Illinois gambling generated nearly $1 billion in taxes last year

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Illinois gambling revenue climbed to $3 billion last year from $1.65 billion in 2012 but it’s the future growth that Illinois and Chicago are banking on to generate tax revenue for a $45 billion capital program and the city’s pensions.

The report this week from the General Assembly’s non-partisan Commission on Government Forecasting and Accountability on 2019 revenues and the taxes generated by that income provides a lookback as questions loom over the future growth following approval last spring of a gambling expansion package.

The legislation signed by Gov. J.B. Pritzker authorized six new casinos, added additional gambling at racetracks, raised the number of gambling positions to 2,000 from 1,200 at existing venues and expanded video gambling terminal machines, a key ongoing funding source for the new six-year capital plan in addition to one-time license fees. Tax structures were also altered for some forms and sports wagering was authorized allowing for a new revenue form.

“Many questions remain, including: the timing in which each of these changes will occur; how many new casinos/racinos will actually be opened; how will these gaming formats impact each other’s performance; and what level of revenue will these gaming formats actually generate in light of the tax rate changes and the multitude of gaming options that Illinois will soon offer?” the review notes.

Past COGFA reports on gambling have also raised questions over saturation and just how much new revenue and tax income can be generated.

The $3.03 billion of overall revenue coming from the existing 10 casinos totaled $1.35 billion while video gaming terminals made up $1.68 billion in the last calendar year. “When combined, revenues generated from these gaming formats have increased by nearly $1.4 billion or 83.6%,” reads the report.

The $1.68 billion of video gambling income translated into $528 million of tax revenues with $84 million going to local governments and the remainder to the state. That’s up from about $4 million in total tax revenue in 2012. A portion of the 2019 increase comes from an increase in the tax to 33% from 30% approved in the gambling expansion package to fund the infrastructure plan. It rises to 34% later this year.

The $1.35 billion of casino revenue generated $455 million in tax revenue last year from an admissions tax and graduated tax on adjusted grow receipts. That compares to $574 million in 2012.

“When combining these video gaming tax revenues with casino tax revenues, overall tax revenues grew from $578 million in calendar year 2012 to $983 million in calendar year 2019, an increase of 70.1%,” the report reads.

Overall, the numbers made a big leap from 2012 when video gambling was legalized in the state and overall adjusted gross revenues totaled $1.65 billion.

But all of the increase came from video terminals. In 2012, video gambling was in its infancy and only 61 terminals were operational so casinos accounted for nearly all of the $1.65 billion collected that year.

The number of video gambling machines has steadily risen since and now surpasses 35,000 at more than 7,000 establishments generating $1.68 billion in total revenue last year. “This increase is expected to continue into 2020 in large part due to the terminal limit increases provided under” under the 2019 gambling package Public Act 101-0031, the report reads.

The state allows local governments to decide whether to allow establishments to host video gambling. Chicago has not authorized it.

The growth across the state was so strong it offset the annual decline of casino revenue. Casino revenue fell in all years between 2012 and 2019 for an overall drop of 17.4%.

Chicago's effort to structurally balance its budget by 2022 relies on $200 million in revenue a casino is estimated to generate annually. The funds would go toward ts police and firefighter pension funds. The city is banking on drawing some of the gambling revenue that now goes to Indiana facilities just over the city’s southeast border and experts testified at hearings that it could also cut into other nearby existing casinos such as the one just northwest of the city’s border in the suburb of Des Plaines.

The city is pressing lawmakers for tax structure changes in the new legislative session. An independent report sided with Mayor Lori Lightfoot’s assessment that the existing tax structure was too onerous to attract financing.

The Chicago Civic Federation has warned of the dangers governments face relying on gambling expansion for capital funding. The state’s last plan — Illinois Jobs Now — adopted a decade ago relied on video gambling but it took years to pick up steam and meet projections. That contributed to the need to draw on the general fund to cover debt service on borrowing.

The 2019 capital package known as Rebuild Illinois relies on more than $350 million of new annual gambling tax revenue at full implementation.

“The ability of the state to implement the expansion quickly remains in doubt, as it requires implementation of new regulations and the selection of expansion. There is also concern that expanded gambling capacity in Illinois could exhaust demand and face stiff competition from facilities in neighboring states,” the federation wrote in a review of the capital plan.

In other revenue updates, COGFA reported that January general fund revenues rose by $60 million putting overall base general fund receipts up $1.4 billion from last year. “Those gains have been driven by specific transfers, stronger federal sources, court settlement proceeds, tax amnesty program efforts, and decent underlying performance from the larger economically related sources,” COGFA wrote.

Net personal income taxes are ahead of last year by $387 million while net corporate income taxes are up $131 million, and net sales taxes are up $177 million net.

The state also announced cannabis sales of $39.2 million in January, the first month for recreational marijuana sales in the state. The Department of Financial and Professional Regulation said 972,045 items were sold, including $8.6 million to out-of-state resident. The state did not release total tax revenue numbers.

The Illinois Department of Revenue also reported that a tax amnesty program that was part of Pritzker’s revenue measures to balance on a cash basis the fiscal 2020 budget netted $240 million. That’s $65 million more than expected.

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State and local finance State tax revenues Infrastructure Pension funds Illinois
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