THE VIDEO POKER CASINOS begin at the state line, at every major entry point, and spread out in all directions. They have names like Winner’s World, Paradise and Fast Freddie’s, and you will find them nearly everywhere in South Carolina, from the beaches to the Interstates to the strip malls that line the outskirts of every town.
There are still some roads into the state that aren’t lined with video poker machines, but it’s getting harder and harder to find them. With hundreds of poker operators holding thousands of licenses in thousands of locations, it’s difficult to drive very far without reaching the conclusion that the Palmetto State is hooked on electronic five-card draw. It’s a great pleasure to play video poker.
It has all happened startlingly fast. Ten years ago, there were 7,000 video poker machines in South Carolina. Now there are about 34,000–not just in casinos but in gas stations, convenience stores, bars and restaurants. As recently as 1996, the amount bet at the machines was $1.75 billion; now, it is about $2.5 billion. Last year’s state tax take from video poker was $61 million–not a very high percentage of the gross, but a sum of money few in state government would wish to give up.
In short, gambling has attached itself to South Carolina life in a powerful way. So you might be surprised to hear that last year, while the rollicking video poker industry was minting money, the state’s campaign for governor hinged almost entirely on the debate over a comparatively innocuous plan for a state-sponsored lottery. Arguing about a lottery in South Carolina seems a little bit like arguing about bingo in Las Vegas. Under the circumstances, it ought to be a minor issue.
And yet the sheer incongruity of the gambling debate says something important about what is happening to South Carolina, and to some of the states around it as well. Desperate for money to improve their educational systems, they are becoming more and more dependent on the revenue stream from gambling in many different forms. But that dependence is accompanied by some persistent self-doubts–and by some determined rear-guard opposition.
“Unfortunately, the gambling industry has its foot in the door in South Carolina,” says Republican House Speaker David Wilkins, a gambling opponent. “It worries me greatly. Our worst nightmare is to become the gambling mecca of the Southeast.”
Last fall’s election created a large share of Wilkins’ current unease. Long-shot Democratic challenger Jim Hodges, who campaigned for a lottery with the revenues earmarked to education, unseated Republican Governor David Beasley, a gambling opponent whose only concession on the lottery was a willingness to put it to a public vote. And the lottery wasn’t Hodges’ only important gambling-related weapon. In retaliation against Beasley’s effort to ban video poker from the state, the poker machine operators poured a staggering amount of money into a no-holds-barred effort to oust him.
What the whole episode made clear was that the gambling issue, with all its alliances and intricacies, is reordering the state’s politics. “Who would have expected an incumbent governor in a strong economy to lose?” says Bill Moore, a political scientist at the College of Charleston. “If you talk to people about the 1998 election, it was like the stars and the moon aligned and everything changed.”
Gambling has grown so rapidly in South Carolina that the state isn’t even quite sure of the industry’s size, or whether there is any practical way to regulate it.
Just in the two months following last year’s election, 3,000 additional video poker machine licenses were granted in South Carolina. Meanwhile, a nascent casino boat industry seemed to surface out of thin air. The boats are a particularly worrisome problem because they operate offshore, outside the state’s three-mile zone, and the state failed to opt out of a federal law that allows casino gambling outside that zone.
As the presence of gambling becomes more pervasive, the horror stories about its effects circulate more and more widely. In one well-publicized instance, a woman spent hours in a casino pouring change into a video game while her infant daughter suffocated to death inside her car. In another, an elderly couple not only spent their life savings on video poker but went more than $50,000 into debt to finance their habit.
In his campaign last year, Beasley regularly referred to the fast-moving games as “the crack cocaine of gambling.” Beasley may have lost, but his crusade left an impression that will not be easily dissipated. “Until it was made an issue by the governor when he moved to have it abolished, I don’t think most people understood how big the industry was, the revenues it brings in and the almost total lack of regulation,” says Bill Moore.
South Carolina Democrats place the blame squarely on Beasley’s shoulders, pointing out that the industry’s explosive growth took place on his watch. That much is true, but not entirely fair. The machines were ruled legal and in operation long before he took office. The truth is that nobody in the state quite knows what to make of the industry–not the courts, the legislature, the governor or even the voters, who have sent mixed signals at the polls as to whether video gambling should remain legal. “Unlike most other states, we have reversed government’s role in video poker,” says state Senator Ernie Passailaigue, who filibustered against a video poker ban last year. “Here, our industry developed and now we’re trying to pass law.”
Whatever else it may be doing, video poker is breathing life into the state Democratic Party. It is impossible to say exactly how many millions of dollars gambling interests spent in their successful effort to oust Beasley last year, but it’s no secret that they went after him with a vengeance. There were billboards, television commercials, direct mail, get-out-the-vote efforts and generous contributions to both Hodges and his party. Even convenience stores offered anti-Beasley literature. It’s safe to say that South Carolina politics had never seen anything remotely like it.
Today, the once-moribund Democratic Party has the GOP looking warily over its shoulder, fearful of putting any gambling issues–such as a ban on video poker–on the ballot next year, when its House majority will go before the electorate. “Does the issue have an impact on the legislative process? Very much so,” says Speaker Wilkins.
But it’s not without some trepidation that Hodges and other Democrats are embracing gambling interests. Back when he served as a legislator in the 1980s, Hodges was a staunch opponent of any form of gambling. Despite his unqualified support for a lottery today, he confesses to being uneasy about video poker. Like many in his party, he insists that what the industry really needs is tighter regulation and taxation–and that a sensibly regulated gambling industry is an acceptable price to pay for a massive infusion of dollars for education. “You have to do a cost-benefit analysis on any issue such as a lottery or on video poker,” says Hodges. “There are social costs with the lottery or with other forms of gambling, but I’d argue that the costs are far greater when you have a poor educational system.”
Many other Democrats echo the governor’s argument, especially those who advocate for minorities and the poor. Despite the regressive impact of statesanctioned gambling, particularly within minority communities, many find the lure of increased education and social spending without the responsibility of additional taxation irresistible.
Not all Democrats are willing to take the bait, however. Six Democratic legislators–two of whom are African American–broke ranks with the governor on the lottery.
It’s also a mistake to assume that the gambling issue follows strict party lines. The Republican side of the aisle is divided among Christian conservatives who oppose gambling in nearly all forms, tax-cutters who view gambling revenues as a way to support tax reduction, and a more pragmatic wing that holds no intense position on the subject but simply wants to avoid raising the ire of the gambling industry.
The latter faction appears to have some support from Republicans in Washington: Late in the 1998 campaign, when Beasley’s popularity was plummeting, the Republican National Committee in Washington cut him adrift by intervening and vetoing a Republican Governors Association effort to spend $500,000 on a tough TV ad linking Hodges to the gambling industry. The national party didn’t want to alienate gambling either.
Similar divisions surfaced on the Democratic side this year when the question of what to do about video poker came up. “We’re all over the map. We have some strong anti’s, some supporters and some in the middle,” says House Minority Leader Gilda Cobb-Hunter. “The problem for the Democratic caucus is that during the last election the party was unfairly portrayed as the video poker party.”
The ability to splinter each party’s caucus goes a long way toward explaining the success of the gambling lobby in South Carolina and nearly everywhere else. Perhaps more important, the industry recognizes the dynamics of the budget-making process.
That’s why, on the day after the election last year, video poker interests paid for billboards literally begging the state for more regulation. For them, it’s been a constant theme. Although it might seem incongruous for a powerful industry to seek tighter regulation and higher taxes, there is a certain political genius to it.
The reason is that for a $2.5 billion business, video poker occupies a precarious perch in South Carolina. Although the industry has been legitimized by the state supreme court, it still could be banned by the legislature or voted out of existence in a referendum. In fact, a measure to ban the industry lost on a 58-58 tie vote in the GOP-controlled House in March. While the Democratic-majority state Senate is reliably on the pro-gambling side, the industry would rather not take its chances.
On the other hand, if the industry is regulated and taxed, the state budget is certain to become permanently hooked on the revenue stream. Then the poker machine operators can be virtually certain of defeating any effort to target them for extinction. “They want to be taxed so they can be left alone,” explains Democratic Representative Robert Sheheen, who sponsored the bill to outlaw video poker.
If there were any doubts about the efficacy of that approach, they were dispelled in March, when the House–counting on future video poker revenues–larded its budget bill with a $300 million spending spree on construction projects and tax cuts. It hardly mattered that, even under the sunniest of estimates, only $200 million would be available.
“By legitimizing and then regulating them, you’ve further entrenched them,” says Sheheen, the former House speaker. “When you add in all these artificial boosters and then spend it, then you’ve locked yourself in, because you are not going back. If we get used to that, I think you’ll see other forms of gambling come into the state.”
One form of gambling that will almost certainly arrive soon is the lottery. Hodges not only promised in the campaign to create one but launched his gubernatorial term vowing to keep the promise.
When Hodges took to the floor of the South Carolina General Assembly in January to offer his maiden state-of-the-state address, you might have thought an aide had slipped him the wrong speech. He seemed to want to talk about Georgia. “Since 1993,” he said, “lottery revenues have provided almost 400,000 Georgia students with more than $600 million in scholarship money. This year alone, 61,000 Georgia children will attend pre-kindergarten programs funded by lottery dollars.”
Hodges was making a pitch for his campaign platform the best way he knew how–by pointing to the well-publicized successes of the lottery in the neighboring jurisdiction. He’s not the only one with Georgia on his mind these days. Across the Southeast, elected officials in every lottery-less state can’t seem to talk about anything else.
In Alabama, newly elected Governor Don Siegelman, another Democrat elected in 1998 on a pro-lottery platform, took Georgia lottery-worship one step further: He brought in former Georgia Governor Zell Miller, the Democrat who created the lottery, to swear him into office.
Hodges and Siegelman don’t just admire the Georgia lottery–they’re envious of it. When Georgia lottery jackpots swell, the parking lots of convenience stores just inside the Georgia border are filled with out-of-state license plates. In fact, the state estimates it sells 16 of every 100 tickets to residents of Alabama, South Carolina, North Carolina and Tennessee. South Carolina residents bought $87 million worth of Georgia lottery tickets last year; Hodges highlighted that fact last fall in a campaign spot featuring a Georgia bumpkin thanking Governor Beasley for not supporting a lottery.
“Whether you are pro or con, the lottery is here. From a practical standpoint, people know it’s here, right on the Georgia border,” says South Carolina state Senator Glenn McConnell. “We’re just not getting any money for it.”
Barely six months after the vote that put Hodges and Siegelman in office, that situation is about to change. Lottery bills have cleared the legislature in Alabama as well as South Carolina; they will have to be approved by the voters, but the consensus is that this will happen easily.
And nearby Tennessee and North Carolina may not be far behind. Each is as close to putting a lottery to a public vote as it’s ever been. In Tennessee, Republican Governor Don Sundquist recently tempered his opposition and now supports a lottery referendum. In North Carolina, Democratic control of the legislature is providing hope to lottery proponents. Every major Democratic candidate for governor in next year’s campaign is already on record as favoring a lottery.
Advocates in Tennessee and North Carolina argue that neither can afford to wait any longer, not only because Georgia continues to drain dollars from both states but also because South Carolina and Alabama will soon have their own lotteries up and running.
It is the same argument that has powered gambling expansion all across the country. The horse racing industries in Pennsylvania and Maryland insist they need slot machines at racetracks so that they can compete against neighboring West Virginia and Delaware, where slots are already permitted. In Kansas, horse racing interests argue that slots are the only way they can survive against Missouri’s riverboat casinos. In Nebraska, Iowa gaming is used for leverage. In Massachusetts, it is Connecticut and New Hampshire that play that role.
There’s little reason to believe it is part of a concerted effort, but nevertheless the strategy serves the same purpose. It creates a relentless force pressuring for incremental concessions in state after state, year after year.
In Alabama and South Carolina, there was no direct connection between the interest groups advancing a lottery and those backing video poker casinos. But each side was acutely aware that legalization of one almost surely paves the way for the other. That’s how it worked in Louisiana, where a lottery generated support for video poker, and in Missouri, where the initiation of a lottery in 1986 prepped the state for riverboat casinos several years later.
The rise of the Indiana gambling industry is even more instructive. A decade ago, legalized gambling was nearly nonexistent there. It kicked off with a small step in 1989–a state lottery–then progressed to riverboat legalization in 1993 and finally a horse track in 1994. By 1996, just seven years after it began, legalized gambling had become a $1.6 billion industry.
“The adoption of a state lottery significantly increases the likelihood that a state will legalize casino gambling,” says Patrick Pierce, a St. Mary’s College political scientist who has studied the link between the two. “It tells policy makers that the forces that oppose gambling can be beaten. And if they can be beaten on a lottery, they can be beaten on a casino.”
Alabama faced the gambling question in all its complexities a couple of months ago, when legalization of video poker made its way to the state Senate floor just minutes after the Senate agreed to send voters a constitutional amendment creating a lottery. The most vociferous backers of video poker were track owners: Since the state would soon have a lottery, they argued, the survival of Alabama’s four already struggling dog tracks was predicated on the authorization of video gambling machines. Besides, they argued, video poker would stanch the flow of Alabama gambling dollars to Mississippi casinos. Video poker advocates even had their own self-serving label for the bill–it was titled “The Illegal Gambling Prevention Act.”
But gambling opponents had their own name for it: the Casino Gambling Enabling Act. From their perspective, once the lottery and video poker were both established, full-fledged casinos would be impossible to stop. What might begin as limited video poker at dog tracks would soon mushroom into something else entirely.
It wasn’t an altogether implausible fear. If Alabama did legalize video poker, dog track owners wouldn’t be the only ones poised to benefit. The state’s small-time Indian gaming operations also stood to cash in, since under federal law Indian tribes are allowed to offer any form of gambling that a state makes legal.
The Alabama Christian Coalition, which led the anti-gambling forces, found an unusual ally to help it in its struggle. Mississippi gambling interests, it seems, had their own concerns about an expansion of gambling next door. The lottery didn’t worry them so much; it was the prospect of dog track poker machines on the Alabama side of the border eating into the market share of the Magnolia State casinos. Not only that, if dog tracks got a monopoly on video poker in Alabama, the Mississippi casinos would lose any future opportunity to expand across the border. So the debate produced one of the oddest alliances in recent Alabama history–evangelical Christians and Mississippi gambling interests working in concert to vote video poker down.
The fight dragged on into the waning days of the session. A filibuster appeared at first to send the video poker bill to its grave, but a tenacious effort by supporters kept the issue alive until almost the final gavel. No matter which side you were on, it was impossible not to notice the intensity of the debate and the ferocity of the opposition. And it was clear that critics would have a difficult time as they attempted to stop gambling’s momentum in the future.

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