Unsustainable

Delaware, a state with a population smaller than that of nearby Baltimore, is in somewhat better fiscal health than most states.

This is mainly due to the First State's position as the whore of corporate America. The old system of kickbacks for irresponsible incorporation is now a slightly more legitimate system of corporate taxes and fees that helps to keep Dover in the black.

Thanks to this unique source of revenue, Delaware is in much better shape than its neighbors to the west and the north. But therein lies the problem.

It may like to act like an offshore haven, but Delaware is not an island, and the fiscal troubles of Maryland and Pennsylvania are about to spill over its borders.

Maryland's situation is probably the most dire. Gov. Bob Ehrlich slithered into the statehouse promising to balance his state's budget without raising taxes or cutting services. His magic solution to the state's fiscal crisis: slot machines and more slot machines.

Gambling revenue is also being considered by Pennsylvania Gov. Ed Rendell, who was swept into office in the hopes that he can recreate the fiscal miracle he pulled off in a nearly insolvent Philadelphia.

In both states, slots proposals are tangled up in opposition from a disparate collection of groups including advocates for the poor, religious conservatives who consider gambling immoral for reasons they are unable to articulate, and casino developers who think the current proposals do not go far enough.

These delays are only temporary. The slots are coming, and tiny Delaware will feel their impact.

Right now, gambling revenue — the state lotteries and income from its three "racinos" — accounts for 9 percent of the state's total budget. Columnist Al Mascitti, in The (Del.) News Journal, notes the potential impact of expanded slots in Maryland and Pennsylvania:

Nobody can be sure how big a hit Delaware will take when out-of-state gamblers start playing closer to home. But the Delaware Economic and Financial Advisory Council is floating a seat-of-the-pants number that demands attention: $120 million, roughly half the current amount raised on slots. Even a $100 million shortfall would amount to nearly 4 percent of the state's revenue.

Delaware is likely to respond with an aggressive expansion of its own gambling, including perhaps a new casino on the Wilmington riverfront and legalized betting on sports. Its neighbors will likely respond with further steps of their own.

This arms-race mentality will produce diminishing returns for all three states. We'll see a repeat of the same race to the bottom that Delaware initiated with its lax standards for banking and incorporation, with a similar predatory impoverishment of the citizenry. This will, in turn, create synergistic benefits for the public's corporate masters, as people max-out their MBNA credit cards and stake their home equity loans in search of jackpots at the new casinos.

This is not sustainable. Something has to give.