Are States Addicted to Gambling?

CHICAGO – Gambling (search) of some kind is legal in 48 states, but a new study questions whether the business pays off.

"It's almost like the state's on a fix. They get gambling, it doesn't solve the financial problems of the state, and then they say, 'Let's have more gambling,' said study co-author Bill Thompson, who is a professor at the University of Nevada, Las Vegas.

Thompson found that many cash-strapped states failed to lure tourists to their casinos (search), leaving them to feed off local communities.

"They're going after local dollars. They're picking the pockets of their own citizens," he said. "This doesn't help the economy. In the long run, they lose."

Susan Montano, whose Aurora, Ill., pizzeria is near a river boat, said even surrounding businesses aren't picking up business from casinos.

"It seems to me that people are ushered from the parking lot right into the casino," she complained.

Still, more state leaders are looking to gambling to revive their economies. Iowa's gambling commissioners this month approved four more casinos, bringing the state's licensed gambling facilities to 17.

"The fact that politicians do not like to raise taxes, nor do they like to cut spending, there has been this demand for more revenue from gambling," said Michael Mahaffey, a commissioner with the Iowa Racing and Gaming Commission (search).

While some states — including Louisiana, Oregon, South Dakota, and most especially Nevada — do benefit from gambling, other states should probably look to other ways to close their budget gaps, Thompson said.

But the gaming industry sticks by its claim that gambling stimulates economic growth.

"Our industry employs about 350,000 people directly a year, which produces a payroll of about $12 billion," said Frank Fahrenkopf, president of the American Gaming Association (search).

Click on the video box at the top of this story to watch a report by Fox News' Jeff Goldblatt.