WSJ.com: Auto Parts Plant Turns Casino

Strapped States Find New Virtues in 'Vice'
May 11, 2010

Voters and politicians in Ohio used to slap down attempts to expand gambling in their state. But last week, many cheered as demolition crews razed an old auto-parts plant in Columbus to make way for a new casino.

Facing high unemployment and the aftermath of a $3.2 billion state-budget shortfall, Ohioans voted to allow casinos in November. Gov. Ted Strickland dropped his longtime opposition to video lottery machines, proposing to add them to racetracks to generate new tax revenue.

"If I had not been confronted with these difficult circumstances, I would have obviously opposed expanding gambling in Ohio," says Mr. Strickland.

Nationwide, the public-funding crisis has led many state and local leaders to similarly reverse course. Hampered by withering funds for law enforcement, health care and other public services, a growing number of officials are condoning activities and businesses they'd be apt to restrict in better economic times.

For fiscal 2011, 38 states project combined budget shortfalls of $89 billion, according to the National Conference of State Legislatures, a bipartisan policy research group. Thirty-one states expect budget gaps totaling $73.5 billion in 2012. As a result, says Todd Haggerty, an analyst at the group, lawmakers are "trying anything and everything in order to bring their budgets into balance."

Oakland, Calif., began taxing sales of medical marijuana last year. Now at least a half- dozen states are weighing measures to allow some legal pot sales. Others have loosened decades-long restrictions on Sunday alcohol sales. And about a dozen, like Ohio, have discussed or passed plans to ease restrictions on gambling.

California legislators are debating whether to allow and tax Internet poker, even though such gambling is prohibited by federal law. "It is generally easier to pass something like this in a recession," says Lloyd Levine, a political consultant working for the pro-poker effort. As a state assemblyman in 2008, before the economic crisis, Mr. Levine introduced a similar initiative that failed.

Americans have a time-honored tradition of banking on vice in tough economic times, says David Laband, an Auburn University economics professor who studies the alcohol industry. "Blue laws" restricting Sunday alcohol sales, he says, are a common casualty of recessions.

"Every time there's an economic contraction, sure enough, you start seeing local repeal efforts," says Mr. Laband.

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