The Roosevelt Institution
Higher Ed Funding Proposal
http://rooseveltinstitution.org/rutgers_nb/highered
To view this proposal as a Word doc, please click here. Questions and comments should be sent to Josh Ontell.
Video Lottery Terminals:
Revitalizing NJ’s Higher Education Institutions and Horse Industry
By David Rolek, Tom Lynch, and Josh Ontell
THE ISSUE
Increased funding for higher education in New Jersey is an investment in the public good with a guaranteed return. It stimulates the state’s economy and generates tax revenue. Using Rutgers, the State University of New Jersey as our primary example, we will show how funding higher education is both critical to the future of New Jersey’s economy and plausible to implement despite budget difficulties. The Rutgers Economic Impact Report, a study of the impact of state aid to higher education, enumerates the many benefits of funding Rutgers. Rutgers attracts monies from outside the state with research grants, spending by out-of-state students, and federal student aid. For every dollar spent by Rutgers, “another dollar’s worth of economic activity is generated for the state’s economy. The combined effect of university direct and indirect spending [in fiscal 2003] was $2.8 billion – more than five times the state’s $524 million investment in the university.”1 Also, New Jersey businesses are able to stay competitive thanks to the “sophisticated workforce” educated by the state’s flagship university. Further benefiting the state, “Rutgers’ research and development programs – often conducted in collaboration with New Jersey industry – generate ideas that become practical inventions with the potential to transform our daily lives and fuel the economy.” 2
Just as higher education funding benefits New Jersey, so does the state’s horse industry. The 1.1 billion dollar industry is vital to New Jersey’s economy because it sustains 13,000 jobs, supports four billion dollars of infrastructure, and creates 160 million dollars annually in federal, state, and local taxes. Also, equine farms, which are supported by the state’s racetracks, help to preserve open space.3 The horse industry supports twenty percent of the working agriculture in the state.4
BENEFITS OF FUNDING RUTGERS
• Rutgers attracts funds from outside the state with research grants, spending by out-of-state students, and federal student aid.
• For every dollar spent by Rutgers, “another dollar’s worth of economic activity is generated for the state’s economy. The combined effect of university direct and indirect spending [in fiscal 2003] was $2.8 billion – more than five times the state’s $524 million investment in the university.”
• New Jersey businesses are able to stay competitive thanks to the “sophisticated workforce” educated by the state’s flagship university.
• “Rutgers’ research and development programs – often conducted in collaboration with New Jersey industry – generate ideas that become practical inventions with the potential to transform our daily lives and fuel the economy.”
Source: The Rutgers Economic Impact Report
According to the New Jersey State Constitution, all state lottery revenue must fund education. By introducing Video Lottery Terminals, i.e. video slot machines, to the state’s racetracks, New Jersey could use VLT revenue to increase its higher education budget. The inclusion of Video Lottery Terminals in the state’s racetracks could generate approximately, “$433.5 million in [the] first twelve months of operation.”5 In addition to augmenting higher education funding in New Jersey, the state’s racetracks would benefit from the installation of VLTs. According to the Maryland Department of Legislative Services, VLTs are a proven method of increasing attendance at racetracks.6
VLTs are the most effective way of achieving the dual goal of injecting money into the horse industry and the higher education system.
WHY NOW?
A poll conducted by the NJ Standardbred Horse Industry indicated that a majority of the state legislature supports VLT legislation. With a strong outreach effort, advocates can make VLTs a reality—revitalizing NJ’s racetracks and retaining open space.
Source: The Atlanticville (2008, January 10) “Poll shows legislative slot support”
THE NEED
The Horse Industry
New Jersey’s horse industry is vulnerable to competition from VLT-equipped racetracks in Delaware and Pennsylvania, which use VLTs to create a competitive edge that New Jersey lacks. New Jersey’s horse industry has depended on casino subsidies to stay afloat, but those subsidies have ended.7 As Thomas F. Luchento, President of the Standardbred Breeders and Owners Association of New Jersey, said, "The horse racing and breeding industry in New Jersey is facing a crisis of enormous proportion that threatens to destroy it completely. New Jersey racetracks cannot offer enough purse money to compete with neighboring states with slot machines or video lottery terminals at their racetracks. If the state does not do something very soon to provide enough funds to boost horse race purses and breeding funds to compete with New York, Pennsylvania and Delaware, there soon will not be a horse industry at all."8 If the state fails to introduce VLTs to New Jersey’s racetracks, race purses will continue to shrink. The tracks will be unable to financially support high-profile racing events such as the Hambletonian and the Breeder’s Cup—to the economic detriment of the state. The negative economic multiplier effect will worsen if the American economy enters a recession. VLTs present a perfect opportunity to revitalize the equine industry, while adding to the higher education budget.
HOW VLTs BENEFIT RACETACKS
• Video lottery terminals would generate $433.5 million in the first year alone.
• The NJ racing industry is in need of revitalization. Experience in other states shows that VLTs increase attendance at the state’s racetracks.
• Delaware has 5,300 VLTs in three racetracks. In 2002, the VLTs generated $565 million dollars in revenue. Sixty percent of that went to racetracks and purses, and the remaining forty percent went to administrative costs (5%) and the state general fund (35%).
• NJ’s racetracks and horse farms are vulnerable to competition from VLT-equipped racetracks in Delaware and Pennsylvania. VLTs will better position NJ racetracks to compete with similar racetracks in neighboring states.
In Delaware alone there are 5,300 VLTs in three racetracks. These VLTs generated over $565 million in revenue for the state in 2002. Sixty percent of this money went to racetracks and purses, with the remaining forty percent being used for administrative costs (5%) and the state general fund (35%).9 To remain competitive with neighboring states, New Jersey should consider installing Video Lottery Terminals as soon as possible.
1 p.5. Rutgers Economic Impact Report, Rutgers, the State University of New Jersey, 2004. Website: oirap.rutgers.edu/reports/ecom_imp/EIPrintable04.pdf (1/27/08).
2 p.12, Ibid.
3 p. 1. Gottlieb, Paul et al. The New Jersey Equine Industry 2007: Economic Impact, Rutgers Equine Science Center, April 4, 2007. Website: esc.rutgers.edu/news_more/PDF_Files/2007_Equine_Economic_Impact_Study_Report.pdf (1/27/08).
4 Introduction, Ibid.
5 VLT Feasibility Consultant Analysis and Report, Christiansen Capital Advisers on behalf of the NJ Department of the Treasury, March 4, 2007. Website: www.state.nj.us/treasury/pdf/VLT%20Feasibility%20Consultant%20Analysis%20and%20Report%20FINAL.pdf (2/24/08).
6 Overview of Issues Related to Video Lottery Terminals, Maryland Department of Legislative Services, January 29, 2003. Website: mlis.state.md.us/Other/Gaming_2003.pdf (12/6/07).
7 The Atlanticville. (2008, January 10). “Poll shows legislative slot support.” Website:
atlanticville.gmnews.com/news/2008/0110/Front_Page/003.html (2/24/08).
8 Wyckoff, Danielle. (2007, September 26). “Republican Legislators: Immediate Action Is Needed to Save New Jersey’s Horse Racing Industry,” PolitickerNJ.com. Website: politickernj.com/republican-legislators-immediate-action-needed-save-new-jersey-s-horse-racing-industry-12170 (1/21/08).
9 See endnote #6.