Video Lottery Terminal (VLT) Revenue Update

In 2009, Ohio authorized two different forms of gambling. As part of the FY 2010-11 budget, the Ohio lottery was expanded to allow for the implementation of more than 17,000 video slot machines at seven Ohio horse-racing tracks. The slot machines are commonly known as video lottery terminals (or “VLTs”), and the racetracks are now called “Racinos”. Then in November, 2009 Ohioans approved Issue 3, a Constitutional amendment which authorized casinos at four sites across the state.

Despite the fact that these two forms of gambling were authorized in 2009, it was not until November 2014 when all 11 authorized casinos and Racinos were up and running. The four casinos opened over a 10 month period from May 2012 to March 2013 and the Racinos opened over a nearly 2½ year period from June 2012 through November 2014. The delay in the opening of the Racinos was due in large part to several (ultimately unsuccessful) legal challenges which questioned the authority of the state to establish VLTs through the lottery and without a statewide referendum.

Once up and running, the casinos and Racinos provide revenue to Ohio’s public schools in different ways. The Constitutional amendment stipulated that casino profits would be taxed at a rate of 33%. Thirty-four percent of the casino tax revenues are then allocated to public schools. Thus the K-12 share of casino profits is 11.22% (34% of 33%). Casino tax proceeds are distributed to schools twice a year (January and August).

In contrast, Racino VLT profits are split 66.5% to the Ohio Racino Commission (with ½% going towards the funding of services to combat gambling addiction) and 33.5% deposited into the Lottery Profits fund. Lottery profits are then distributed to public schools; however these funds are essentially intermingled with General Revenue Fund revenues that are distributed to public schools through the budget.

The OEPI Summer 2015 Newsletter contained an article summarizing casino tax revenues from Calendar Year (CY) 2012- 2015 (See OEPI website). This article will provide a summary of VLT revenues from FY 12-16. Table 1 provides a list of the seven Racinos and the date that each opened.

Table 1: Racino Locations and Date of Opening

Table 2 provides a summary of total VLT profits from FY 12-FY 16 and their apportionment to the Racinos, Lottery, and gambling addiction programs. FY 16 estimates were prepared by OEPI and are based on actual VLT revenues from July through November of 2015.

Table 2: VLT Profits Allocated by Purpose, FY 12-FY 16

* The Racino Commission share of VLT profits is the amount that is retained by each Racino as compensation for operating the facility. In FY 12 and FY 13 this was 66.5% of net profits before the Problem Gaming fund was instituted.

Table 3 provides a breakdown of the VLT Lottery revenues shown in Table 2 by Racino from FY 12 through FY 16.

Table 3: VLT Lottery Revenues by Racino, FY12-FY16

*33.5% of net Racino profits are allocated to the Lottery Profits fund for educational purposes. Per pupil figures are based on an estimated 1.8 million public K-12 students annually.

Because the Dayton and Mahoning Valley Racinos opened several months into FY 15, FY 16 marks the first time that VLT revenues are based on an entire year’s operation at all seven sites. Table 3 shows that FY 16 VLT revenues are estimated to be roughly $280 million. This figure is larger than the highest year of Casino tax revenue allocated to schools ($272.5 million in CY 2013).

Table 3 also shows that on a per pupil basis (assuming the same roughly 1.8 million public school students across which the Casino taxes are distributed) VLT revenues in FY 16 will only be $156 per pupil. This figure is only 1.4% of the $10,913 statewide average total expenditure per pupil shown on the FY 14 Cupp Report.