Notes From the Field

Notes From the Field

by / July 31, 1996
"No vice exists which does not pretend to be more or less like some virtue and which does not take advantage of this assumed resemblance."
-- La Bruyere, 1688

The recent move by the Justice Department to ban Internet gambling helps illustrate a growing conflict of interest in state and local governments.

Gambling is not -- strictly speaking -- illegal in the United States. Most states run their own gambling operations -- they're called lotteries.

Native American tribes run casinos, local governments run riverboat gambling. The country is full of completely legal pari-mutual betting, dog and horse racing, card rooms, bingo games, cash prize contests and casinos. Government -- if not actually running the operation with civil service croupiers and dealers -- regulates, licenses and extracts revenues from them.

This is not to say that gambling is intrinsically evil, or that government has devious intent. For the most part, state and local governments have plunged into gambling out of financial desperation.

And gambling can be justified. There is some truth to the claim that -- unlike taxpayers -- gamblers pay without complaint. There is also the feeling that by "taxing sin" one is doing good. Plus -- as the conventional wisdom goes -- people will gamble anyway, so government participation and regulation helps keep organized crime out. And many states use gambling revenues to help support schools and other programs.

But what happens when government begins to depend on gambling for revenues? It can compromise the role of government. Instead of controlling and regulating something with the potential to cause harm, state lottery commissions run television ads, erect billboards and conduct promotional giveaways to encourage gambling.

Governments -- like private-sector businesses -- become infected with the natural desire to protect their source of revenue. Carried to extremes, it could lead to such absurdities as a local government prosecuting a church bingo game because it diverts Thursday night customers from the local-government riverboat casino.

One could suspect that the Justice Department's interest in Internet gambling has more to do with the inability to collect taxes on offshore casinos than any detrimental effects it might have on society. If the effects of gambling are, in fact, harmful, then why are state and local governments allowed to run gambling operations? There is a fundamental conflict of interest between the regulatory and law-enforcement mission of government, and its self-interest in collecting gambling revenues.

And gambling isn't the only area of potential trouble. Recently the Supreme Court struck at the ability of law enforcement to use drug asset forfeiture money, saying government agencies shouldn't profit from drug busts. It is a fundamental conflict of interest.

Some states have a monopoly on hard liquor sales. State liquor stores -- run by civil-service clerks -- are controlled by liquor commissions with the clout to close down the competition. Is liquor, then, still seen as a potential threat to society that must be closely regulated, or has it become a revenue source to be protected from competition?

Perhaps the height of absurdity was when the IRS actually managed a Nevada brothel for a time, after it defaulted on a tax liability.

Gambling, liquor, tobacco -- government is deeply involved in all of them, and dependent on their revenue. Recent attacks on the tobacco industry by health advocates puts tax revenues in jeopardy and compromises tobacco-tax dependent government agencies.

When any organization begins running on autopilot, it sooner or later collides with new realities. At that point, decisions must be made.

For example, while perhaps nothing is more important to adults than their children's futures, public schools have lost the support of the public. Taxpayers pass limitations of property taxes, bond measures fail and school buildings fall into disrepair.

Some states -- avoiding the inevitable confrontation with this new reality -- brought in lotteries as the "solution." It became almost a moral obligation to gamble because it "helped the children." But in the rush to cover the bottom line, the tough questions and tough decisions were deferred. Why have schools fallen from favor, and what is needed to restore confidence? Perhaps funding problems are the symptom -- and not the cause -- of a system overripe for major structural change.

The financial pressures experienced by governments over the past few years have unearthed untapped resources and new, more effective ways of doing business. As Eric Hoffer said, "The most gifted members of the human species are at their creative best when they cannot have their way."

Information technology has become the indispensable ally of those who are confronting the tough questions and tough choices. And as the basic structural flaws are corrected, what will emerge is a new flexible customer-oriented model of governance running on an information technology nervous system.

Perhaps then governments will discover that some of what they once struggled to support was unnecessary and much of their revenue generation was a distraction from the core mission of government.