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Government in the Gambling Business

State governments have a history of turning to gambling revenues when their budgets get blasted. Now Illinois Governor Blagojevich is considering whether to the state should run its own casino.

That there is monopoly rent in casino ownership is obvious; bids of $300 million for a mere license to operate testify to that. Illinois currently rakes in significant revenues from existing casinos. Apparently Gov. Blagojevich believes additional profits for the state can be realized through ownership. For this belief to be correct, either license revenue is lower than it could be, tax revenues are lower than they could be, or the state of Illinois can run a casino more efficiently than Harrah's.

Licenses are granted though competitive bidding, so license fees should soak up monopoly rent, given casino taxes. That the state of Illinois has special expertise which Harrah's and other casino companies lack is risible. If Blagojevich's idea has any merit, it's a substitute for raising casino taxes, which may be difficult given prior agreements between the state and casino operators.