Solving Social Problems Is How KY & Other States Pitched Sports Betting

Written By Adam Hensley on July 24, 2023
pitching kentucky sports wagering with solving problems like pension crisis

Kentucky sports betting looks to bring significant dollars into the state, and that means money will go toward helping its pension crisis.

Gov. Andy Beshear believes sports betting in Kentucky will generate $23 million in annual tax revenue.

The state taxes retail sports betting revenue at a 9.75% rate and online sportsbooks at 14.25%. Both are fairly in line with industry standards. Online sports betting dominates in most states, so the tax is higher for that sector.

In general, tax revenue is how politicians sell sports betting to their constituents. For Kentucky, 97.5% of tax revenue from sports betting will go toward the state’s pension fund. That’s a key reason the sports betting bill was able to garner bipartisan support.

After all, Kentucky faces major pension funding issues.

But other states take the same approach: Use sports betting tax revenue to fund government programs and solve social problems. For example, California’s failed attempt at legalizing sports betting was centered around a campaign to end homelessness in the Golden State.

California’s attempt to legalize sports betting tied it to homelessness

Sportsbook operators tried to legalize online sports betting through a ballot initiative last fall. It failed. And with so many competing interests in the state, legalization won’t be happening any time soon.

In 2022, there were two ballot initiatives aimed at legalizing sports betting. One would allow online betting and the other would only allow brick-and-mortar sportsbooks on tribal land.

Prop 27, or the Legalize Sports Betting and Revenue for Homelessness Housing, and Education Initiative, made its rounds. It was mainly funded by FanDuel and DraftKings, two of the largest online sports betting operations on the planet.

Not only would this initiative legalize sports betting, but it would have taxed sports wagering revenue at 15%. Tax dollars would go into a sports wagering fund, which would be directed toward homelessness-related issues.

The money would have gone toward affordable housing, additional public education, mental health programs and more.

California’s unhoused population has become a struggle on a national scale.

New York Times article published last month states that California is home to more than 171,000 homeless individuals. According to the story, that number makes up 30% of the nation’s total.

Obviously, this initiative didn’t pass. But California’s homeless issue is too steep for sports betting to fix. The current situation is a result of years of deterioration. It isn’t an easy fix by any means.

Sports betting would help, but it would not solve California’s homeless problems alone.

Colorado sports betting taxes help conservation

Like how California attempted to combat a statewide issue, Colorado incentivized sports betting by allocating tax dollars to its water plan.

Proposition DD was the Legalize Sports Betting with Tax Revenue for Water Projects measure. When it passed in 2019, it created a 10% tax on sports betting profits. Those tax dollars go toward water conservation projects and resources within the Colorado Water Plan. Those include:

  • New water storage
  • Raw water supply
  • Project planning
  • Agricultural projects such as collaborative water-sharing agreements, watershed and recreation projects and water education and innovation

According to Water for Colorado’s website, the Colorado Water Plan has received $14.7 million since 2020.

The state’s 10% tax on sports betting is low compared to how other states tax their respective markets. But last year, Colorado passed HB 22-1402, which will allocate more d0llars to the Colorado Water Plan.

US saw $3 billion in sports betting taxes go toward education, other areas

Every state has some incentive behind its sports betting industry. Typically, states use gambling taxes of all sorts to help fund public education.

Since the Supreme Court legalized sports betting in 2018, Americans have bet $220 billion on sports, according to PBS News. Of that total, sports wagering taxes came out to $3.6 billion across the country.

Of that total, $3 billion went back to individual state and local projects, such as education, health care and other areas.

KY’s sports betting industry won’t solve pension crisis, but it could preserve essential services

More than $25.1 billion in pension liabilities remain unfunded in Kentucky, and the state’s sports betting taxes will attempt to help alleviate the issue. But sports betting won’t solve it.

Remember, 97.5% of the state’s sports betting tax revenue will go to its pension fund. The state is estimated to receive $23 million in sports betting taxes. That’s a huge plus for the state.

However, sports betting taxes aren’t a quick fix for the issue. It will make just a small dent in the astronomical number. There isn’t an easy fix for Kentucky’s pension problem.

It’s not an ideal situation. Kentucky does not want to cut any essential services to reallocate funds. Sports betting tax dollars, though, should help in this area. Should the industry be a hit, like in most states, sports wagering could prevent Kentucky from cutting funding for its essential services.

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Adam Hensley

Adam Hensley is a staff writer for PlayKentucky. His byline has appeared in the Associated Press, Sports Illustrated and sites within the USA Today Network. Hensley graduated from the University of Iowa in 2019 and spent his college career working for the Daily Iowan’s sports department, both as an editor and reporter.

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