Illinois governor Blagojevich considers taking over casinos

CHICAGO -- Gov. Rod Blagojevich said Thursday he is considering an unprecedented state takeover of Illinois' casinos and hiring a company to operate them for the state's profit -- an idea immediately called absurd by experts in and out of the gaming industry.

He also said he is considering auctioning off the nine licenses currently in use to raise money to fill the state's $5 billion budget deficit.

The casino industry immediately called the proposals "preposterous."

The governor said his legal, budget and policy teams are "aggressively" exploring the idea of taking back the casino licenses. He pointed to a casino in Ontario, Canada, that is state-owned but run by a separate management firm.

"It's conceivable, for example, that the state can own the boat and hire Harrah's or MGM to do the management and pay them a management fee," Blagojevich said. "But instead of the profits going to the casino industry, they would go to the state and the difference would be the cost of the management fee that they would get for their services."

Casino industry representatives dismissed the idea of state-owned casinos, which Blagojevich discussed during a news conference to announce a stronger Amber Alert system for abducted children.

"For the past 12 years, Illinois casinos have invested billions of dollars into their businesses. Having the state literally confiscate these businesses and destroy this investment is preposterous," said Tom Swoik, executive director of the Illinois Casino Gaming Association.

Swoik said Blagojevich's idea shows the state "is bent on scaring away business investment and threatening an already anemic business climate." He said it would be a conflict of interest for the state to both run and regulate its casinos, which last year reported more than $1.83 billion in receipts after paying winners.

Bill Thompson, professor of public administration at the University of Nevada, Las Vegas, and author of a book on gambling, agreed.

He said no other state has taken over casinos.

"We have private casinos in Nevada. Government regulates them and, when they cheat, they go out of business. What happens when the government owns the casino? Are they going to close it down?" Thompson said.

He said other states are not running casinos, and he called Blagojevich's idea "absurd."

"Governments are pigs when it comes to gambling and the Illinois government stands up there with the best," he said. "They aren't thinking of whether it's a good arrangement. They're only thinking they're going to get more money for their state budget."

Blagojevich angered the casino industry earlier this month when he proposed raising an additional $200 million by increasing taxes at the state's nine riverboat casinos. His budget is also banking on the state's inactive 10th casino license to be sold next year, generating another $350 million.

Blagojevich said the state's budget crisis -- the deficit is about $5 billion -- is forcing him to keep an open mind about gambling expansion, which the Democrat opposed while campaigning for governor last year.

"Sometimes you have to say, 'Can you get more money for schools by taking an approach that maybe you wouldn't do at other times,"' Blagojevich said.

Taking over the casinos was the most dramatic, but not the only, idea the governor raised Thursday.

Blagojevich also said that allowing video poker and increasing the number of slot machines at casinos or adding them to horse tracks would not necessarily be an expansion of gambling.

"You can debate the semantics of whether that's expansion or whether that is just providing more positions for existing places where gambling occurs," he said.

He also said the state is considering having casino licenses rebid, but he did not know how often it would be done or if it was legally possible.

Gambling opponents criticized the governor for suggesting that adding slot machines to casinos and horse tracks isn't expansion.

"There's no other thing that it could be than expansion," said Anita Bedell, executive director of the Illinois Church Action on Alcohol and Addiction.

"There's already so much gambling in Illinois and expanding it further is just going to add more problems for the people: addiction, bankruptcy, crime, suicide," Bedell said. "The governor needs to be realistic and look at the problems that gambling causes. This is not free money."

Several proposals are pending in the Legislature to expand gambling. Casino owners say the state could get an extra $365 million a year by lowering the tax rate and letting boats add more slot machines.

Horse track owners want lawmakers to allow slot machines at the tracks, which they say could generate as much as $450 million a year for the state.

And bar and restaurant owners want to legalize video poker machines in their establishments, which they say would net the state $750 million in new revenue annually.

Tom Grey, the executive director of the National Coalition Against Legalized Gambling, chastised Blagojevich.

"This is expansion and it's unfortunate he's chosen to play word games," he said. "But maybe that's what the voters have got to be aware of: This is not the Land of Lincoln, this is the land of the deal."