Will legalizing sports gambling in Missouri really support education?

Missourians will decide whether to legalize sports gambling in Missouri through Amendment 2, a referendum on this year’s general election ballot. Supporters say it’ll help fund education in the state, but critics say the amendment’s writing leaves more questions than it answers.

The amendment is being pushed by a group calling itself Winning for Missouri Education, a coalition of sports teams and gambling operators.

Sports gambling is legal in 38 states across the country, including seven of Missouri’s neighboring states.

“Every day, tens of thousands of Missourians are betting on sports, either on illegal offshore websites or they’re going to one of our seven neighboring states,” Jack Cardetti, spokesperson for Winning for Missouri Education said. “As it currently stands, Missouri is getting no benefit out of that.”

The coalition commissioned a study from Eilers & Krejcik to find out exactly how much money Missouri was missing out on. Based on revenue from comparable states like Indiana and Ohio, the group calculated about $560 million that could be wagered in the first five years.

The ballot measure’s language would create a 10% sales tax on all gambling revenue collected. Meaning that over the course of five years, Missouri could reap $100 million in taxes.

According to the Winning for Missouri Education, that money would cover the costs of sports betting regulation, fund compulsive gambling treatment, and contribute to the state’s education budget.

However, representatives of Missourians Against Deceptive Gambling, a coalition opposing Amendment 2, said the wording of the ballot measure is misleading.

“We just found it very suspect that they did not include non-supplant language,” Brooke Foster, the group’s spokesperson said.

Non-supplant language ensures any money collected for any specific cause would be additional to the budget rather than replacing funding the state would cover. Particularly with regards to funding education.

In the case for Missouri’s education, gambling revenue from riverboat gaming and Missouri’s lotto are worked into the foundation formula, which calculates the funding a school needs depending mostly on their student attendance numbers.

That foundation formula is the primary funding source for the Department of Elementary and Secondary Education (DESE), according to Kari Monsees, the deputy commissioner for financial and administrative services for the department.

This year’s budget includes $476 million in gaming revenue earmarked for schools, which Monsees said is included within the overall foundation formula.

“We are to fund [the foundation formula] to meet the state adequacy target, so it’s a portion of that total,” Monsees said. “I wouldn’t describe [gaming funding] as on top of what they were already getting.”

Because DESE is a government agency, it cannot give opinions regarding any ballot initiatives. It noted that it would be up to the legislature whether gaming revenue would replace existing funds or provide extra funding.

That’s something that bothers Bob Dorries, a former American Federation of Teachers (AFT) Missouri president. He said gaming revenue replacing existing funds within education’s budget doesn’t sit well with him.

“All the folks in Jefferson City did was take the money that’s collected, put it into the general operating budget and then shift that money back out of education and replace it,” Dorries said. “You’re just playing a shell game.”

Dorries has served 23 years as a band director at his school. He said he cares about his students’ growth and wants to see funding support their education. However, when he looked into the initiative petition’s writing, he grew disillusioned with how much money Missouri could actually get.

“I have a hard time believing that we’re ever going to see a dime,” Dorries said.

It’s a concern that Kansas City’s AFT president, Jason Roberts, also shared.

“Initially, I thought it was great,” Roberts said. “And that’s what I thought until I started digging into it.”

One of Roberts’ main concerns is the prospect of raises in teacher’s salaries. Because the state allocates funds to districts, it’s up to their discretion how to spend money.

“That doesn’t guarantee any teacher is getting a raise in the state,” Roberts said. “The district may decide they need a new football field. Well, that’s not raising anyone’s salary.”

Jason Roberts

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Jason Roberts

At the district level, Michelle Baumstark, the communications director for Columbia’s Public Schools explains Amendment 2 could work similar to how gambling revenue from the lottery and riverboat gaming currently work.

Once revenue is allocated to the foundation formula, the districts receive funds monthly as part of payments from DESE.

“Those funds are then used in the operating budget for the school district,” Baumstark said via email. “So…we aren’t receiving funds directly from the lottery, but rather indirectly via the state education funding streams.”

That money can show up in the form of transportation funding, state programs like A+ scholarships, which provide financial aid for two-year college students and more. While the state funding helps, local tax dollars make up 65% of Columbia’s education funding.

“We are grateful to our local community for its continued support of its public schools,” Baumstark said. The Columbia Public School system has not taken a stance on the sports betting initiative.

Roberts said his concerns only grew bigger once he read the state auditor’s report on Amendment 2. As noted on the ballot that Missourians will receive, the state auditor’s office calculates Missouri could see revenues ranging from $0 to $28.9 million annually.

These predictions were made using revenue data from Indiana, which legalized sports gambling during the pandemic. Winning for Missouri Education reps said because the pandemic artificially depressed Indiana’s revenue, the report understates how much revenue Missouri could actually be making.

Still, the Missouri Department of Revenue and Missouri Gaming Commission reported that the language in the ballot puts up some roadblocks for funding Missouri schools.

The Commission said any money collected would be used to first reimburse any expenses incurred by the Commission to regulate gambling, then to fund the Compulsive Gambling Prevention Fund and — finally — to fund education.

Even then, the commission said it doesn’t anticipate any sports wagering tax revenue due to deductions gambling operators could take. To begin, operators are allowed to deduct 25% of the gross costs of promotions or free plays they may run.

Additionally, the ballot measure says that operators would be able to deduct “federal taxes” when they file to the state. The Commission said that due to the vagueness of the language, operators could deduct federal income, employment and any other federal tax when reporting its receipts.

If, after all those deductions, the receipts appear to show negative revenue, the operator would not have to pay any taxes to the state.

“This would in turn impact the ability of the Commission to meet its reasonable expenses,” the commission said in the report. “As well as limit or eliminate contributions to the Compulsive Gambling Fund and education in the State of Missouri.”

Eilers & Krejcik’s study, which calculated $100 million in taxes, only took into account a federal excise tax deduction. In an email, the firm said it did so under the guidance of Winning for Missouri Education.

It’s a situation that the Wichita Beacon previously reported on when calculating how much taxes gambling operators paid in the state of Kansas. Their investigation found that out of $194 million generated in February of 2023, only $1,134 were paid out in taxes due to deductions operators took out.

Roberts said all of these factors leave him with more questions than answers regarding the amendment’s effects on Missouri’s education. And in the end, he feels frustrated to be used as a “political pawn.”

“If this thing passes and all this money starts flowing, then that’s fantastic,” Roberts said. “But using teachers as political pawns for any ballot initiative is simply unacceptable.”

As voters head to the polls in November, Monsees with DESE said that while there’s validity to both sides of the argument, there’s a caveat to keep in mind.

“I think at the very least there’s a false perception that riverboat gaming and the lottery were going to solve all funding issues for education,” Monsees said.

Winning for Missouri Education did not reply to questions about why it asked for only some taxes to be included in Eilers and Krejcik’s report or whether additional deductions available to sports gambling operators would leave Missouri’s education funding formula essentially unchanged.