouses. In

addition, respondents in 6 of the 10 communities located within a 50-mile

radius of a casino that were in NORC’s case studies reported their

perception of an increase in domestic violence after the opening of

casinos.

NGISC also reported that children of individuals suffering from

pathological gambling are often prone to suffer abuse and neglect.

Effects of Gambling on

Family Problems
Appendix II

Social Effects of Gambling on Communities

Page 27 GAO/GGD-00-78 Impact of Gambling

According to the report, NGISC heard testimony of cases in which parents

or caretakers locked children in cars for an extended period of time while

they gambled. NGISC discussed NRC’s review of two studies indicating

that between 10 and 17 percent of children of individuals suffering from

pathological gambling had been abused by those parents. NORC also

reported that in its 10-community case study, 6 communities had one or

more respondents who said they had seen increases in child neglect and

attributed this increase, at least in part, to parents leaving their children

alone at home or in casino lobbies and parking lots while they gambled.

NGISC also reported that testimonial statements were made indicating that

pathological gambling and divorce were frequently linked. In addition, the

NORC survey found that 53.5 percent of identified pathological gamblers

reported having been divorced. This figure contrasts with the 18.2 percent

of nongamblers and 29.8 percent of low-risk gamblers who reported having

been divorced.

Similarly, gambling disorders possibly contribute to the homeless

population. Three surveys of homeless populations cited by NGISC

(including one conducted by the Atlantic City Rescue Mission) reported

that 18 to 33 percent of homeless individuals cited gambling as a

contributing factor or cause of their homelessness. NGISC cautioned that

it remains unclear whether homelessness is actually caused by gambling or

other factors related to addictive behavior.

Concerning a direct cost associated with the pathological gambler, NGISC

reported that in 1998, NORC estimated that the annual average cost to

society for problem and pathological gamblers for job loss, unemployment

and welfare benefits, poor physical and mental health, and gambling

disorder treatments were approximately $1,200 per pathological gambler

and $715 per problem gambler. NGISC also stated that NORC further

estimated that the lifetime costs (bankruptcy, arrests, imprisonment, legal

fees for divorce, and so forth) for problem gamblers were $5,130 per

gambler and $10,550 per pathological gambler. NORC concluded that

overall, pathological and problem gamblers in the United States cost

society approximately $5 billion per year and an additional $40 billion in

lifetime costs for productivity reductions, social services, and creditor

losses.

NORC’s analyses on the economic costs associated with problem and

pathological gambling, reported in NGISC’s report, isolated the effect of

problem and pathological gambling net of other effects, such as drug and

alcohol abuse. NORC reported that it compared economic cost estimates
Appendix II

Social Effects of Gambling on Communities

Page 28 GAO/GGD-00-78 Impact of Gambling

from its study with measurable costs of other sources of morbidity,

mortality, and productivity loss and found that while the annual economic

cost estimated for problem and pathological gambling in 1998 was $5

billion, 1995 estimates were $110 billion for drug abuse and $166.5 billion

for alcohol abuse. According to NGISC, NORC focused on a small number

of tangible consequences and, as a result, its figures on problem and

pathological gambling must be taken as minimums.

NGISC concluded that determining the social impact of gambling on the

general population was difficult because the amount of quality research

was extremely limited. In addition, NGISC reported that pathological

gambling often occurs in conjunction with other behavioral problems,

including substance abuse, mood disorders, and personality disorders—a

joint occurrence, which is termed comorbidity. Because of this, even when

an individual acknowledges that gambling contributed to a particular

family or social problem, it is extremely difficult to determine exactly what

caused the problem. In addition, NGISC concluded that while studies have

attempted to quantify the costs associated with pathological gambling,

such as costs of crime and abuse, many of the costs, including the costs of

emotional damage and long-term impact on families, are hard to identify

and quantify.

We also were not able to clearly identify the social effects of gambling on

Atlantic City due to the difficulty of isolating the effects of gambling from

other factors and finding conclusive evidence on whether or not gambling

increased social problems. In addition, according to a New Jersey official,

about two-thirds of the gamblers in Atlantic City reside outside of New

Jersey. Therefore, whatever the social costs are upon gamblers who

gamble in Atlantic City, the bulk of the social costs is exported

elsewhere—where the gamblers actually reside.

Data on some family problems, such as domestic violence, prior to 1978 in

the Atlantic City area were not readily available. Therefore, we were not

able to compare social problems before and after casinos began operating

in the city. However, as discussed below, some family problems, including

domestic violence, child abuse, divorce, and single-parent families

increased in Atlantic County in some years after the casinos began

operating and decreased in others.1

 Also, the incidents of family problems

 

1

An official in an Atlantic County community agency dealing with domestic violence said that about 40

percent of the agency clientele were Atlantic City residents. Officials from three additional county

agencies providing family services said that Atlantic City residents represented from 15 to 50 percent

of the agencies’ clientele.
Appendix II

Social Effects of Gambling on Communities

Page 29 GAO/GGD-00-78 Impact of Gambling

per 10,000 population in Atlantic County have generally been higher than

New Jersey rates.

As shown in figure II.1, the reported number of domestic violence

incidents per 10,000 population for Atlantic County has been higher than

the rate for New Jersey since 1983.2

Note: According to a Department of Justice official, national data on the reported number of domestic

violence incidents were not available; national data are based on surveys and not actual reported

incidents. Also, domestic violence data for Atlantic City were not readily available.

Source: GAO analysis of data obtained from New Jersey State Police Department, Atlantic County

officials, and the Bureau of the Census.

While the reported number of domestic violence incidents per 10,000

population in Atlantic County increased from 45 in 1983 to 225 in 1997, the

rate increased from 33 to 102 in New Jersey during the same time period.

However, a state official emphasized that yearly data may not be

comparable because the reporting system has been revised and the post-

 2

Data for 1977 to 1982 were not available. According to a state official, state legislation on domestic

violence was passed in 1981, and counties began collecting statistics in 1983. We used Atlantic County

data because domestic violence data for Atlantic City were not readily available.

Figure II.1: Reported Number of

Domestic Violence Incidents for New

Jersey and Atlantic County 1983-1997
Appendix II

Social Effects of Gambling on Communities

Page 30 GAO/GGD-00-78 Impact of Gambling

1992 data include more categories of domestic violence than the pre-1992

data.

As figure II.2 shows, with the exception of 1 year, between 1982 and 1996,

substantiated child abuse and neglect cases per 10,000 population in

Atlantic County have been higher than the number of cases in New Jersey.

Note: An official with New Jersey’s Division of Youth said that data for 1977 to 1981 were not

available. The state began collecting the data in 1982. Also, according to the National Clearinghouse

on Child Abuse and Neglect, a U.S. Department of Health and Human Services contractor, complete

national data on substantiated child abuse and neglect cases were not available, because national

reporting, which began in 1990, is on a voluntary basis and all states do not report certain data. Also,

substantiated child abuse data for Atlantic City were not readily available.

Source: GAO analysis of data obtained from the New Jersey Division of Youth and Family Services

and the Bureau of the Census.

While substantiated child abuse and neglect cases per 10,000 population in

Atlantic County increased from 19 in 1982 to 47 in 1987, they had declined

to 18 in 1996.

Figure II.2: Trends in Substantiated

Child Abuse and Neglect Cases in New

Jersey and Atlantic County 1982-1996
Appendix II

Social Effects of Gambling on Communities

Page 31 GAO/GGD-00-78 Impact of Gambling

Atlantic County’s divorces per 10,000 population slightly increased from 30

in 1977 (1 year before the casinos began operating) to 44 in 1980 (2 years

after the casinos began operating). The county’s rate was lower than the

national rate and higher than New Jersey’s rate in 1977, 1980, and 1990 as

shown in figure II.3.

Note: Divorce data for Atlantic City were not readily available.

Source: GAO analysis of data obtained from the Bureau of the Census.

Also, as shown in figure II.4, the percent of families with children under 18

who were single-parent families in Atlantic City was higher than both the

state and national rates in 1970, 1980, and 1990. The percentage in Atlantic

City increased from 41 percent in 1970 to 61 percent in 1980 and to 63

percent in 1990.

Figure II.3: Trends in Divorce Rate in

the United States, New Jersey, and

Atlantic County 1977, 1980, and 1990
Appendix II

Social Effects of Gambling on Communities

Page 32 GAO/GGD-00-78 Impact of Gambling

Note: We did not adjust the Atlantic City population to include visitors and nonresident workers

because these data represented Atlantic City’s residents only. We looked at the single-parent rates

for Asbury Park and Long Branch, two other New Jersey shoreline cities. Asbury Park’s rates were

similar to Atlantic City’s rates, and Long Branch’s rates were about twice the state and U.S. rates.

This indicates that factors other than casinos may be contributing to the difference in Atlantic City’s

single-parent rate compared with New Jersey and U.S. single-parent rates.

Source: GAO analysis of data provided by the Bureau of Census.

As table II.1 shows, while some officials said the casinos had at least some

impact on family problems, other officials said the presence of the casinos

had no impact on social problems in Atlantic City.

Figure II.4: Percent of Families With

Children Under 18 that Are SingleParent Families in the United States,

New Jersey, and Atlantic City 1970,

1980, and 1990
Appendix II

Social Effects of Gambling on Communities

Page 33 GAO/GGD-00-78 Impact of Gambling

Number of agencies

Family problems

Casinos

had no

impact

Casinos

had some

impact

Casinos

had great

impact

No basis

to judge

Total number of

agencies with

officials

responding

Domestic violence 1 4 3 1 9

Child abuse and neglect 1 3 2 2 8a

Divorce 0 4 3 1 8a

Single-parent families 0 4 3 1 8a

Homelessness 1 4 3 1 9

Note: Of the 26 agencies and organizations included in our case study in the Atlantic City area, nine

were government and community agencies that provided social services to Atlantic City residents. We

asked officials in those nine agencies for their opinions on the impact, if any, that the casinos in

Atlantic City had on family problems, such as domestic violence.

a

The official from one of the nine agencies did not comment on the impact of the casinos on child

abuse, divorce, and single-parent families

Source: GAO analysis of comments made by officials in the Atlantic City area.

Both government and community officials stated that working in the

casinos was very stressful and had a negative impact on employees’

personal lives. For example, they said casino job security is limited by the

seasonal nature of many positions; casino employees work in shifts and

many are on-call 24 hours; and employees have difficulty maintaining

consistent child care when both parents work irregular hours. The officials

said stress originating from these factors contributed to family problems.3

Concerning the impact of gambling on homelessness, officials in seven of

the nine government and community agencies in our case study that

provided social services to Atlantic City residents said that the casinos in

Atlantic City had at least some effects on homelessness. They commented

that (1) the casinos attract troubled, unskilled persons to Atlantic City who

are “looking for a new life” and (2) because of the problems they bring

with them, they cannot obtain employment and thus, in some cases,

become homeless.

NGISC reported that the suicide rate among pathological gamblers is

higher than for any other addictive disorder, but questioned whether a link

existed between gambling and suicide in general. NGISC stated that it

heard repeated testimony and received various reports about suicide and

attempted suicide on the part of individuals suffering from pathological

gambling; however, the reports’ conclusions conflicted. According to

 3

Information from the New Jersey Casino Control Commission shows that about 80 percent of total

casino employees live in Atlantic County, and about 23 percent of the total employees reside in Atlantic

City.

Table II.1: Opinions of Officials in Nine

Government and Community Social

Services Agencies on the Impact of

Casinos on Family Problems in the

Atlantic City Area

Effects of Gambling on

Suicide
Appendix II

Social Effects of Gambling on Communities

Page 34 GAO/GGD-00-78 Impact of Gambling

NGISC, while some of the reports concluded that the magnitude of the link

between gambling and suicide may be understated, others questioned

whether a link even existed between suicide and gambling.

While three suicides occurred in Atlantic City casinos during the summer

of 1999, Atlantic City area community and government officials said that

the available data were insufficient to link suicide and gambling. As shown

in figure II.5, in 1970, the suicide rate in Atlantic City on the basis of

unadjusted population was higher than New Jersey’s rate but lower than

the national rate.

Note 1: Suicide rates were calculated by dividing the number of suicides that took place in each area

by the number of residents. When calculating the suicide rate for 1970, we did not adjust Atlantic

City’s population to include visitors and nonresident workers because in 1970, Atlantic City’s

Convention and Visitors Authority did not collect visitors’ information.

Figure II.5: Suicides for the United

States, New Jersey, and Atlantic City

1970, 1980, and 1990
Appendix II

Social Effects of Gambling on Communities

Page 35 GAO/GGD-00-78 Impact of Gambling

Note 2: In addition, because many Atlantic City gamblers do not reside in Atlantic City, if gamblingrelated suicides occur in other geographic locations that may be related to gambling in Atlantic City,

they would not be identified with Atlantic City. According to a New Jersey official, about two-thirds of

the gamblers in Atlantic City casinos reside outside of New Jersey.

Source: GAO analysis of data obtained from the Bureau of the Census and South Jersey

Transportation Authority.

In 1980, Atlantic City’s suicide rate was higher than both the New Jersey

and U.S. rates and in 1990, it was lower than the U.S. rate and slightly

higher than the New Jersey rate. After adjusting Atlantic City’s population

data to include visitors and nonresident workers, the rate dropped below

both New Jersey and the U.S rates for 1980 and 1990.

The majority of individuals in nine government and community agencies

that provided social services to Atlantic City residents said they either had

no basis to judge or they did not believe that the casinos had an impact on

suicides.

While NGISC and its contractors reported a linkage between increased

crime and pathological gambling, NGISC concluded that, in general,

existing data were not sufficient to quantify or define the relationship

between gambling and crime. It reported that although numerous studies

have explored the relationship between gambling and crime, the reliability

of many of these studies is questionable. Some studies suggested that

increased crime rates in gambling jurisdictions result from surges in

tourist populations rather than the introduction of gambling. Other studies

were limited to particular types of crime and/or particular locations, thus

prohibiting generalization of their results.

The NORC study completed for NGISC found that pathological gamblers

had higher arrest and imprisonment rates than nonpathological gamblers.

NRC’s study completed for NGISC also found that some persons with

gambling disorders resort to crime to pay debts and secure additional

funds for gambling. These findings were supplemented by testimony

before NGISC from and about pathological gamblers who commit crimes

to finance their gambling habit.

Rates for some crimes increased in Atlantic City after the casinos began

operating in the city. Both county and city officials we interviewed said

that the visitor population that casinos attract to the area has increased

some types of crime.

Effects of Gambling on

Crime
Appendix II

Social Effects of Gambling on Communities

Page 36 GAO/GGD-00-78 Impact of Gambling

We examined the crime rates in the Atlantic City area before and after the

casinos began operating4

 and compared the rates with both state and

national rates. Because New Jersey and local government officials

emphasized that any crime data analysis should include in the population

the number of visitors Atlantic City receives daily, we calculated crime

rates with and without adjustments to Atlantic City’s population to include

the influx of visitors and nonresident workers to the city. While we show

crime rates based on both the city’s unadjusted population and the city’s

adjusted population, we believe that the more appropriate method is the

method that includes the adjusted population. We agree with some

researchers’ comments that visitors become part of the pool who may both

commit and become victims of crime and therefore should be added to the

resident population when calculating the crime rate. In contrast, other

researchers have stated that calculating the crime rate using the

unadjusted population (local residents only) provides a more complete

picture of the impact of crime on the local geographic area. They stated

that regardless of whether visitors are included in the crime rate

calculation, the actual increase in the number of crimes affects the local

area’s law enforcement costs.

Our analysis of the FBI’s Uniform Crime Report (UCR) data showed that

the total crime rate initially increased in the years after casinos began

operating in Atlantic City (1978).5

 As shown in table II.2, the increase

occurred when we used either the unadjusted or adjusted population.

 

4

We used the Federal Bureau of Investigation (FBI) Uniform Crime Report (UCR) to calculate the rate

of crime in Atlantic City, New Jersey, and the United States. UCR includes reported incidences of

violent crime (murder, forcible rape, robbery, and aggravated assault) and property crimes (burglary,

larceny-theft, and motor vehicle theft).

5

 Total crime includes violent crimes (murder, forcible rape, robbery, and aggravated assault) and

property crimes (burglary, larceny-theft, and motor vehicle theft).
Appendix II

Social Effects of Gambling on Communities

Page 37 GAO/GGD-00-78 Impact of Gambling

Total crimes per 10,000 population

Year United States New Jersey

Atlantic City (based on

the population

adjusted to include

visitors and

nonresident workers)

Atlantic City

(based on

unadjusted

population)

1977 507.76 511.39 695.89 1,006.00

1978 514.03 520.72 768.66 1,336.00

1979 556.55 582.06 798.62 1,678.00

1980 595.00 640.13 1079.29 3,109.37

1981 585.82 617.98 922.29 3,132.91

1982 560.36 567.61 986.85 3,863.68

1983 517.50 516.34 947.99 4,168.01

1984 503.13 485.55 763.01 3,537.48

1985 520.71 509.44 857.61 4,203.70

1986 548.04 524.13 850.56 4,179.05

1987 555.00 526.15 749.90 3,963.67

1988 566.42 529.53 833.44 4,593.15

1989 574.10 526.94 794.57 4,323.13

1990 582.03 544.72 800.75 4,107.04

1991 589.78 543.13 808.80 4,047.54

1992 566.02 506.44 721.22 3,597.11

1993 548.44 480.08 641.31 3,144.05

1994 537.35 466.09 509.63 2,555.94

1995 527.59 470.37 538.08 2,902.93

1996 508.66 433.29 525.89 2,874.49

1997 493.00 405.70 526.49 2,776.26

Note: While we show the crime rate based on both the unadjusted and adjusted Atlantic City

population, we believe that the rate based on the adjusted population to include visitors is the more

appropriate rate calculation method.

Source: GAO analysis of data obtained from the FBI’s UCR, South Jersey Transportation Authority,

and the Bureau of the Census.

A 1997 study sponsored by the American Gaming Association said that

while the number of reported crimes in Atlantic City increased between

1978 and 1982, so did the number of police employees, raising the

possibility that reported crime increased because more police employees

were available to uncover crimes.

While the Atlantic City unadjusted total crime rates have been higher than

the New Jersey and U.S. rates during all of the years since 1977, beginning

in the early 1990s, all rates began an overall decline. In 1997, Atlantic City’s

crime rate based on the adjusted population was closer to the New Jersey

and U.S. rates, while the unadjusted rate still remained higher than the

state and U.S. rates.

Table II.2: Total Crimes in the United

States, New Jersey, and Atlantic City

1977-1997
Appendix II

Social Effects of Gambling on Communities

Page 38 GAO/GGD-00-78 Impact of Gambling

Officials in Atlantic City and Atlantic County said that casinos have had

some impact on property crime. For example, according to an Atlantic

County official, the number of larceny cases (nonviolent property crimes

such as hotel room theft) increased from 2,000 cases in 1977 (the year

before casinos began operating in Atlantic City) to 8,000 in 1980 and 12,000

in 1985. As shown in table II.3, the overall property crime rate per

unadjusted population began to increase in 1978 and remained higher than

the state and national rates through 1997.

Property crimes per 10,000 population

Year United States New Jersey

Atlantic City (based on

the population

adjusted to include

visitors and

nonresident workers)

Atlantic City

(based on

unadjusted

population)

1977 460.17 472.18 624.42 902.68

1978 464.25 478.37 682.13 1185.59

1979 501.66 531.94 710.33 1492.48

1980 535.33 579.70 985.87 2840.26

1981 526.39 554.92 827.97 2812.51

1982 503.25 506.88 906.31 3548.34

1983 463.74 461.03 885.10 3891.49

1984 449.21 432.78 706.36 3274.86

1985 465.05 454.99 800.91 3925.78

1986 486.26 466.88 790.28 3882.88

1987 494.03 472.05 702.73 3714.35

1988 502.71 471.25 776.85 4281.28

1989 507.79 466.04 731.11 3977.84

1990 508.85 479.97 726.53 3726.37

1991 513.97 479.65 732.83 3667.40

1992 490.27 443.85 652.81 3255.94

1993 473.76 417.40 569.09 2789.98

1994 466.00 404.68 453.83 2276.10

1995 459.13 410.39 489.01 2638.19

1996 445.01 380.14 481.41 2631.35

1997 431.87 356.44 484.67 2555.72

Note: While we show the crime rate based on both the unadjusted and adjusted Atlantic City

population, we believe that the rate based on the adjusted population to include visitors is the more

appropriate rate calculation method.

Source: GAO analysis of data obtained from the FBI’s UCR, South Jersey Transportation Authority,

and the Bureau of the Census.

After adjusting the population data, Atlantic City’s property crime rate

dropped considerably but still remained higher than the state and national

rates until 1994, when it decreased to a point closer to the New Jersey and

U.S. rates. According to a county law enforcement official, the number of

car thefts also increased when casinos opened; however, after several

Table II.3: Property Crimes in the United

States, New Jersey, and Atlantic City

1977-1997
Appendix II

Social Effects of Gambling on Communities

Page 39 GAO/GGD-00-78 Impact of Gambling

years, the number decreased due to the crime prevention experience

gained by local police and casino employees.

Both county and city officials said that the introduction of casino gambling

had resulted in an increase in white-collar crimes. One county official said

that the most likely reason for this increase was that people lose money at

casinos and embezzle or steal money to recover their losses. As table II.4

shows, an analysis of the UCR data from 1977 to 1997 showed that

embezzlement rates increased in 1978 and 1979 after casinos began

operating in Atlantic City in 1978 and have been lower than New Jersey

and national rates in most of the years since 1980.

Embezzlement arrests per 10,000 population

Year United States New Jersey Atlantic City

1977 0.36 0.58 0.23

1978 0.38 0.55 0.92

1979 0.40 0.52 0.94

1980 0.42 0.25 0.00

1981 0.42 0.17 0.00

1982 0.39 0.16 0.00

1983 0.38 0.21 0.26

1984 0.40 0.23 0.00

1985 0.48 0.15 0.00

1986 0.52 0.18 0.27

1987 0.53 0.29 0.55

1988 0.61 0.22 4.36

1989 0.65 0.20 0.85

1990 0.61 0.20 0.00

1991 0.55 0.15 0.00

1992 0.55 0.16 0.00

1993 0.51 0.10 0.00

1994 0.56 0.12 0.00

1995 0.57 0.09 0.00

1996 0.60 0.12 2.44

1997 0.65 0.15 0.00

Note: In calculating the embezzlement arrest rate, we did not adjust Atlantic City’s population to

include visitors and nonresident workers because embezzlement cases are handled in the jurisdiction

in which they occur.

Source: GAO analysis of data obtained from the FBI’s UCR, South Jersey Transportation Authority,

and the Bureau of the Census.

Both city and county officials said that the presence of casinos had a great

impact on prostitution. One official commented that the casinos do not

generally draw families, and this creates an atmosphere conducive to

prostitution. Another official said the impact of the casinos on prostitution

is now decreasing. As shown in table II.5, analysis of UCR prostitution data

from 1977 to 1997 shows that the arrest rate for prostitution crimes based

Table II.4: Embezzlement Arrests in the

United States, New Jersey, and Atlantic

City 1977-1997
Appendix II

Social Effects of Gambling on Communities

Page 40 GAO/GGD-00-78 Impact of Gambling

on Atlantic City’s unadjusted population increased in some of the years

between 1977 and 1997 and remained higher than the state and national

levels.

Prostitution arrests per 10,000 population

Year United States New Jersey

Atlantic City (based

on adjusted

population to include

visitors and

nonresident wokers)

Atlantic City

(based on

unadjusted

population)

1977 4.34 1.44 14.26 20.89

1978 4.49 1.07 31.08 53.08

1979 4.49 1.03 20.73 42.61

1980 4.24 1.18 12.89 37.13

1981 5.07 1.34 15.67 55.52

1982 5.93 2.30 31.76 122.88

1983 5.94 2.27 23.88 100.27

1984 5.66 1.91 23.54 107.60

1985 5.53 3.15 36.35 169.33

1986 5.23 3.66 28.33 138.67

1987 4.99 2.31 16.82 88.89

1988 4.25 2.41 19.97 106.15

1989 4.42 2.56 14.12 76.58

1990 4.64 3.44 18.02 92.40

1991 4.53 3.33 21.20 105.69

1992 4.37 3.33 20.80 102.94

1993 4.43 3.99 19.55 96.97

1994 4.17 3.29 18.90 95.60

1995 4.46 2.97 12.93 69.38

1996 4.25 3.02 11.36 61.43

1997 4.19 3.91 9.59 52.08

Note: While we show the prostitution arrest rate based on both the unadjusted and adjusted Atlantic

City population, we believe that the rate based on the adjusted population to include visitors is the

more appropriate rate calculation method.

Source: GAO analysis of data obtained from the FBI’s Uniform Crime Report, New Jersey’s South

Jersey Transportation Authority, and the Bureau of the Census.

However, after adjusting Atlantic City’s population data, the prostitution

arrest rate moved much closer to the state and national rates between 1977

and 1997 than the rates based on the unadjusted population.

UCR data on drug arrests showed that in 1977 (the year before casinos

were established in Atlantic City), the national, state, and city rates were

similar, as shown in table II.6.

Table II.5: Prostitution Arrests in the

United States, New Jersey, and Atlantic

City 1977-1997
Appendix II

Social Effects of Gambling on Communities

Page 41 GAO/GGD-00-78 Impact of Gambling

Drug arrests per 10,000 population

Year United States New Jersey

Atlantic City (based on

population adjusted for

visitors and

nonresident workers)

Atlantic City

(based on

unadjusted

population)

1977 30.52 40.47 29.95 43.88

1978 29.81 44.66 17.68 30.20

1979 26.44 36.70 21.08 43.31

1980 27.38 36.82 19.25 55.44

1981 28.90 42.33 35.37 125.31

1982 30.17 41.36 30.96 119.78

1983 30.74 41.13 38.89 163.26

1984 31.67 46.17 40.12 183.42

1985 35.20 48.50 43.91 204.54

1986 36.03 47.90 47.57 232.81

1987 40.09 56.13 43.72 231.05

1988 45.02 72.35 63.04 335.07

1989 53.88 88.16 60.26 326.80

1990 44.40 62.07 70.68 362.50

1991 42.25 55.97 65.02 324.14

1992 44.85 54.50 74.48 368.66

1993 46.97 55.16 65.62 325.53

1994 53.87 64.12 58.26 294.77

1995 59.80 70.72 60.18 322.98

1996 59.27 73.24 72.70 393.23

1997 63.79 77.87 71.48 388.19

Note: While we show the drug arrest rate based on both the unadjusted and adjusted Atlantic City

population, we believe that the rate based on the adjusted population to include visitors is the more

appropriate rate calculation method.

Source: GAO analysis of data obtained by the FBI’s UCR and the Bureau of the Census.

As table II.6 shows, between 1980 and 1997, Atlantic City’s drug arrests per

10,000 unadjusted population experienced an overall increase and was

about five times higher than the state and national rates during some years.

When the population is adjusted, the city’s drug arrest rate was closer to

the state and national rates and in some years, lower than the state and

national rates. Although an Atlantic County official said the casinos in

Atlantic City had not had a material impact upon the amount of drugrelated crimes in the county, an Atlantic City official said he believed that

gambling had made a direct impact on drug-related crimes.

Officials in the New Jersey Attorney General’s office said that the state has

had no major scandal or organized crime influence in the casino industry.

They attribute this in large part to the strong controls and strict regulation

that the state enforces over the casino industry. They described their

system of regulating casino gambling as being the best in the United States.

Table II.6: Drug Arrests in the United

States, New Jersey, and Atlantic City

1977-1997
Appendix II

Social Effects of Gambling on Communities

Page 42 GAO/GGD-00-78 Impact of Gambling

Some Atlantic City mayors have been charged with and a number of them

have been convicted of corruption crimes both prior to and since the

introduction of legalized casino gambling. State officials noted that two

mayors have been charged with corruption since casino gambling was

legalized. The public record indicated that one of the two mayors pled

guilty to federal corruption charges; and the charges in that case, at least in

part, involved an attempt to make a favorable sale of city land with casino

development potential. State officials also pointed out four moneylaundering cases involving casino employees.

The difficulty of directly attributing social problems to problem gambling

or to the presence of casinos in Atlantic City was a recurrent theme in

response to questions about Atlantic City’s primary social problems. When

asked to identify the city’s key social problems, several officials said

Atlantic City suffers from the same social problems faced by other cities,

such as drug use, unemployment fueled by a transient population, and a

group of individuals who lack job skills. Whether these problems would be

better or worse without the presence of casinos in Atlantic City remains

unknown.
Appendix III

Estimated Prevalence of Pathological

Gambling

Page 43 GAO/GGD-00-78 Impact of Gambling

Researchers looking at the prevalence of pathological gambling in the

United States and New Jersey estimated that the percentage of

pathological gamblers ranged from 1.2 to 1.6 percent. The American

Psychiatric Association (APA) defines problem gambling as a pathological

disorder and includes it in APA’s Diagnostic and Statistical Manual of

Mental Disorders (DSM-IV). APA states that the essential feature of

pathological gambling is a “persistent and recurrent maladaptive gambling

behavior . . . that disrupts personal, family, or vocational pursuits.”

Individuals who meet at least five of the criteria (shown in table III.1) that

are used to diagnose pathological gambling—Level 3 gambling disorder—

are diagnosed as having the disorder.

Diagnostic

criteria Behavior pattern

Preoccupation Is preoccupied with gambling (e.g., preoccupied with reliving past

gambling experiences, handicapping or planning the next venture, or

thinking of ways to get money with which to gamble)

Tolerance Needs to gamble with increasing amounts of money in order to achieve

the desired excitement

Withdrawal Is restless or irritable when attempting to cut down or stop gambling

Escape Gambles as a way of escaping from problems or relieving dysphoric

mood (e.g., feelings of helplessness, guilt, anxiety, or depression)

Chasing After losing money gambling, often returns another day in order to get

even (“chasing one’s losses”)

Lying Lies to family members, therapists, or others to conceal the extent of

involvement with gambling

Loss of control Has made repeated unsuccessful efforts to control, cut back, or stop

gambling

Illegal acts Has committed illegal acts (e.g., forgery, fraud, theft, or embezzlement)

to finance gambling

Risked significant

relationship

Has jeopardized or lost a significant relationship, job, or educational or

career opportunity because of gambling

Bailout Has relied on others to provide money to relieve a desperate financial

situation caused by gambling

Source: National Gambling Impact Study Commission final report, June 1999 and American

Psychiatric Association information.

Some researchers classify individuals with gambling problems who do not

meet the psychiatric criteria for a gambling disorder but who appear to

experience substantial difficulties related to gambling as either “problem”

or “potential pathological” gamblers or individuals with a Level-2 gambling

disorder.1

 

1

 Some researchers have noted that the use of various terms has contributed to confusion about what

constitutes Level-2 problem gambling.

Table III.1: Diagnostic Criteria for

Pathological Gambling
Appendix III

Estimated Prevalence of Pathological Gambling

Page 44 GAO/GGD-00-78 Impact of Gambling

Researchers estimate the prevalence of pathological gambling by

conducting surveys among populations or within clinical settings and using

screening instruments to identify individuals with gambling disorders. The

screening instruments are used to assign points based on answers to

gambling related questions, and individuals with scores at certain levels

are placed in various gambling disorder categories. As noted by NGISC,

prevalence rates are stated in terms of time frames, either “lifetime”

(prevalence rate of individuals who have at some time met the criteria for

a gambling disorder category) or “past-year” (prevalence rate of

individuals who met the criteria for a gambling disorder category in the

past year).2

NORC, an NGISC contractor, based its prevalence results on a 1998

national telephone survey supplemented with data from on-site interviews

with patrons of gambling establishments. In addition, in December 1997,

NGISC contracted the National Research Council of the National Academy

of Sciences (NRC) to conduct a review of available literature on the

prevalence and nature of problem and pathological gambling.

NGISC concluded that researchers have different opinions on the

definition and prevalence of pathological gambling and reported the

results of four studies—three recent studies and one published over 20

years ago. As shown in table III.2, on the basis of the three most recent

studies, the estimated percentage of adults in the United States classified

as lifetime pathological gamblers ranged from 1.2 percent to 1.6 percent,

and the percentage of lifetime problem gamblers ranged from 1.5 percent

to 3.9 percent.

 

2

 NGISC noted that for measuring prevalence in the general population, lifetime estimates may

overestimate prevalence because the estimates include people who may have recently gone into

recovery and no longer manifest any symptoms; and in contrast, past-year estimates may understate

prevalence because they do not include people who continue to manifest pathological gambling

behaviors, but have refrained from such behavior during the past year.
Appendix III

Estimated Prevalence of Pathological Gambling

Page 45 GAO/GGD-00-78 Impact of Gambling

Estimated percentage of adult pathological and problem gamblers

University of

Michigan ( 1976)

Harvard Metaanalysis (1997)

National

Research

Council(1998)a

National

Opinion

Research

Center(1998) a

Lifetime

pathological

gamblers 0.8 1.6 1.5 1.2

Past year

pathological

gamblers b 1.1 0.9 0.6

Lifetime

“problem”

gamblers 2.3 3.8 3.9 1.5

Past year

“problem”

gamblers b 2.8 2.0 0.7

a

Both the National Research Council of the National Academy of Sciences (NRC) and the National

Opinion Research Center at the University of Chicago (NORC) were contractors hired by NGISC to

conduct research on gambling behaviors.

b

NGISC did not include a past year estimate for the 1976 study.

Source: The National Gambling Impact Study Commission Final Report, June 1999.

NORC estimated that about 2.5 million adults are pathological gamblers

and another 3 million adults should be considered problem gamblers.

NORC further estimated that about 15 million adults are at risk of

becoming problem gamblers.

The NGISC report showed that in comparison to drug and alcohol

addictions, the percentage of gambling addiction in the adult population

was lower. As table III.3 shows, while the estimated prevalence of lifetime

drug and alcohol addiction in the adult population ranged from 6.2 percent

to 13.8 percent respectively, the estimated prevalence of lifetime adult

pathological gamblers was about 1.6 percent.

Type of disorder

Estimated lifetime percent

of adults

Estimated past year

percent of adults

Pathological gambling 1.6a 1.1

Drug abuse/dependence 6.2 2.5

Alcohol abuse/dependence 13.8 6.3

a

When making this comparison, NGISC elected to use prevalence rates derived from the 1997

Harvard Meta-analysis study titled: Estimating the Prevalence of Disordered Gambling Behavior in the

U. S. and Canada: A Meta-analysis, Harvard Medical School Division of Addictions.

Source: The National Gambling Impact Study Commission Final Report, June 1999.

Table III.2: Estimate of Adult

Pathological and Problem Gambling

Prevalence in the United States

Table III.3: Comparing the Estimated

Pathological Gambling Prevalence With

the Estimated Drug Abuse and Alcohol

Dependence in the United States
Appendix III

Estimated Prevalence of Pathological Gambling

Page 46 GAO/GGD-00-78 Impact of Gambling

NORC reported that pathological and problem gamblers are much more

likely than low-risk gamblers to have been troubled by mental or emotional

problems, including manic symptoms and depressive episodes and to have

received mental health care in the past year. NORC also concluded that

lifetime and past year at-risk, problem, and pathological gamblers are more

likely than low-risk or nongamblers to have ever been alcohol or drug

dependent and to have used illicit drugs in the past 12 months.

NGISC’s contractors also conducted surveys on the prevalence of

pathological gambling among youth in the United States. NORC estimated

that on the basis of a 1998 national survey of 534 U. S. youth ages 16 to 17

that the combined rate of pathological and problem gambling was 1.5

percent. NRC reported that on the basis of its review of 16 studies of U. S.

adolescent and college students from 1988 to 1997, the estimated

percentage of lifetime adolescent pathological gamblers ranged from 1.2

percent to 11.2 percent, with a median of 5.0 percent. The contractors

cautioned that the proportions reported in the adolescent and adult studies

are not always directly comparable because different instruments were

used to collect data.

The availability of gambling, specifically in casinos, appears to be

associated with increased problem and pathological gambling. NORC

reported that on the basis of its combined 1998 patron and national

telephone survey results (that were previously discussed), the availability

of a casino within 50 miles (versus 50 to 250 miles) is associated with

about double the prevalence of problem and pathological gambling.

According to the Council of Compulsive Gamblers of New Jersey, Inc., the

most recent study on the prevalence of pathological gamblers in New

Jersey was conducted in 1990. The study did not include a separate rate for

Atlantic City. It concluded that 1.2 percent of the New Jersey respondents

may be classified as probable pathological gamblers, 1.9 percent as

potential pathological gamblers, and 5.8 percent as problem gamblers. The

study noted that to identify pathological gambling, it used the criteria in

the fourth edition of APA’s Diagnostic and Statistical Manual (DSM-IV).3

In our attempt to compare the rates of alcohol and drug addiction in the

Atlantic City area with the pathological gambling rate, we reviewed data

 

3

 According to the 1990 study on the prevalence of pathological gambling for New Jersey residents age

15 and older, the nine criteria established by APA to identify gambling disorders were used; and a score

of four or more positive responses was deemed "probable pathological;" a score of two or three was

deemed as "potential pathological;" and because of the maladaptive behavior of each of the nine

criteria, a score of one positive response was deemed as "problem" gambling.
Appendix III

Estimated Prevalence of Pathological Gambling

Page 47 GAO/GGD-00-78 Impact of Gambling

from the New Jersey Department of Health. The most current available

information was 1995 data covering Atlantic County and New Jersey—

which again provided no specific rate for Atlantic City. As table III.4

shows, the estimated percentage of New Jersey residents suffering from

alcohol and drug addictions was higher than the estimated percentage of

pathological gamblers in New Jersey.

Type of disorder Estimated percent of New Jersey residents

Probable Pathological gamblinga 1.2

Drug abuse/dependenceb 3.9

Alcohol abuse/dependencec 7.7

a

Includes New Jersey residents age 15 and older.

b

Includes New Jersey residents age 12 and older.

c

Includes New Jersey residents age 18 and older.

Source: The 1.2 percentage relating to pathological gambling is derived from a report entitled

Pathological Gambling Prevalence in New Jersey 1990 Final Report for New Jersey Department of

Higher Education Research on Pathological Gambling: Epidemiological and Needs Assessment

Factors, November 1990. Both the 3.9 and 7.7 percentages relating to drug and alcohol abuse are

based on 1995 data provided by New Jersey Department of Health and Senior Services, Division of

Alcoholism, Drug Abuse, and Addiction Services.

The 1990 study on pathological gambling in New Jersey also noted that a

1987 study on the prevalence of adolescents’ gambling in New Jersey

reported a 5.7 percent probable pathological prevalence rate for New

Jersey teens.

On the basis of information provided by NJCCC, in 1999, 53,400 juveniles

(under the age of 21) were stopped and prevented from entering Atlantic

City casinos, 39,461 were escorted from the casinos, 337 were found

gambling in the casinos, and 270 were taken into custody by New Jersey

State Police.

Information provided by NJCCC showed that from 1983 to 1999, fines

imposed by NJCCC upon the casinos for underage gambling totaled about

$335,250. According to a NJCCC official, annually, the first $600,000 of all

casino fines are allocated to a fund for compulsive gambling treatment and

education, and the balance is placed in the casino revenue fund to be used

for senior citizens and the disabled in New Jersey.

Table III.4: Comparing the Estimated

Pathological Gambling Prevalence With

the Estimated Drug and Alcohol

Prevalence in New Jersey
Appendix IV

Incentives to Attract Gambling

Establishments

Page 48 GAO/GGD-00-78 Impact of Gambling

NGISC did not address whether communities offered incentives to attract

gambling establishments.

According to New Jersey and Atlantic City officials, casinos generally do

not receive subsidies or tax incentives from the government. In fact, New

Jersey officials pointed to taxes and levies uniquely imposed on casinos

that are not imposed on other businesses in the state. In addition to the

usual corporate, property, or other taxes imposed on businesses in New

Jersey, casinos must also pay an 8 percent gross revenue tax to the state1

and invest 1.25 percent of their gross revenue as obligation deposits in

CRDA.2

 (See appendix I for a description of CRDA.) Furthermore, New

Jersey laws specifically prohibit casinos from receiving 5-year property tax

exemptions or abatements that may be granted to other businesses, which

are located in areas in need of rehabilitation.3

Atlantic City casinos also pay for the costs of their own regulation. The

New Jersey Division of Gaming Enforcement and NJCCC are state

agencies charged with regulating casinos in Atlantic City. According to the

Gaming Enforcement Division, casino operators desiring to establish

themselves in Atlantic City must pay for the costs of background

investigations that the Gaming Enforcement Division performs on

prospective licensees.

Additionally, once a casino has been established, it must continue to pay

for the costs of the regulatory oversight of casino operations. For example,

the Division of Gaming Enforcement and the NJCCC do not receive annual

state appropriations for their oversight activities. The casinos pay the

operating expenses of the two agencies. For fiscal year 1998, the

Enforcement Division’s budget was about $32 million and NJCCC’s was

about $23 million, all of which was funded by state levies on casino

interests, on the basis of information provided by New Jersey officials.

As mentioned earlier, casinos are required to either pay 2.5 percent of their

gross revenue as a tax or invest a percentage of their gross revenue as

obligation deposits in CRDA, and CRDA was initially established to

reinvest these funds into Atlantic City and state community development

projects. State law has since authorized the use of some casino

reinvestment funds for projects that provide for the expansion of casino

 1

 N.J. Stat. Ann. 5:12-144a.

2

 N.J. Stat. Ann. 5:12-144.1.

3

 N.J. Stat. Ann. 40A:21-4.
Appendix IV

Incentives to Attract Gambling Establishments

Page 49 GAO/GGD-00-78 Impact of Gambling

hotel rooms in Atlantic City. Specifically, in 1993, New Jersey enacted a

law4

 authorizing CRDA to use $100 million of the funds for investment in

hotel development projects in Atlantic City undertaken by casinos, “which

result in the construction, reconstruction or rehabilitation of at least 200

hotel rooms” in Atlantic City. According to a state official, the funding was

designed to increase the rooms available in Atlantic City for the new

convention center. As a condition for receiving the funds, the casinos were

required to agree to reserve the rooms at certain times for convention

business. In 1996, the state authorized CRDA to invest another $75 million

of the casino reinvestment funds for further hotel room

construction/rehabilitation.5

 Under that law, funding provided to the

casinos was limited to 27 percent of the hotel rooms’ construction costs.

While state and local officials said casino owners are not provided with

free land for their casinos, casino reinvestment funds have been used to

purchase land for a casino. According to a CRDA official, CRDA used the

funds to pay $807,000 for land that it obtained under its eminent domain

authority (the forced sale of private property for public use) and

transferred it to a casino to use for hotel expansion. As previously

mentioned, the use of the reinvestment funds for hotel expansion was

authorized by state law.

Atlantic City recently used the eminent domain process to obtain land for

casino development purposes. According to an Atlantic City official, in

October 1999, the results of an eminent domain court decision favored

Atlantic City. City officials said that while Atlantic City has been granted

title to the land, the actual payment to the landowner for the land will be

made by the casino—not by Atlantic City.

Although state officials said casinos have not received subsidies from the

state, one recent development has been challenged as providing a state

subsidy for a casino. The state is funding two-thirds of the costs to

construct a tunnel pursuant to an agreement with a casino interest. A. C.

Holding Corporation, a Mirage Resorts Incorporated company (Mirage), is

planning to construct a casino in the Atlantic City marina district,

contingent upon New Jersey agreeing to construct a highway connecting

the marina district to the Atlantic City Expressway. In an agreement with

Mirage, the state, through the South Jersey Transportation Authority

(SJTA), has authorized the construction of the Atlantic City/Brigantine

 

4

 N.J. Stat. Ann. 5:12-173.8.

5

 N.J. Stat. Ann. 5:12-173.8b.
Appendix IV

Incentives to Attract Gambling Establishments

Page 50 GAO/GGD-00-78 Impact of Gambling

Connector. The connector, a little over 2 miles in length, would unite the

expressway with the bridge to Brigantine, NJ, thus providing a means of

travel to the marina without the need to drive through the city. The cost of

the connector is estimated to be $330 million. On the basis of information

provided by SJTA and CRDA, Mirage is to finance one-third of this cost —

$110 million—which is also to be used as a future credit to satisfy Mirage’s

requirement to deposit funds into the CRDA fund for community

reinvestment purposes. Of the remaining $220 million, $125 million is being

funded by SJTA in the form of bonds and $95 million is being funded by the

New Jersey Transportation Trust Fund Authority.

The connector has generated nine lawsuits from a contractor, a casino

operator, and residents of Atlantic City, partly because of the belief that

the tunnel is being erected solely for the benefit of Mirage. SJTA argues

that the tunnel would benefit both the residents of Brigantine, NJ, as well

as Mirage and the two casinos that are already in the marina district.

According to a New Jersey official, as of January 28, 2000, six of the nine

cases either had been dismissed, settled, or resolved. Five of the court

rulings have been in favor of SJTA, and one case resulted in a financial

settlement paid by the casino. The remaining three cases were still on

appeal.
Appendix V

Objectives, Background on the National

Gambling Impact Study Commission, and

Scope and Methodology

Page 51 GAO/GGD-00-78 Impact of Gambling

Our objectives were to determine the social and economic effects of

gambling on communities and families focusing on

(1) the economic effects of gambling, particularly on employment,

bankruptcy, and tax revenues and community investment;

(2) the social effects of gambling;

(3) the prevalence of pathological gambling; and

(4) whether communities offer incentives to attract gambling

establishments.

To accomplish objectives 1, 2, and 3, we examined the final reports from

the National Gambling Impact Study Commission and its contractors and

conducted a case study in Atlantic City to determine the social and

economic impacts of gambling. We selected Atlantic City for our case

study because it is a large destination gambling location that—compared

to Las Vegas, Nevada—recently established gambling, which enabled a

before and after review of the effects of gambling. Our work included a

review of information on gambling provided by federal, New Jersey,

Atlantic County, and Atlantic City agencies; the gambling industry; and

nonprofit organizations.

NGISC was established by the National Gambling Impact Study

Commission Act (NGISC Act).1

 The Act required the NGISC to conduct a

comprehensive study of the social and economic impacts of gambling in

the United States and report its findings, conclusions, and

recommendations to the President, Congress, state governors, and Native

American tribal governments. Pursuant to the Act, a nine-member

commission was formed, with three members (or commissioners)

appointed by the President, three by the Speaker of the House of

Representatives, and three by the Majority Leader of the Senate.

Guided by the NGISC Act and a research agenda adopted in October 1997

covering 42 specific policy questions, NGISC reported its findings on June

18, 1999. During its 2-year study, the NGISC held hearings and/or

conducted site visits in Atlantic City, NJ; Biloxi, MS; Boston, MA; Chicago,

IL; Las Vegas, NV; Ledyard, CT; New Orleans, LA; San Diego, CA; Tempe,

AZ; Virginia Beach, VA; and Washington, D.C. These visits included two

tribal casinos. The NGISC also heard testimony from federal and state

 

1

 P.L. 104-169, 110 Stat. 1482, Aug. 3, 1996, 18 U.S.C. 1955 note.

Objectives

NGISC Background
Appendix V

Objectives, Background on the National Gambling Impact Study Commission, and Scope and

Methodology

Page 52 GAO/GGD-00-78 Impact of Gambling

officials; community leaders; representatives of more than 50 Indian

nations; and experts on state lotteries, casinos, sports wagering, parimutuel, and other forms of gambling.

NGISC spent about $2.5 million in contracts with outside research

organizations to collect data. NGISC contracted with the National Opinion

Research Center at the University of Chicago (NORC) to conduct four

studies: (1) a database analysis of economic and social indicators in 100

communities (with and without gambling), from 1980 to 1996; (2) case

studies in 10 communities that were within a 50-mile radius of at least one

major casino; (3) two nationally representative telephone surveys of 2,417

adults and 534 youths, regarding gambling behavior and attitudes; and (4)

an exit survey of 530 adult patrons of 21 gambling facilities in eight states,

regarding problem and pathological gambling.

NGISC contracted with the National Research Council (NRC) to review

existing pathological gambling literature and contracted with Adam Rose

and Associates to review published economic impact studies on casino

gambling.

In addition, NGISC contracted with Clotfelter and Cook2

 to develop a

profile of typical lottery players, perform an analysis of lottery marketing

strategies, and review some broad policy questions regarding lotteries.

Finally, NGISC contracted with the Advisory Commission on

Intergovernmental Relations (ACIR) to conduct a review and catalogue the

laws and regulations on commercial gambling and gambling on Indian

reservations.

NGISC’s report contained a total of 76 recommendations to the President,

Congress, the federal government, state governments, tribal governments,

gambling regulators, and gambling operators. In summary, NGISC’s

research covered the following topics: regulation of gambling by federal,

state, local, and Native American governments; an estimation of the

prevalence and costs of pathological and problem gambling; the economic

and social impacts of gambling on individuals, families and communities;

and an assessment of the interstate and international effects of gambling

by electronic means, including through the Internet. According to a

General Services Administration official, NGISC ceased operation in

August 1999.

 

2

 Charles Clotfelter and Phillip Cook are Duke University professors who have conducted research

studies on state lotteries.
Appendix V

Objectives, Background on the National Gambling Impact Study Commission, and Scope and

Methodology

Page 53 GAO/GGD-00-78 Impact of Gambling

We examined NGISC’s final report, its contractors’ research reports, and

testimony and written statements submitted to NGISC. We met with the

Commission’s Executive Director and Research Director and attended

several Commission meetings in 1999.

Our review of NGISC’s work focused on the conclusions stated in its final

report and the reports of its research contractors. We did not replicate its

work in an effort to verify its conclusions. We also did not attempt to

independently verify the results or methodologies of any of the studies

cited in NGISC’s report.

In conducting the Atlantic City case study, we interviewed officials in 26

government agencies and community and private industry organizations.

We judgmentally selected agencies whose missions involved the social and

economic issues addressed in the request letter. Interviewees included

New Jersey, Atlantic County, and Atlantic City personnel involved in

social, economic, revenue collection, law enforcement, and regulatory

efforts in the area as well as officials representing unions, casinos, the

banking industry, and nonprofit organizations. Included in the 26 agencies

were nine government and community organizations providing social

services to Atlantic City residents. We used data collection instruments

that contained both general questions that we asked each interviewee and

specific questions pertaining to the subject area of which the interviewee

was involved.

In addition, we analyzed social and economic statistics using data from the

FBI’s UCR and other federal agencies and New Jersey, Atlantic County,

and Atlantic City agencies. For example, we compared the crime rates in

the Atlantic City area before and after the introduction of legalized casino

gambling.3

 We then compared these data with crime trends in New Jersey

and in the United States during the same time period. We calculated crime

rates with and without adjustments for visitors to Atlantic City. New

Jersey and local government officials emphasized that any crime analysis

should include in the population the number of visitors Atlantic City

receives daily. We also asked Atlantic City and Atlantic County law

enforcement officials about their perception of a relationship between

crime and casino gambling.

 3

 We used the FBI’s UCR to calculate the rate of crime in Atlantic City, New Jersey, and the United

States. The UCR includes reported incidences of violent crime (murder, forcible rape, robbery, and

aggravated assault) and property crimes (burglary, larceny-theft, and motor vehicle theft).

Scope and

Methodology
Appendix V

Objectives, Background on the National Gambling Impact Study Commission, and Scope and

Methodology

Page 54 GAO/GGD-00-78 Impact of Gambling

In some cases, data were not available specifically for Atlantic City. In

such cases, we used the data covering the closest geographic area to

Atlantic City. In all cases, this was Atlantic County—the county in which

Atlantic City is located. Census Bureau data show that since 1970, Atlantic

City has been the largest city in Atlantic County. For the last 3 census

years, 1970, 1980, and 1990, Atlantic City’s residents represented about 27,

21, and 17 percent of Atlantic County’s population respectively. While

historical national and state data were available on a yearly basis for most

of the social indicators we reviewed, comparable data for Atlantic City or

Atlantic County were available for census years only—1970, 1980, and

1990, and in those cases, we analyzed data for only those years.

As noted by NGISC, the amount of high quality and relevant research on

the social effects of gambling is extremely limited. Both NGISC’s and our

work in Atlantic City regarding the social effects of gambling relied heavily

on testimonial evidence. Added to the lack of information was the fact that

individuals who suffer from pathological gambling tend to suffer from

other addictive disorders, and this situation, called comorbidity, further

complicates the process of attributing negative effects to any one cause.

Our response to objective 4, on whether communities offer incentives to

attract gambling establishments, is based solely on our case-study work in

Atlantic City. The issue of subsidies and incentives provided to the

gambling industry was not covered by NGISC. To accomplish objective 4,

we reviewed state and local legislation and regulations related to Atlantic

City casinos. We also interviewed pertinent state and local officials,

including those of New Jersey’s Casino Control Commission and the

Division of Gaming Enforcement of the Department of Law and Public

Safety. As you requested, we limited our inquiry in Atlantic City to

legalized casino gambling.

We did our review between May 1999 and December 1999 in accordance

with generally accepted government auditing standards. We did our work

in Atlantic City, and Trenton, NJ and Washington, D.C. We also attended

one NGISC hearing held in Virginia Beach, VA. We did not independently

verify the results and methodologies of gambling prevalence reports or the

accuracy of data we obtained from various national, New Jersey, Atlantic

County, and Atlantic City databases, such as the FBI’s UCR and New

Jersey’s Department of Labor employment information.
Appendix V

Objectives, Background on the National Gambling Impact Study Commission, and Scope and

Methodology

Page 55 GAO/GGD-00-78 Impact of Gambling

We contacted the following government agencies and community and

private industry organizations in New Jersey:

• Office of the Mayor, Atlantic City, NJ;

• Office of the City Council, Atlantic City, NJ;

• Department of Health & Human Services, Atlantic City, NJ;

• Department of Revenue and Finance, Atlantic City, NJ;

• Police Department, Atlantic City, NJ;

• Department of Planning and Development, Atlantic City, NJ;

• Greater Atlantic City Chamber of Commerce;

• Office of the County Prosecutor, Atlantic County, NJ;

• Board of Taxation, Atlantic County, NJ;

• Department of Regional Planning and Development, Atlantic County, NJ;

• Department of Family and Community Development, Atlantic County, NJ;

• Atlantic County Women’s Center, Northfield, NJ;

• New Jersey Casino Control Commission;

• New Jersey Division of Gaming Enforcement;

• New Jersey Office of the State Treasurer, Management and Budget Office;

• New Jersey Department of Labor/Atlantic City Employment Services;

• New Jersey Department of Health and Senior Services;

• South Jersey Transportation Authority;

• The Casino Reinvestment Development Authority, Atlantic City, NJ ;

• Former New Jersey State Legislator, Atlantic City, NJ;

• The Council of Compulsive Gambling of NJ, Inc.;

• Atlantic City Rescue Mission;

• Family Service Association, Absecon, NJ;

• AlantiCare Behavioral Health, Hammonton, NJ;

• Clark Institute, Brigantine, NJ;

• Community Presbyterian Church of

Brigantine, NJ;

• Sun National Bank, Atlantic City, NJ;

• Bally’s Park Place, A Hilton Casino Resort, Atlantic City, NJ; and

• Hotel and Restaurant Workers Union, Local 54, Atlantic City, NJ.
Appendix VI

Comments From the New Jersey Casino

Control Commission

Page 56 GAO/GGD-00-78 Impact of Gambling
Appendix VI

Comments From the New Jersey Casino Control Commission

Page 57 GAO/GGD-00-78 Impact of Gambling
Appendix VII

Comments From the Former Chair of the

Former National Gambling Impact Study

Commission

Page 58 GAO/GGD-00-78 Impact of Gambling

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.
Appendix VII

Comments From the Former Chair of the Former National Gambling Impact Study

Commission

Page 59 GAO/GGD-00-78 Impact of Gambling

See comment 2.

See comment 1.
Appendix VII

Comments From the Former Chair of the Former National Gambling Impact Study

Commission

Page 60 GAO/GGD-00-78 Impact of Gambling

See comment 5.

See comment 4.

See comment 3.
Appendix VII

Comments From the Former Chair of the Former National Gambling Impact Study

Commission

Page 61 GAO/GGD-00-78 Impact of Gambling

See comment 7.

See comment 8.

See comment 6.
Appendix VII

Comments From the Former Chair of the Former National Gambling Impact Study

Commission

Page 62 GAO/GGD-00-78 Impact of Gambling
Appendix VII

Comments From the Former Chair of the Former National Gambling Impact Study

Commission

Page 63 GAO/GGD-00-78 Impact of Gambling

The following are GAO’s comments on a letter dated February 14, 2000,

from the former Chair of NGISC in which she noted several areas in our

draft report where she believed that we should add information to provide

additional perspective and context.

1. The Chair said our draft report did not appear to include comments or

conversations between us and expert researchers originally contracted by

NGISC that would provide needed background and analysis to the report.

Our scope, in agreement with the requester’s office, was to examine the

contents of NGISC’s and its contractors final reports and summarize that

work as part of our study. Throughout our report, we reported relevant

information from both NGISC and its contractors. For example, regarding

the prevalence of pathological gambling, we reported that the National

Opinion Research Center (NORC), a NGISC contractor, found that the

availability of a casino within 50 miles (versus 50 to 250 miles) is

associated with about double the prevalence of problem and pathological

gambling. As another example, we noted that Clotfelter and Cook, NGISC

contractors, reported that in 1997, total revenues from the 38 state lotteries

amounted to about 2.2 percent of the states’ own-source general revenue

compared with 25 percent for state general sales taxes and 25 percent for

state income taxes. We did not, however, include discussions with NGISC’s

researchers in the scope of our review.

2. The Chair said that our draft report did not provide adequate context,

explanation, or discussion of the significant data concerning gambler types

other than pathological gamblers. The Chair further said the NORC report

included percentages of lifetime and past-year gamblers by mental health,

bankruptcy, crime, and other problems for several categories other than

pathological gamblers and that this information is relevant to any

comparative assessment of pathological gambling and social problems.

As the Chair said, our objective was to report on the prevalence of

pathological gambling. However, our report also includes available

information on the prevalence of problem gamblers (those individuals who

have gambling problems but do not meet the psychiatric criteria for

pathological gambling). Our report also includes discussions on NORC’s

findings that (1) a higher percentage of lifetime pathological gamblers

reported filing bankruptcy than low-risk gamblers and nongamblers and

(2) pathological gamblers had higher arrest and imprisonment rates than

nonpathological gamblers. In response to the Chair’s comments, we added

text to the letter and included a discussion in appendix III on NORC’s

finding that lifetime pathological and problem gamblers are more likely

than low-risk gamblers to have been troubled by mental or emotional

GAO Comments
Appendix VII

Comments From the Former Chair of the Former National Gambling Impact Study

Commission

Page 64 GAO/GGD-00-78 Impact of Gambling

disorders. We also noted that NORC reported that lifetime pathological,

problem, and at-risk gamblers are more likely than low-risk or

nongamblers to have been alcohol or drug dependent. We also included

NORC’s estimate that 15 million adults are at risk of becoming problem

gamblers.

3. The Chair said that our draft report did not fully mention the lifetime

cost of problem and pathological gambling. The Chair emphasized that

both annual and lifetime costs have significant policy implications for

policymakers and taxpayers. Our report included NGISC’s estimate of the

annual cost to society for a pathological and a problem gambler. As

suggested by the Chair, we included in appendix II of the report NORC’s

estimated lifetime cost per pathological and problem gambler and NORC’s

overall estimated annual cost to society for problem and pathological

gambling.

4. The Chair said that our draft report should use both percentages of the

population and actual numbers when discussing the number of problem

and pathological gamblers. We modified appendix III of this report to

include NORC’s estimated number of pathological and problem gamblers.

5. The Chair said that our draft report did not list the officials, agencies,

and experts whom we contacted, and thus the report is subject to being

labeled as biased. As is our policy, we conducted this review in an

objective manner, attempting to obtain data and views from various

available sources and sides of the issue so we could present a balanced

and fair report of our results. Generally, we do not however, list the names

of officials we contact in our reports. However, we modified this report in

the Objectives, Scope, and Methodology section in appendix V to include

the names of the government agencies and community and private

industry organizations we contacted in New Jersey.

6. The Chair said our draft report should include information on

adolescent gambling in Atlantic City in terms of the number of youngsters

removed from casinos, the number taken into custody, the fines imposed

on casinos and allocation of revenues collected from these and related

fines, and a detailed analysis of adolescent gambling. The Chair said

NGISC received testimony from the Atlantic City Police Department that

unattended juveniles in casinos were a dilemma and an issue of utmost

importance.

The Atlantic City Police Department did not mention the juvenile issue in

our contacts with the Department. However, we modified the report in
Appendix VII

Comments From the Former Chair of the Former National Gambling Impact Study

Commission

Page 65 GAO/GGD-00-78 Impact of Gambling

appendix III to include 1999 information provided by NJCCC on the

number of juveniles (under the age of 21) stopped and prevented from

entering Atlantic City casinos, removed from the casinos, found gambling

in the casinos, and taken into custody. We also included data on the fines

imposed on casinos because of juveniles found gambling there. Regarding

the Chair’s suggestion that we provide a detailed analysis of adolescent

gambling, our report includes some information on this topic in New

Jersey, but we did not do a detailed review of adolescent gambling.

7. The Chair said that while our draft report referenced three studies on

homelessness that were cited in the NGISC report, it omitted that NGISC

received testimony on the homelessness in Atlantic City and suggested

that we report information that the Atlantic City Rescue Mission provided

to NGISC. As the Chair stated, we referenced three studies on

homelessness in our report including the Atlantic City Rescue Mission

study. We modified our report in appendix II to show that the Mission’s

study was one of the three studies on homelessness.

8. The Chair said our draft report section on the economic impact of

casinos on Atlantic City’s noncasino restaurants differed from information

received by NGISC. The Chair said that our 1996 data did not reconcile

with 1998 data NGISC received. The 1998 data cited by the Chair was

provided to NGISC in testimony and did not include casino food and

beverage establishments. The 1996 data we used was the most readily

available concrete data we found and included both casino and noncasino

establishments. According to NJCCC, data on the number of casino

restaurants were not readily available. We added a footnote in appendix I

of our report to explain why our numbers and the numbers cited by NGISC

differed.
Appendix VIII

GAO Contacts and Staff Acknowledgments

Page 66 GAO/GGD-00-78 Impact of Gambling

Bernard Ungar, (202) 512-8387

John Baldwin, (202) 512-8387

In addition to those named above, Bradley Dubbs, Laurie Ekstrand, Lynn

Gibson, V. Bruce Goddard, Lucy Hall, Michael Horton, Yesook Merrill, and

Michelle Sager made key contributions to this report.

GAO Contacts

Acknowledgments
Page 67 GAO/GGD-00-78 Impact of Gambling
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