“Casinos, crime, and community costs”

by Clara NiiSka

Seven gambling bills are pending in the Minnesota Legislature, including Sen. Doug Johnson’s SF 1841 to establish a Twin Cities casino operated by the Minnesota State Lottery and splitting the profits with Minnesota Indian tribes.

The ostensible purpose of the various gambling bills is to raise money.

Government-owned gambling enterprises, whether Indian casinos or a state-owned casino, seem like a good way for the government to raise money. No new taxes, just “vending machines” (slot machines) selling the hope of “winning big” and pouring revenue into state and tribal coffers. “If you don’t want to spend money on gambling, don’t gamble,” we are told. Voluntary contributions subsidizing the government is a wonderful idea … isn’t it?

The National Gambling Impact Study Commission (NIGSC) was established by Congress in 1996, and released its official reports three years later. NIGSC’s website, last revised in August 1999, is still online at http://www.ngisc.gov. NIGSC recommended a national moratorium of the expansion of gambling, and more study of the costs, benefits and effects of gambling.

There have been subsequent studies of the effects of gambling, including articles published last summer in the academic journal Managerial and Decision Economics, which devoted a full issue to consideration of gambling and its consequences.

The academic paper, “Business Profitability versus Social Profitability: Evaluating Industries with Externalities, the Case of Casinos,” was co-authored by economists Earl L. Grinols and David B. Mustard. Using an econometric cost-benefit analysis, these economists found that, “the costs of casinos are at least 1.9 times greater than the benefits.” In other words, a dollar worth of casino profits—and other social benefits—costs taxpayers at least $1.90: in “cost-creating activities such as crime, suicide, and bankruptcy,” and in the expensive social problems engendered by ‘problem and pathological’ gamblers.

Casinos create crime

In an earlier paper, “Casinos, Crime, and Community Costs,” Grinols, Mustard, and their fellow economist Cynthia Hunt Dilley concluded that, “casinos increase crime in their host counties and that crime spills over into neighboring counties to increase crime in border areas.”

Grinols, Mustard, and Dilley analyzed county crime rates for every U.S. county between 1977 and 1996. “Casinos create crime, rather than attract[ing] it from elsewhere,” they found. In 1996, the last year for which statistics were available at the time of their study, “casinos accounted for 10.3 percent of violent crime, and 7.7 percent of property crime in casino counties.” Auto theft is the crime that increased the most as a result of casinos; robberies increased by 20%, despite increased expenditures by law enforcement agencies after the casinos opened. The data shows a time-lag between casino opening and higher crime rates, which typically begin a few years after casinos open and increase over time. The researchers theorized that much of that time-lag reflected the addictive processes of ‘problem and pathological gamblers,’ who “according to clinical research, take two or three years to exhaust alternative resources before they commit crime.”

“Casinos, Crime, and Community Costs” is posted online at http://www.cba.uiuc.edu/grinols/Scribblings/Casinos-Crime-15SEP00.pdf.

Press/ON contacted Earl Grinols and David Mustard, and asked them about their research. Both economists said that their published assessments of the costs of casinos were “conservative,” and that inclusion of other less-measurable factors would establish that the social and other costs of casinos are even higher.

“A lot of social costs are hidden, not easily observed,” said Mustard. Some crimes in particular are harder to measure accurately, for example prostitution, he said.

Grinols put it bluntly to Press/ON. “We found that casinos are making crime.” He explained that casinos create problems for pathological gamblers, and also that the “concentration of people with money is an ‘attractive nuisance’ to criminal activities … Also, it might be that casinos change the social fabric – the ‘get rich quick mentality’.”

He also pointed out that “corruption is a statistical certainty” in the gambling industry, and that problems of corruption are exacerbated with respect to Indian casinos because of the jurisdictional ambiguities in which they are entangled.

This writer mentioned Press/ON’s involvement in legal action to obtain access to casino audits, and commented on the apparently cozy relationship between the Minnesota Department of Public Safety (DPS) and the Indian casinos DPS regulates. “That’s typical,” Grinols said. “The regulatory agency is often captured by the industry they are supposed to regulate.” He also commented that in at least one state, “the gambling industry ‘owns’ the legislature.”

Press/ON asked the economists about reactions to their research. “The heat is still going on,” Grinols said. “The gambling industry has a habit of addressing research that harms their image,” and sponsoring “shatter-research” to counter it, as well as challenging the credibility of researchers who question the benefits of gambling enterprises. Grinols also mentioned that gambling interests responded to the symposium issue of Managerial and Decision Economics by encouraging authors of some of the articles cited or mentioned in that academic journal to go to the journal editors and demand that a “follow-up” issue be published to present the more positive aspects of gambling.

Casino-related crime in Minnesota?

In their paper, “Casinos, Crime, and Community Costs,” economists Grinols, Mustard and Dilley present compelling documentation that casinos do, in fact, increase crime. Their published analysis draws on nationwide statistics. Have crime rates in Minnesota followed the same pattern? Have Minnesota’s Indian casinos fueled a crime wave?

The Minnesota State Planning Agency has posted state crime and arrest statistics for the years 1985 - 1999 at http://www.mnplan.state.mn.us/cj/cjc-data.html.

Press/ON averaged the county crime figures for 1985-1988. Using that average as a pre-casino “base rate,” we compared the county-by-county base rate with statewide crime figures and mapped the annual changes in reported crimes. The results are published on page 8 of this issue.

Minnesota’s increases in crime—both in counties with casinos and in neighboring “collar counties”—follow a pattern strikingly similar to that found by Grinols, Mustard and Dilley in their nationwide study: after a time lag, crime rose and in some instances crime rates soared.

Press/ON discussed the results of our analysis with two criminal justice officials who have previous experience with the gambling industry. Both confirmed that the statistics fit with what they had observed ‘in the field,’ and added their own off-the-record anecdotal observations.

Press/ON asked about the dynamics of the interrelationships between casinos and increased crime. Do problem and pathological gamblers account for all of the problem, we wondered, or does the ‘time lag’ followed by sharply increased crime rates also reflect the development of a criminal infrastructure associated with casinos? One of the officials detailed his observations of the casino-related drug trade in support of our criminal-infrastructure theory. The other less directly confirmed the connections between casinos and homegrown criminal organization, but stressed the sometime spectacular bank robberies, embezzlements, and other crimes committed by compulsive gamblers.

Press/ON showed our crime rate maps to one of the official sources. He said, “Wow, they are just shocking. It says it all.”

Where from here?

Press/ON’s survey of Minnesota crime figures and their relationship to the state’s Indian casinos is incomplete. State crime statistics do not include on-reservation crimes committed under federal jurisdiction, nor do they include those crimes under the jurisdiction of tribal law enforcement. At press time we had not yet received the crime statistics we requested from the Department of the Interior and from the F.B.I.

It is clear, however, that there has been a significant increase in crime correlated with casinos. And, as David Mustard told Press/ON, it is also clear that “externalities”—the costs associated with casinos—must be considered along with the benefits which gambling proponents claim come from government-operated gambling enterprises. “There are more things we need to find out … to get people, neutral parties, to think about seriously,” he said.

Earl Grinols summed it up, “Gambling is a loser from society’s point of view. … It’s what my research leads me to. … The costs exceed the benefits, 1.9 to 1, and that’s a conservative estimate. … Gambling carries with it social costs” that outweigh the benefits. “I think that most people, when they hear that casinos are owned by Indians, say, ‘that is great’,” it helps compensate for the injustices of the past and provides badly-needed money for impoverished Indian tribes. But, he said, “we need to recognize that this vehicle is harmful to society as a whole.” We need to look at the whole picture.