Education

Have casinos helped fund education across Mississippi?

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Mississippi school funding

The Mississippi Center for Investigative Reporting, a new nonprofit news organization, collaborated with news outlets across the state, including the Sun Herald, to produce this series on the lack of education funding in the state and its affects.

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Every time he speaks to Rotary, Kiwanis or other groups, Larry Gregory says people ask if casino tax revenue isn’t supposed to be pumping millions of dollars into schools across Mississippi.

Every time he tells the audience it’s a misconception, said Gregory, executive director of the Mississippi Gaming and Hospitality Association and former executive director of the Mississippi Gaming Association.

If there had been talk about education becoming a major beneficiary when voters approved casinos back in the early 1990s, he said it didn’t make it into any of the regulations.

It’s not in the Mississippi Gaming Control Act or other legal document that casino tax revenue specifically would benefit education throughout the state, he said.

A 1990 report in the New York Times said new jobs, large payrolls, revenue for cities and counties and more business for local suppliers were what residents and officials hoped the casinos would bring. It didn’t mention schools being the priority.

State regulations do say schools get a percentage of the tax at the local level.

Haves and have nots

In Biloxi, in Tunica and other cities and counties where casinos flourished, schools have shared in the prosperity casinos brought.

“They’ve got a windfall given to them that the other school districts don’t,” Gregory said.

On the 25th anniversary of casinos in Mississippi in 2017, Mississippi Gaming and Hospitality Association reported that Mississippi casinos had paid $6.5 billion in state taxes and $638 million in taxes for local education over the first 25 years.

In just the first 5 years of the casino industry in South Mississippi, $26 million in tax revenue was funneled to local schools, according to a 1997 article in the Sun Herald. Gulfport schools collected $3.9 million of that total, the report said, and used the money for more teachers, better libraries, newer computers and indoor physical education rooms in every grade school.

“Gaming dollars are doing so much right now that has been neglected for 37 years,’‘ said Larry Drawdy, superintendent at the Biloxi School District at that time. “We were at a point where we would have had to raise local property taxes or do without and have less than a quality standard of education,” he said.

There were drawbacks. Schools that didn’t get tax money from the casinos struggled to offer competitive salaries while teachers in gambling towns got raises, the article said.

Before casinos, Tunica County schools spent less per student and had the lowest test scores in the state, according a 1999 case study. By 1997, more than $3 million a year was going to the local schools, according to “The Effects of Casino Gaming on Tunica County.” But the report says the school system was still under control of the state. Instead of going to college, the report said bright high school graduates were going to work at the casinos.

The formula

Mississippi casinos pay 12 percent tax on gross gaming revenue. While most businesses pay taxes on profits, casinos pay this 12 percent tax on winnings before deducting the cost of wages, insurance and other expenses of doing business.

The breakdown from there is:

8 percent — goes to the state general fund, which is used in part for education. $3 million goes to the bond sinking fund to pay for improvements to state roads and bridges.

Up to 4 percent — of the 12 percent is split between local governments and schools. In Biloxi, for instance, 40 percent goes into the city general fund, 20 percent to city public safety, 20 percent to Biloxi School District, 10 percent is distributed to public schools in Harrison County and 10 percent to Harrison County government.

Of the 151 school districts in Mississippi, only the districts in the 7 counties where casinos operate benefit from the local distribution.

Biloxi School District receives about $6 million a year from the tax on gross casino revenue, which Shane Switzer, director of business, says is about 10 percent of the schools’ overall budget. The addition of sports betting has boosted the city’s share by more than $200,000 since the state fiscal year began in July.

“In addition to the gaming revenue tax, we also receive ad valorem taxes from both land assessments and personal property assessments,” he said. Casinos pay a local fee on each slot machine, along with other use and wage taxes. Mississippi’s casinos had nearly 20,000 employees and a monthly payroll of $51 million in December 2018.

All schools benefit

Under Florida law, all tax revenue from slot machines goes to Florida’s Educational Enhancement Trust Fund to be distributed to school districts and public colleges, along with providing financial aid to Florida students. Missouri is another state that directs a large portion of casino taxes to education, according to the American Gaming Association.

Although Mississippi doesn’t have these provisions, casinos taxes do benefit all school districts throughout the state, said Kathy Waterbury with the Department of Revenue.

Nearly all of the tax on gross gaming revenue the state collects this year will go into the general fund that provides money for education.

A portion of the sales tax collected at casinos and other businesses across Mississippi, is dedicated to education, Waterbury said.

“In fiscal year 2018, DOR transferred more than $2 billion in sales tax revenue to the state’s general fund,” she said. These transfers are made after all other diversions are paid to cities and for hotel and other special taxes.

She said 2.266 percent of the total sales tax revenue is deposited in the School Ad Valorem Fund up to a total of $42 million annually. Anything over $42 million is transferred to the Education Enhancement Fund, which also receives 9 percent of the state tax revenue. That amounted to $299 million last year, she said.

More for education?

That’s up to the state lawmakers. In 2015, House Bill 1630 changed the way casino revenue was split and directed revenue previously earmarked for bridges and highways near casinos to instead be used throughout the state.

The changes didn’t provide additional money for education.

Waterbury said the Legislature allocated a portion of the $3 million a month bond sinking fund, and in 2016 lawmakers provided $500,000 each month to the Gulfport Aquarium Construction Fund, $41,663 for Catfish Row Museum Construction Fund and $83,334 to Bass Cultural Arts Center Fund. In 2017, another $500,000 a month from the bond sinking fund was earmarked for construction of the Gulfport aquarium. Beginning in 2018, all $3 million a month is again directed to the bond sinking fund.

The state Legislature had another opportunity to direct gambling money to education in 2018, when after years of debate, a lottery bill finally passed in Mississippi.

Unlike in Louisiana, where 35 percent of lottery winnings help fund education across the state, the Mississippi Legislature chose to make the state’s crumbling roads and bridges the priority.

Education will get a share of the lottery proceeds in Mississippi if there is any remaining revenue after $80 million a year is spent on roads and bridges.

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Mary Perez is the business and casino reporter for the Sun Herald and also writes about Biloxi, jobs and the new restaurants and development coming to the Coast. She is a fourth-generation journalist.
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