In the fiscal year 2005 Executive Budget, Governor George Pataki proposed to dedicate receipts from video lottery terminals to finance sound basic education initiatives. The Executive Budget projects receipts of $204 million in fiscal year 2005, growing to $2 billion annually in five years. The proposed eventual $2 billion annually is in addition to approximately $1.9 billion annually the State already collects from other types of gambling. The proposal raises two questions:

• Can gambling activities realistically be expected to yield an additional $2 billion or more in State revenues in coming years?
• If gambling can yield substantial additional revenues, should this source be given priority as a way to raise money for education?

While ample demand for gambling suggests that expanded gambling in the state could raise a significant amount of revenue, other aspects of gambling make it problematic. First, the long-run sustainability of gambling revenues is questionable, especially given the proliferation of gambling venues regionally and nationally. In the case of VLTs, whose revenues the Governor is proposing to earmark for education purposes, revenue projections rest on a number of assumptions that may not in fact materialize, suggesting that at best VLTs could be a source of only partial funding for education initiatives.

Second, the incidence of gambling is regressive. The extent to which this is so varies by type of gambling. Casino gambling is less regressive than the lottery; VLTs likely are more regressive than casinos, but less regressive than the lottery.

Third, gambling carries with it social costs. Problem and pathological gambling increases as gambling opportunities are expanded. These increases bring higher crime rates, illness, and social pathology, all of which impose a cost on society. These costs already reach $1.1 billion per year in New York State. They could rise with expanded VLT and casino gambling opportunities, although regulatory actions can be taken to mitigate some social costs.