Although we have criticized the manner in which our political leaders have embraced gambling as Louisiana's new fiscal panacea, we do not oppose gambling on moral grounds. Indeed, this newspaper endorsed the concept of a single land-based casino in 1984. Rather, our gripe is that our governors and lawmakers have shown a total lack of foresight in establishing and regulating the gaming industry. The just-ended special legislative session is a case in point. Once again, Gov. Mike Foster resorted to an end-run to get what he wanted.
Harrah's new contract, which Foster supported, has several troubling loopholes. First and foremost, it purports to raise the casino's tax rate from 18.5 percent to 21.5 percent -- something only lawmakers can do under Louisiana's constitution, and only after a two-thirds vote in each house.
The tax end-around reflects Foster's inability to muster a two-thirds legislative majority for the tax. Instead, he "hid" the tax increase in Harrah's new contract. The problem now is that Harrah's could challenge the higher rate in court and, under the contract's terms, revert to the original 18.5 percent tax rate -- but still keep its valuable new hotel and restaurant concessions.
That's not all.
Harrah's and the local hotel and restaurant associations reached an unofficial compromise to give the casino 150 more restaurant seats and 450 new hotel rooms. Hospitality industry officials ultimately concluded that the market could absorb such as expansion. However, the new contract doesn't hold Harrah's to those limitations. It authorizes hotel and restaurant operations "to the extent permitted by state law." Lawmakers could grant additional concessions later.
There is another catch: if Harrah's pays its taxes and earns at least $350 million a year for two years, its parent company, Harrah's Entertainment Inc., no longer has to guarantee minimum payments to Louisiana. "Big Harrah's" has had to bail out the local casino in the past. If Harrah's enjoys a spurt and then falters, an important safety net will be gone, and Louisiana could once again be left holding the bag.
We don't blame Harrah's for negotiating a good deal for itself. That's what companies are supposed to do. However, the uncertainty of Harrah's future success means that the promise of raising sufficient funds to pay for teacher raises is fleeting. Relying on revenues that might not materialize is nothing new; in fact, it's part of a pattern of fiscal irresponsibility by Gov. Foster and his allies.
Foster's plan to finance teacher raises with gambling revenues also assumes that $54 million will come from a riverboat casino tax hike. Those revenues likewise are a big question mark. House Bill 2 mandates immediate dockside gaming at floating casinos statewide in exchange for a 3-percent tax hike. The full tax hike will take effect immediately at most boats, and will be phased in at Bally's in New Orleans and at the Shreveport-Bossier boats. The problem with this idea is not dockside gaming, but the assumption that letting boats remain dockside all the time will generate 17.25 percent more money immediately. Most boats rarely leave the docks now, and Louisiana will soon see a significant expansion of gambling. The state Gaming Control Board voted just last week to add 1,700 slots at the Louisiana Downs racetrack in Bossier City.
This is no way to pay for teacher pay raises. At their core, Foster's proposals and lawmakers' actions reflect Louisiana's chronic fiscal short-sightedness. Their rosy projections could all come crashing down, and if they do, you can bet that Foster will ask lawmakers to raise our taxes -- again.
We initially supported the idea of a land-based casino in New Orleans because we believed that such an entity would strengthen the local economy. That could still happen, but only if gambling regulation reflects careful, honest planning and not old-time Louisiana politics. By tying Harrah's new contract and dockside casinos to a "motherhood" issue such as teacher pay, Foster (aided by schoolworker unions) peddled the notion that teacher pay hikes depend on gambling.
Who does he think he's kidding?
The governor and lawmakers know full well that raising teachers' salaries does not require giving Harrah's a tax break or letting riverboats remain dockside. Paying teachers more requires nothing more than putting them first in the budget. That's what 49 other states do. If Harrah's and the riverboats deserve concessions, the governor and lawmakers should grant them on their own merits -- not on the backs of teachers, and not saddled with promises that may be impossible to keep.