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Measuring The Impact Of Casino Proceeds On Local Per Pupil Expenditures In Mississippi

 

 

Rodney E. Stanley

Institute of Government

Tennessee State University

330 10th Avenue North

Nashville, TN 37203

615-963-7249

Rstanley34@hotmail.com

 

[Forthcoming Publication in the International Journal of Public Administration]

 

 

 

 

 

 

 

Abstract

 

The Mississippi Legislature adopted casino gaming in 1990 for the purpose of curing financial ills that have traditionally plagued the Magnolia state.  Local policymakers were given the opportunity to tax the casino industry at 3.2 percent, with an additional .8 percent if these local government stakeholders deemed it necessary to extract additional supplemental revenue from the casino industry.  One program designated as a beneficiary of this revenue-generating source was education.  The conclusions reached by this research suggests that four school districts receiving casino proceeds for education are significantly benefiting from this supplemental source of revenue.


INTRODUCTION

During the 1980s, Mississippi was faced with severe budgetary hardships, due to the collapse of the oil industry.  Operating a mere $2 billion budget, policymakers in Mississippi were forced to slash many governmental programs and reduce the number of many other services.  The one program that received the largest cut was education. Because of Mississippi’s lag in per pupil expenditures compared to other states, policymakers viewed additional supplemental revenue from casinos as a possible panacea for alleviating this funding problem (Oliver, 1995).  For the practitioner working in education, this study may assist them in determining if gaming is a possible source of supplemental revenue for education because no other study examines the relationship between casino revenues and per pupil education expenditures.  Therefore, the following hypothesis is tested by this research to fill the gap in the literature.

H1: School districts receiving casino revenue tend to spend the same on per pupil education expenses, compared to matching school districts without casinos.

Literature Review

State Supported Gaming In America

As the demand for social intervention programs increased, governmental officials used their ingenuity in generating supplemental revenue to assist in the cost of running government. “Games of chance,” in one variation or another were the revenue generating mechanisms chosen by many state governments as their “economic savior” (Rivenbark and Rounsaville, 1995: p.3).  One of the primary arguments used to rally support for legalized gambling is spending more revenue on per pupil expenditures.  In theory, these government officials asked the populace to invest in the future of their community and country by using gambling dollars to educate the younger generations. 

State Operated Lotteries

            Lotteries have proven to be appealing mechanisms for producing supplemental government revenue because they are considered a voluntary tax: individuals pay the tax because they want to, instead of having to pay the tax because the government demands it (Mikesell, 2001).  The voluntary aspects of lotteries are extremely appealing to governors and legislators because resources for social intervention programs are generated without unpopular tax increases.  In other words, legalized gambling intends to raise revenues without increasing the tax burdens of the lower class (Mikesell, 1989).     

            The most popular gambling device today is by far the lottery (Mikesell and Zorn, 1986).  The allure of lotteries and other forms of gambling as a source of revenue enhancement for state and local governments ascribes amply to the continued emergence of legalized gambling over the past two decades.  Currently, thirty-eight states and the District of Columbia operate lotteries (National Gambling Impact Study, 2000).  From 1982 to 1990, expenditures on legalized gaming increased at almost two times the rate of income; and by 1992, revenues from state sanctioned gambling operations averaged approximately 30 billion dollars a year (Gross, 1998). 

            While lotteries are touted by many as a means of increasing funds for needy state programs, opponents contend that lotteries are not the economic savior that policymakers and voters originally thought (Jones and Amalfitano, 1995).   Miller and Pierce (1997) examined the financial aspects of a lottery’s short-term and long-term effects.  They found that state-sponsored lotteries increased spending on education per capita during the early years of the lottery, but as time passed, these same states witnessed an overall decrease in spending for education. 

            The second major problem with lotteries funding education is the idea of fungibility.  Spindler (1995) reinforces the notion of fungibility in reference to lottery dollars for education.  Spindler examines the lotteries of New York, New Hampshire, Ohio, Michigan, California, and Montana to determine their impact on educational revenue enhancement of public education expenditures.  Spindler attributes the issue of fungibility to the “politics of the budgetary process” because education expenditures are highly visible to the public, and are plagued with fiscal and political restraints (p. 60).  Spindler contends that in states where lottery revenues are earmarked for education, revenues actually substitute for general fund expenditures.  Hence, Spindler concludes by postulating that state lotteries “are robbing Peter to pay Paul” (p.61).   On a similar note as Spindler, Fields (1996) points out that even though Florida’s educational system has received billions of dollars from lottery proceeds, the state legislature has taken non-lottery monies previously designated for education, and used them for funding other state commitments.  Public education’s share of the state budget in Florida has decreased more than 5 percent over the past decade since the lottery began in 1986 (National Education Association, 1997). 

A third major problem with lotteries occurs when the proceeds are used to finance a tax cut.  Lotteries have proven to be appealing mechanisms for producing revenue because they are considered a voluntary tax. The voluntary aspects of lotteries are extremely appealing to governors and legislators because resources for social intervention programs are generated without unpopular tax increases (Rubin, 1993). 

This is quite appealing to governors and legislators in their reelection bids for office.  Rodgers and Stuart (1995) stipulate that “the revival of lotteries,” despite immoral concerns and “negative distributional effects,” has occurred because of the belief that lotteries, instead of other tax instruments, raise additional revenue by generating smaller efficiency losses than other taxes (p. 244).  In turn, political leaders will endorse tax cuts and replace the lost revenue with lottery dollars (Jones and Amalfitano, 1994). 

Casino Gaming

A second type of gambling device that is receiving attention among governmental policymakers as a supplemental source of revenue is casino gaming.  Since the precursor to casino gaming is state-sponsored lotteries, and in many states lotteries were adopted to assist in funding education, casinos must also be evaluated to determine if they are having the financial impacts on education as originally envisioned by policymakers. 

            According to Franckiewicz (1993), ten states have supported casino gaming as a supplemental revenue-generating device.  They are: Colorado, Illinois, Iowa, Louisiana, Mississippi, Missouri, Montana, Nevada, New Jersey, and South Dakota.  Recently, the states of Michigan and Indiana have also adopted casino gambling bringing the total of twelve states utilizing this revenue generating device to pay the expense of operating government (National Gambling Impact Study, 2000).  Recent scholarly endeavors measuring the economic impacts of casino gaming include: economic development (Oliver, 1995) marketing and tourism (Denise von Herrman, Ingram, and Smith, 2000) municipal revenues (Clynch and Rivenbark, 1995; Clynch and Kaatz, 1999) and taxation (Rivenbark and Rounsville, 1995; Rivenbark, 1997). 

The Casino Industry and Economic Development In Mississippi

Oliver (1995) provides the academic community with a detailed description of how casinos were adopted in Harrison County, Mississippi for enhancing economic revitalization. The revitalization of Mississippi occurred in 1990 with the passage of the Mississippi Gaming Control Act, which authorized casino gambling in local communities that chose to adopt this revenue- generating device.  During the 1980s, Mississippi was faced with severe budgetary hardships.  Mississippi was operating on a budget of around $2 billion, which was not sufficient enough to cover all the expenses that the state was incurring, and they were forced to slash governmental programs. 

            The Harrison County Development Commission hired an independent agency from Reno, Nevada to conduct an economic impact assessment on the effects that dockside gambling would have on their community.  The independent assessment agency performed the impact analysis by identifying the number and size potential of dockside gambling operations.  They determined that each facility would accommodate a certain number of gambling devices due to limited space.  Since gambling was new in Mississippi there were no counties to study.  Therefore, they selected two comparison groups in Nevada to conduct their study.  The two groups used in the analysis were North Shore of Lake Tahoe and Laughlin.  Both comparison groups are municipalities in Nevada.  The analysis compared anticipated tax revenue to estimated increased costs, and identified deficit or surplus positions to local and state governments.  The analysis estimated that revenues from dockside gaming should be around $37 million dollars the first year of operation.  Once the impact assessment was completed, the Harrison County Development Commission began arguing that their community would benefit economically through casino revenues (Mississippi Gaming Commission, 2000). 

            Residents in Harrison County were eventually convinced that casinos might generate valuable resources for their community.  In 1990, the constituency voted on the adoption of dockside gaming.  To the surprise of many local governmental leaders, the casino, in its first year, exceeded the amount of revenue that the impact analysis had initially stated.  In 1993, the US News & World Report cited Mississippi as the number one state in economic recovery.  The magazine credited the casino industry with this success story (Oliver, 1995).

            Casinos, especially in Mississippi, have been credited with generating enormous amounts of economic growth, which resulted in larger tax revenues.  This economic growth is important to education funding both directly and indirectly.  For instance, when businesses decide to build in a casino district, the millage rates of the school district are affected.  These taxes are then placed into a general fund account or directly funneled into a specific program such as education.  This depends on local legislation passed by school boards, city councils, etc.  Clynch and Kaatz (1999) postulated that millage rates would decrease as more businesses decided to relocate in casino districts.  They argued that casino districts could afford to lower their millage rates in order to attract business.  In theory, attracting more business would increase the amount of revenue local governments would receive from property taxes, even if the rate were decreased.  The authors found that millage rates have remained the same in Mississippi, but contend that casinos in Mississippi are still relatively new, and as time passes they claim that millage rates will decrease, resulting in more economic development from future private investment in casino districts.

Mississippi Casinos, Marketing and Tourism

            Denise von Herrman, Robert Ingram, and William C. Smith (2000), in a gaming impact report on marketing, tourism, and economic development, funded by the Mississippi Legislature, argue that casino gaming in Mississippi has dramatically impacted the areas of tourism.  The authors contend that hotels, air services, dining, retail, leisure attractions, convention facilities, and entertainment attractions have all witnessed an increase in the number of individuals served, because of casinos.  With this increase in tourism, Mississippi has witnessed an increase in tax revenues from these industries.  They recommend that Mississippi should pursue a stronger effort at marketing these ventures in order to increase the amount of taxation from tourism in the future.  However, the authors are against any increases in the tax rate on casinos because Mississippi already taxes its casinos at a higher rate than most other casino states.  Furthermore, many of the casinos in Mississippi are operating below the profit margins of similar casinos in other states because of Mississippi’s tax rate.  They contend that an increase in the tax rate may cause some casinos to go bankrupt, and cause others to find Mississippi unprofitable and completely close their gaming establishment.  In their overall assessment of casinos on tourism, marketing, and economic development in Mississippi, Denise von Herrman, Robert Ingram, and William C. Smith posit that casino gaming has made a positive impact on these areas in society.

Mississippi Casinos and Municipal Revenues

            Another issue addressed in the academic literature regarding casinos is the impact that casino generated revenue is having on the fiscal health of municipalities.  Clynch and Rivenbark (1995) stated that the casino industry in Mississippi impacted the general fund revenues significantly.  The initial projections of this impact were far exceeded by the actual amount of revenue generated by casinos.  In turn, Mississippi witnessed a large increase in the general fund revenues.  Furthermore, Mississippi began witnessing an increase in revenues from other sources as well.  For instance, more jobs resulted in an increase in the amount of individual income taxes received by the state.   Clynch and Kaatz (1999) concluded that municipalities in Mississippi have benefited tremendously from casino revenues.  The authors argued that assessment values increased dramatically in municipalities housing casinos. Furthermore, the authors found that general revenues increased and expenditures on public works and public safety increased as well, to meet the growing needs of population growth.  Basically, many of the municipalities in Mississippi housing casinos have witnessed population increases that have put a strain on their infrastructures.  The casino revenue has made it possible for these municipalities to keep up with these growing demands.  The authors conclude that despite millage rates remaining the same, which they predicted to decrease, the overall year-end balances for operating budgets have increased significantly since the adoption of the casino industry in Mississippi.

Mississippi Casinos and Taxation

            A third issue regarding casino gaming in the academic literature deals with taxation.  Rivenbark and Roundsville (1995) and Rivenbark (1997) postulate that casino taxation in Mississippi is regressive.  Rivenbark and Roundsville stipulate that since policy makers in Mississippi have allowed casino gaming in only specified areas, the tax incidence is placed on Mississippi residents.  The authors contend that accessibility to casinos plays a major role in the issue of tax incidence.  They argue that casinos are experiencing more play from local residents than people on vacation.  The authors attribute this to location.  The residents of Mississippi are paying most of the taxes received from casinos.  Rivenbark (1998), through telephone interviews, and the use of log-linear regression analysis, demonstrates that the poor in Mississippi have more access to casinos and are paying more of the taxes.  From this data he concludes that casino revenues are regressive because Mississippi residents, compared to the rest of the country, are much poorer, and cannot afford to pay these taxes.  However, the allure of “get rich quick schemes,” such as the casino, attracts those who reside close to them.  Therefore, the location of casinos in low-income communities is having a regressive effect on the economy because of the immense play they are receiving from those individuals residing where casinos are located. 

            Due to the collapse of the oil industry in Mississippi, concerned citizens in Vicksburg, Mississippi consulted their state Senator (Bob Dearing) about the possibility of bringing casino gaming to the Magnolia state.  Despite the rejection of lottery legislation just a few months earlier casino legislation was authored by Representative Montgomery in the House of Representatives while Senators Dearing and Gallot co-authored a similar bill in the Senate.  The House bill passed with limited resistance, but after heated debate among policymakers in the Senate, the upper house ratified the legislation by a vote of 22 – 20 (eight Senators reframed from voting on the legislative bill).  Casino gaming in Mississippi was passed with the stipulation that only counties bordering waters ways (the Gulf Coast and Mississippi River) were allowed to vote to adopt this revenue-generating device.  Once the county had adopted casino legislation, each municipality located in the county would have the opportunity to vote on the casino bill.  Originally fourteen counties voted on the bill and eight of those counties chose to bring casino gaming to their respected community.  Currently, 30 casinos are housed in eight counties throughout the Magnolia state (the Choctaw casino in Philadelphia, MS was excluded from this figure because it is on federal land and cannot be taxed by the state) (Mississippi Code: Sections 75-76-100; 75-76-195). 

Mississippi essentially followed the Nevada approach on taxation, which included a maximum of 8 percent of gross revenues for the state, with an additional 3.2 and .8 percent of gross revenues for local governments.   Towns and municipalities may levy a .8 percent gaming tax on casinos residing within the entity’s corporate limits, and counties are allowed to collect taxes from facilities operating in unincorporated areas.  Taxes paid by gaming facilities located in municipalities are divided between the city and the county, with the city’s share equivalent to the percentage of the county residents living within the city limits.  The statute does not require county governments to share revenues with cities that have casinos residing in unincorporated areas. Overall, the casino industry is taxed at 12 percent by state and local governmental entities. The states portion of the proceeds (8%), is placed into the general operating fund, while local communities are given the opportunity to disburse the proceeds in the manner they deem fit (Mississippi Gaming Control Act, 1990).

THEORY

The Rationale For A Casino Study

            In theory, scholars such as Mikesell (1989), Spindler (1995), Miller and Pierce (1997), have measured the impact of state operated lotteries on funding education in the American states.  The conclusions reported by all of these scholars indicate that lotteries are an enormous hoax because so few proceeds are used to enhance education.  Despite these empirical results, 38 states now operate lotteries with a large portion of the proceeds earmarked for education.  The growth of casino gaming in American is related to the perception that this gaming device will also provide additional revenue for such programs as education.

            As the literature suggests, earmarking lottery and casino gaming funds for education is popular among policymakers.  Policymakers in Mississippi sold the idea of casinos in many municipalities and counties by earmarking casino funds for education (Rivenbark, 1997).  If casino revenue is impacting per pupil expenditures in Mississippi school districts with casinos, in theory, casino school districts should be spending more on per pupil expenditures, compared to matching noncasino school districts. Therefore, the null hypothesis tested in this study is as follows:

H1: School districts receiving casino revenue tend to spend the same on per pupil education expenses, compared to matching school districts without casinos.

DATA

The conceptual definitions of the data used in this study are as follows: Local

Spending Per Pupil by School District (Dependent Variable) is defined as the amount

of spending per pupil by local governments. As in many of the lottery studies, the dependent variable is the amount of per pupil expenditure increases or decreases across time since the adoption of lottery gaming.  This study utilizes Local Spending Per Pupil by School District (dependent variable) because casino taxes are serving as a supplemental source of revenue intended to increase per pupil expenditures for education.  In turn, this increase in per pupil expenditures is supposed to assist in making education “better” (See Hanushek for definitions about what “better” means in education)!  Per pupil education expenditures as the dependent variable allows the researcher to measure changes in spending as additional sources of revenue are made available to local school districts. 

Casino Tax Revenue is the amount of revenue casino school districts in Mississippi receive from the gaming tax placed on casinos. This variable serves in a similar manner as the lottery proceeds variable in that it allows the researcher to see if the additional revenues added to the pool of revenue for per pupil expenditures has significantly increased since the adoption of casino gaming in Mississippi, controlling for all other possible variables that may impact the regression model. 

Per Pupil Assessment Value is the average per pupil assessment value based on average daily student attendance (measured in $100 thousand). This variable is new to gaming studies because with the adoption of casino gaming in Mississippi came economic development (Casinos had to spend $1 on land development for every $1 spent on the casino).  As a result of this land development, property values increased.  Since Mississippi local school districts rely heavily on property values for education revenues (as most local school districts in America), and assessment values have increased since the adoption of casino gaming, it is important measure and see how much per pupil expenditures for education have increased as a result of increased property values. Number of Students is the number of students in each Mississippi school district.  Since Mississippi uses a funding formula based on average daily attendance (the more students present means more money), student attendance maybe driving increases in per pupil expenditures on education.

Millage Rate is the percentage of taxable income levied on real and personal property in each Mississippi school district. Measuring the increase in the millage rate is important to the study because if assessed values have decreased it is anticipated that millage rates will decrease or remain the same.  Since the rate is set to extract revenue to pay the education expense, it is important to determine if significant increases have occurred causing school districts to amplify per pupil expenditures for education.

Education Spending Over Time Lagged One Year is an independent variable accounting for education spending over time.  This variable serves to account for spending increases and decreases over time that may have occurred as a result of changes in education spending.  Accounting for spending differences across time may suggest that funding formulas or legislation have caused the increase in per pupil spending instead of supplemental sources of revenue such as a casino.

The operational definitions of the data used in this study are as

follows: Local Spending Per Pupil by School District was gathered from the Mississippi State Superintendent’s Report on Education published by the Mississippi Department of Education. The Casino Tax Revenue variable was gathered from the Mississippi Department of Education. Per Pupil Assessment Values were gathered from the Mississippi Report Card on Education published by the Mississippi Department of Education.  The Number of Students in each school district was gathered from the Mississippi Statistical Abstracts published by Mississippi State University.  The Millage Rate for each school district was gathered from the Mississippi State Superintendent’s Report on Education.  Education Spending is a target variable computed for the dependent variable in the regression analyses to account for changes in the dependent variable over time. 

This research project uses “pooled time series cross-sectional data analysis” as the measuring device for the previously stated hypothesis (Beck and Katz, 1996: 1) (see also Beck and Katz, 1995; Stimpson, 1985).  One of the most promising advantages of using pooled time series cross sectional analysis is its ability in offering explanations of the past, while simultaneously predicting the future behavior of exogenous variables in relation to endogenous variables.  Pooled time series cross-sectional regression analysis allows the researcher to focus on more than one case in predicting social phenomenon, whereas simple time series analysis strictly deals with specific cases at different time points causing data management complications, while also being costly and time consuming.  Furthermore, ARIMA time-series methods of data analysis place an overwhelming emphasis on the burden of controlling for autocorrelation and heteroskedasticity to ensure data dependability.  Autocorrelation and heteroskedasticity do pose threats to data analysis, however, according to Beck and Katz (1996) they are more of a “nuisance” than a real threat (p. 3).  The use of panel data raises concerns for both autocorrelation and heteroskedasticity in estimating model parameters based on those data.  Regression diagnostics indicated that autocorrelation was not generally a problem (DW = 1.768).  Because heteroskedasticity was still suspected, panel-corrected standard errors were obtained from generalized least squares estimation procedure (or OLS with panel-corrected standard errors, see Beck and Katz, which is cited in the text, for a discussion of situations in which the latter is better).[1] The regression equation tested in this research project are reported in Table One:

[Insert Table One]

 

Units of Analysis

According to the Mississippi Gaming Commission (2000), 1993 was the first year that casinos began contributing revenues to state and local governments.  However, according to the Mississippi Department of Education (2000), the first casino dollars used to fund education did not come until 1995. To increase sample size, the school years of 1989 – 90 through 1999-00 were incorporated in the analysis of the data (the only data available since the adoption of casino gaming for school districts was 1995-96 through 1999-00).  Thirteen school districts currently benefit from casino gaming in Mississippi.  However, to measure the impact of casino dollars on education a comparable comparison group was established.  Twenty-six school districts were chosen as the units of analysis in this project (thirteen casino school districts compared to thirteen matching non-casino school districts). 

The comparison groups were chosen premised on previous studies conducted by the Mississippi Department of Education.[2]  These studies utilized a process for choosing comparison groups based on approximation ranges in the number of students in each school district, spending on education per pupil, and per pupil assessment values by each school district.  The range categories used in selecting the comparison groups were as follows: 1000 – 15,000 for number of students, $2,500 to $5,000 for per pupil expenditures, and $10,000 – $50,000 for the assessment value of each school district.  The following table (Table Two) displays the school districts used in this study.  The casino school districts are in bold.

[Insert Table Two]

 

 

[Insert Table Three]

 

DISCUSSION

            Table Three is showing an adjusted R2 of .91, suggesting that 91 percent of the variance is being explained by the equation.  The casino tax revenue variable indicates an estimate that per pupil expenditures for education have increased since the adoption of casino gaming.  These findings suggest that since the adoption of casino gaming, casino school districts have consistently spent more per pupil, compared to matching noncasino school districts.  The t - ratio for the casino tax revenue variable indicates that rejecting the null hypothesis is suitable for this equation.   One additional finding worth noting in the equation is per pupil assessment values.  The significance level of .001 in per pupil assessment values suggests that for every unit increase in per pupil assessment values, an increase of 53.648 is occurring in per pupil spending for education. Together, both the casino tax revenue and the per pupil assessment value variables are significantly impacting the regression model.  Therefore, the null hypothesis: school districts receiving casino revenue tend to spend the same on per pupil education expenses, compared to matching school districts without casinos, was rejected.

            The pooled time series cross-sectional regression analysis suggests that all the casino school districts in Mississippi are benefiting from this supplemental source of revenue for per pupil expenditures; however further analyses indicates a different picture.  The Biloxi, Gulfport, Harrison County and Tunica County school districts are disproportionately benefiting from casino proceeds compared to the other casino school districts.  This phenomenon was noticed when the following residual estimates were examined.

Leverage Values – identifies outliers among the independent variables.

 

Studentized Deleted Residuals – outliers of dependent variables are identified.

 

Cook’s D – the combination of independent and dependent outliers are identified.

 

Therefore, the Biloxi, Gulfport, Harrison County and Tunica County school districts were excluded from the following pooled time series regression model and the results of the equation were much different than the previous analysis.

[Insert Table Four]

            The estimates reported in the table suggest that the casino tax revenue is failing to significantly impact per pupil expenditures for education.  This table indicates that only four casino school districts in Mississippi are benefiting from this additional source of revenue.  These findings are consistent with much of the lottery literature because the inferences drawn from this analysis suggest that gaming dollars are only increasing per pupil expenditures in a few isolated cases (much like Georgia in many of the lottery studies).  The findings in this table make sense since twenty-four out of the thirty-one casinos located in Mississippi are found in these four school districts.  Furthermore, these four school districts have chosen to spend a large portion of their casino tax revenue on education. For example, the Biloxi school district spends 20 percent of its casino money on per pupil expenditures for education.  Other school districts, such as Bay St. Louis, spend a majority of their casino tax revenue on property taxes allowing them to substantially decrease these taxes (Bay St. Louis residents have witnessed a decrease of about 80 percent in property taxes since the adoption of casino gaming). 

            Additional analysis of the data was conducted using dummy variables to represent the Biloxi, Gulfport, Harrison County and Tunica County school districts.  This regression technique was used to determine the impact that each outlying school district was having on the regression equation.  For instance, since the Biloxi school district receives the greatest portion of casino tax dollars, was it having more of an impact on the regression equation than the Harrison County school district?  The analysis failed to report any significant findings suggesting that any of the four outlying school districts were disproportionately impacting the equation.  Therefore, this analysis was excluded from the study.

Conclusion

            In essence, the statistical information suggests that four casino school districts in Mississippi have increased the amount of per pupil expenditures, compared to matching non-casino school districts.  One explanation for this significant difference in per pupil expenditures may be linked to policymakers in casino school districts opting to allocate supplemental casino revenues for per pupil expenditures, understanding that any additional funds for education would be welcomed.  Secondly, the amount of play the casino industry is receiving extends beyond what policymakers could have ever imagined.  According to a Harrison County study, the Mississippi Gulf Coast has emerged into the national limelight for its economic prosperity.  Gaming and Tourism on the Mississippi Gulf Coast is now a 2.8 billion dollar industry with over 19 million visitors annually.  Hotel room inventory now totals over 17,000 units to meet growing demand.  Non-gaming related expenditures account for nearly 75 cents of every visitor dollar.  Gaming revenues topped $1 billion in 1999 and are anticipated to surpass that level in 2000 with continued expansions and new jet service (Mississippi Gaming Commission, 2000).

            Since 1992, more than $2.4 billion has been invested in Mississippi Gulf Coast casino facilities.  This includes 12 hotels offering 6,779 luxury accommodations, and 61 restaurants. Even though the Mississippi Gulf Coast is beginning to be called the gambling capital of the South, the fastest-growing revenue producers for Coast casinos are lodging, retailing, and entertainment (Oliver, 1995). 

            The Mississippi Legislature passed a law requiring casinos to spend equal amounts on land development and casino development.  In other words, if a casino owner invests $1 million dollars in developing a casino, they must also invest $1 million dollars in land development.  In turn, the additional hotels, restaurants, golf courses and resorts have increased the value of property in casino communities because of this land-based development (Mississippi Gaming Commission, 2001). According to educational administrators in the Harrison County School District and the Biloxi and Gulfport City School Districts, this increase in real and personal property values has allowed the school districts to receive more fiscal resources for per pupil expenditures on education (Stanley, 2001).

            The findings of this study suggest that a few select local communities are benefiting from casino proceeds for per pupil expenditures.  These findings are consistent with much of the lottery literature that indicates education in a few states have benefited from a state-sponsored lottery (for instance, Georgia).  In practicality, is this phenomenon in Mississippi only temporary, or will the casino industry continue to impact per pupil expenditures for education in the future?  This research suggests to the practitioner that casino gaming revenues may assist in paying some of the cost of education.  However, practitioners and researchers need to express caution when inferring such conclusions based on a limited period of time as in this study.  Although positive impacts have been recoded by this study measuring casino revenues impact on per pupil expenditures in Mississippi, only time will tell if this significant difference in spending will continue.  As in many of the lottery studies, further studies are needed as the casino industry matures in Mississippi.

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Stimson, James A.  1985.  “Regression in Space and Time: A Statistical Essay.”  American Journal of Political Science.  4: 915-947.

 

Von Herrman, Denise; Ingram, Robert; Smith William C.  2000.  “Gaming In the Mississippi Economy.”  Published by the University of Southern Mississippi.

 

White, Halbert.  1980.  “A Heteroskedasticity-Consistent Covaraince Matrix Estimator and a Direct Test for Heteroskedasticity.”  Econometrica 48: 817 – 838.

 

[Table One]

 

Pooled Time Series CROSS-SECTIONAL Regression Equation

 

Y (LOCAL SPEDU) t-1  = a +  (B1) CASINO t-1  +  (B2) PER PUPIL ASSESSMENT t-1  + (B3) NUMSTUD t-1  + (B4) MILLAGE t-1  + (B5) EDUCATE t-1 + E

 

Formal Model: 1989-1999

 

Casino Tax Revenue                                      

Per Pupil Assessment Values                                                             

            Number of Students                                                    Local Per Pupil Spending

            Millage Rates                                                                (Dependent Variable)

            Education Spending

             

 

[Table Two]

 

COMPARISON SCHOOL DISTRICT DATA FOR1989-95 SCHOOL YEAR

 

 

School District

Number of Students

Spending On Education $

$ Per Pupil Assessment Values

Bay St. Louis

2448

3782

27843

Benton County

1429

3902

14329

Biloxi

6798

4069

22370

Carroll County

1240

3994

27499

Clarksdale City

4492

3464

10876

Coahoma County

2320

4136

20661

Greenville City

8448

3621

15882

Gulfport City

6529

4557

28426

Hancock County

3122

3736

35636

Harrison County

11354

3466

22737

Hattiesburg Municipal

5555

4462

28559

Jackson County

7309

4789

28248

Lee County

5479

3541

20511

Leland City

1759

4199

16438

Moss Point Municipal

5338

4091

18324

Natchez-Adams County

5768

4367

27207

Ocean Springs

4340

3510

18279

Oxford Municipal

2762

4064

23806

Pascagoula City

7828

4342

38623

Rankin County

13360

3125

24095

Tunica County

1999

4115

17082

Tupelo City

7019

4285

34636

Vicksburg City

9586

3990

27196

Webster County

2072

3385

16644

Western Line

2355

3463

36387

Yazoo City

3593

4339

40223

 

 

 

 


[Table Three]

 

LOCAL PER PUPIL SPENDING ON EDUCATION ALL SCHOOL DISTRICTS POOLED TIME SERIES 1989 - 2000

 

                              Coefficient (B)   Standard            t-test       Significance Value

                                                            Error                                             (p.>)

__________________________________________________________________________________

 

(Constant)                             -17.802                    52.689                     -.388                         .736   

Casino Tax Revenue            .388                         .156                         2.487                        .013

# of Students                        001.855                   .003                         .551                          .582

Millage Rate                          2.084                       1.038                       1.008                        .146

Assessment Value               53.648                     13.385                     4.008                        .001

Education Spending t-1        .877                         .033                         26.593                      .001

_________________________

R                                             .954

R2                                                                  .910

Adjusted R2                                         .908

Df                                            6

F                                             472.474

Sig. Of   F                              .001

N                                             286

             

[Table Four]

 

LOCAL PER PUPIL SPENDING ON EDUCATION

ALL SCHOOL DISTRICTS POOLED TIME SERIES MODEL ONE

 OUTLIERS EXCLUDED

1989 – 1999

 

                           Coefficient (B)       Standard           t-test       Significance Value

                                                             Error                                         (p.>)

_____________________________________________________________________

(Constant)                             913.701                   264.151                   3.459                        .001

Casino Tax Revenue            .847                         .670                         1.264                        .209

# of Students                        -02.06                      .012                         -1.701                        .092

Millage Rate                          1.961                       2.700                       .726                           .469

Assessment Value               49.025                     34.631                     1.416                         .160

Education Spending t-1        .859                         .058                         14.699                       .001

_________________________

R                                             .908

R2                                                                  .825

Adjusted R2                                         .814

Df                                            6

F                                             80.747

Sig. Of   F                              .001

N                                             110

                                 



[1] See Durbin (1970) for issues pertaining to autocorrelation and White (1980) for controlling heteroskedasticity.

[2] Charles Shivers, Director of Financial Accountability, Mississippi Department of Education and Dr. Gary Johnson professor of Educational Leadership at Mississippi State University stipulate that the Mississippi Department of Education has used the following indicators in the past to determine comparative school districts in various educational finance studies: average daily attendance, 1st month enrollment, property per pupil assessment values, whether the districts have 16th section trust lands, whether they are municipal or county districts, or rural or urban, per pupil spending, and total federal spending.  Mr. Shivers endorses the indicators (population, per pupil assessment value and spending per pupil) utilized in this study for generating the comparative school districts that were studied (Charles L. Shivers, CPA, Tuesday, January 9, 2001, 3:28 p.m.; Dr. Gary Johnson, January 8, 2001, 2:08 p.m.).  See the Mississippi Department of Education’s official Homepage for such studies.  Available at: (http://www.mde.k12.ms.us.account.2000report-99).