In fiscal year 2022, nationwide U.S. spending on services to treat gambling addiction was just 38 cents per capita at the state level. There is no funding at all for such programs at the federal level. Moreover, some states struggle to spend what little money they have allocated to the problem.
That average includes D.C. and all fifty states, even those with no funding for gambling services. There are nine such states. Most have little or no legal gambling, like Alaska, Hawaii, Utah and Alabama. If we exclude those, the figure for the remaining 41 states and D.C. is $2.2 million per state or 46 cents per resident.
The state-level information comes from the National Association of Administrators for Disordered Gambling Services (NAADGS), which contracted Problem Gambling Solutions Inc. to prepare the data.
Linda Graves, Executive Director of the NAADGS, told Bonus:
Budgetary allocations dictate the scope of services available to problem gambling programs. It is imperative that as states expand their gambling opportunities, they also make more than token investment in services to protect their constituency by designating a percentage of gaming revenue toward addressing the scope of services for gambling disorders, including research, prevention, awareness and education, treatment, and recovery. We recommend that 2% of gross gaming revenue be designated in statute/regulation for problem gambling services to address prevention of gambling disorders and a continuum of services for those who have been affected by gambling disorder.
Allocations Up, but a Fraction of NAADGS Recommendations
In that regard, there’s some good news to be found in the NAADGS’s 2022 Budget Update. Spending has increased over the years and faster in 2022 than previously. States spent a total of $104.3 million on problem gambling services in 2022, up 11% from the previous year. That’s an improvement over an annualized growth rate of 5% from 2016 to 2021.
On the other hand, total allocations are still far below the NAADGS recommendations. The American Gaming Association (AGA) reports nationwide gross gaming revenue (GGR) amounted to $60.4 billion. Graves’ recommended 2% allocation to problem gambling treatment would equate to $1.2 billion, or almost 12 times the actual allocations.
Moreover, the gap is widening. The AGA’s stats show an increase of 13.9% in GGR from 2021 to 2022, 2.9 percentage points more than the increase in allocations. So, although state budgets are increasing, they’re not keeping up with the growth of the gambling industry.
Also worrisome is the fact that many states didn’t spend their full allocation. That shows that the problem with gambling treatment in the U.S. is bigger and more complicated than a line item in state budget bills.
Budget Allocation vs. Real Spending
In terms of dollars allocated, Massachusetts topped the chart at just over $11 million, followed by New York, Michigan and California. These are all heavily populated states with correspondingly large overall budgets.
On a per capita basis, Oregon is number one, allocating about $1.90 per resident. Massachusetts and Delaware each allocated around $1.50, and Nebraska makes a somewhat surprising appearance as the only other state allocating more than a dollar per resident.
But allocating money to fight problem gambling is one thing. Actually spending the money is another.
The study found that 59% of state agencies said actual spending was at least 5% lower than the amount allocated. Conversely, only 9% reported that they had supplemented their spending from the state’s general fund or other sources.
Many of those agencies that offered an explanation for this said they had difficulties finding enough service providers in the aftermath of COVID-19.
Dr. Jeff Marotta, the study’s Lead Investigator, provided a list of agencies’ comments to Bonus. One reads:
Due to the pandemic, we could not continue with our grant allocation nor fill our prevention/outreach position. All spending was down across the board due to limitations of Covid.
In total, two-thirds of the comments mention trouble finding providers, the effects of COVID, or both.
Marotta elaborated on the issue:
It is important to note that problem gambling services are generally viewed within the broader context of behavioral health systems. Behavioral health systems across most, if not all, states were significantly impacted by pandemic related effects, most notably, a nationwide behavioral healthcare workforce crisis. Many behavioral healthcare workers left the field and the field is still recovering. This was due to higher demand on the behavioral healthcare system, flight of providers leaving low wage behavioral healthcare positions for higher paying jobs and many taking early retirement, high rates of burnout. The workforce crisis applied to both administrators of services and direct service providers, which both impacted the ability to program fund.
Fortunately, Graves expects that aspect of things to be temporary:
There were certainly some residual complications from COVID, staffing issues, and logistical issues like transitioning to telehealth services, availability of hiring qualified staff, etc. We certainly expect these issues to be resolved in 2023 and forward.
Other Reasons for Spending Below Allocation
Even as the effects of COVID subside, some states may still have trouble spending their full allocation.
One common reason is uncertainty about the final budget. Tying problem gambling budgets to GGR is good because it allows initiatives to grow alongside the industry. However, it means that agencies don’t necessarily know how much they’ll have to spend.
Graves explains:
Some states’ problem gambling budgets are estimated based on gambling revenue incoming during the fiscal year. When gambling revenues exceed projections, the money does not go to the appropriate department for expenditure until sometimes very late in the fiscal year, which does not give the department time to spend the allocation. Especially with the onset of widespread legalization of sports betting, large allocations have come to the department rendering problem gambling services in the ninth or tenth month of a fiscal year, making the department unable to expend all the funds prior to the end of the year.
The converse can also happen. One agency explained:
The authorized budget was artificially increased by a projected revenue stream from new casino wagering tax that did not occur, as casino opening was delayed long past the fiscal year end. Expenditures were managed carefully to avoid going over budget as we watched slow moving casino development, and continued to monitor lingering impact of pandemic on other revenue derived from state lottery and charitable gaming.
Finally, some budget allocations go not directly to problem gambling services but to funds shared with other programs. That can lead to “pilfering,” as Graves puts it, by other services like drug and alcohol programs. She says the problem with this is that it can give a false impression that the gambling programs don’t need the money:
The allocation is not always expended by the agency for which it was first allocated. Then, when the problem gambling service expenditures are reported, it looks as though the allocation wasn’t needed, when in fact it may have never reached those providing problem gambling services.
The Big Picture
Ultimately, the most critical problem facing problem gambling services in the U.S. is the lack of funding. State budgets would need to be several dollars per capita to meet the recommendations of the NAADGS rather than tens of cents as they are now.
Those budgets would also need to grow faster to keep up with GGR. U.S. sports betting may be nearing its ceiling, but at Bonus, we projected 21% growth in iGaming revenue for 2023, even without new states launching. (So far, the year is shaping up about two percentage points below forecast, i.e., on track for perhaps 19% growth.)
If legislative efforts bear more fruit in coming years, the contributions of online casinos to overall GGR will become increasingly important.
At the same time, the discrepancies between allocations and spending point to other issues. The U.S. needs more problem gambling specialists, though better funding might be enough to solve that problem over time, especially with the worst of the pandemic effects now in the rearview mirror.
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