Beset by soft revenues, the state's liquor servers are exploring whether they can turn their fortunes around - and possibly those of the state - with legalized gambling.
A study commissioned by the Arizona Licensed Beverage Association
showed that allowing bars and restaurants with liquor licenses to have video slot machines for their customers could generate as much a $5 billion per year. Even assuming the state took 60 percent of that for taxes, that would still leave $2 billion on the table for the bars and restaurants with liquor licenses.
Bill Weigele, the association's executive director, said he's not asking lawmakers or the voters to approve the plan - at least not yet.
But he noted that the owners of the state's horse and dog tracks already are pushing legislators to give them rights for video gambling. Weigele said he wants lawmakers to realize there is another option, one he said could prove more lucrative in a state where, even with the temporary sales tax hike, spending still exceeds revenues.
Any such move, though, will have an uphill battle.
The proposal for "racinos" at the tracks proved so unpopular - even with the state's deficit - that the plan did not even get a hearing during the last legislative session.
This measure also has the added political baggage that putting gaming machines in bars might lead to more drinking.
At this point, Sheila Morago of the Arizona Indian Gaming Association is taking a wait-and-see attitude.
She pointed out that if Weigele gets lawmakers to approve the plan it would invalidate much of the measure approved by voters in 2002 which gave tribes the exclusive right to operate casino gaming in Arizona. That would tribes could have an unlimited number of machines, an unlimited number of casinos and cut their revenue sharing to the state to just a fraction.
But the real opposition could come from Jeff Hatch-Miller, director of the Arizona Lottery. He said a claim in the study that video gambling in bars won't hurt sales of tickets for the state-run game is "flawed."
Central to the issue is a bid by this segment of the hospitality industry to boost its revenues.
According to Weigele, in 2007 the tax revenues from bars and restaurants about $800 million a year.
"It's now back to 2004 levels of $400 million a year," he said.
Hatch-Miller said he understands the push.
"They're looking for a way to have a different industry as people have decided to stay home or go elsewhere," he said. But Hatch-Miller said there's probably more at work than the economy.
He pointed to tougher new laws on drunken driving. That includes a law that says convicted motorists, after their driving privileges are restored, can operate only motor vehicles with interlocks designed to keep anyone who is inebriated from driving. And those devices are installed at the motorist's expense.
On top of that are state laws banning smoking in bars and restaurants.
"It's really curtailed the industry's profits and I understand that," Hatch-Miller said. "And they're looking for another source of income."
But he said it would be a bad idea to expand legalized gambling in Arizona.
He conceded that one concern is that having video gambling in bars and restaurants would cut into lottery ticket sales. In fact, what Weigele is suggesting actually would give those bars a big advantage.
Some of that is pure numbers: There are about 6,200 establishments in Arizona with licenses to sell alcoholic beverages for on-site consumption. Hatch-Miller has 2,767 retailers.
And some of that is the nature of the game: The lottery is limited to "pick" and "scratch" games, both of which could prove less interesting than actual video poker or slots that bars and restaurants would be able to install.
"Am I trying to protect my business? Of course," Hatch-Miller said. But he said there's also a difference between the lottery, where the "profits" go to help the state, and the kind of operation the study foresees where the cash would go to the bar owners and the owners of the machines.
Then there's the question of whether giving people another reason to come to a bar would encourage drinking.
Gary Anders, the professor at Arizona State University's W.P. Carey School of Business, who conducted the study, said his research of alcohol tax revenues shows that, despite the decrease in business at bars, there is no indication that overall drinking is down.
"Instead of going out, they are drinking in private," he said.
And Weigele said that's not necessarily a good thing.
"At home you can drink until you drop," he said.
"I admit, that may be a weak argument," Weigele conceded. But he said businesses that have liquor licenses train their employees to be responsible and not to serve people who are intoxicated.
Nor did Weigele believe that, in some sense, it's better to have people drinking at home than to be out at a bar where, given Arizona's sparse mass transit system, patrons need to get in a vehicle to drive home. He said those drinking at home "may not make good judgments" and get in a car anyway.