As states go bust, Casinos win big. (Economy).

Bad as the economy is, it has its fans. In the gaming business, downturns reveal their upside in the wink of a Florida racehorse's eye or in the lamps of a casino riverboat steaming up the Mississippi River at twilight. Gaming executives see opportunity any-where local budgets have gone bust and classroom sizes have grown overlarge, because those are the states that turn, however reluctantly, to casinos to plug budget gaps.

Bernie Goldstein knows this. The 73-year-old chairman and CEO of Isle of Capri Casinos, a $1 billion operator of 14 casinos based in Biloxi, Miss., watched the November 2002 election results with delight. Pennsylvania and Maryland elected pro-gaming candidates and Tennessee voted to establish a lottery. Even in states that elected anti-gaming governors, gambling operations are expected to expand this year.

At election time, 31 states were already reporting budget shortfalls, some by more than $500 million. Last year, many states tapped their rainy day reserves or raised taxes to combat previous budget shortfalls, leaving little cushion in 2003.

Tough budget decisions have already softened some governors stances on gaming revenue. In Florida, for example, a new law requires Gov. Jeb Bush to reduce K-12 class sizes by 2010, which could mean that Florida will have to hire 25,000 new teachers this year. "I'm opposed to the expansion of gambling," said the governor, "but I'm also opposed to raising taxes."

Excluding tribal casinos, the gaining industry pays some of the highest corporate tax rates in the country--up to 35 percent. It has been estimated that Florida could raise up to $1 billion a year by permitting video lotteries and slot machines at racetracks.

Goldstein owns the Pompano Park racetrack, a 200-acre compound happily located off Interstate 95 in Florida, and he likes his odds. It was during another bleak economic stretch, back in 1989, that he earned his sobriquet: "The father of riverboat gaming."

The grandson of immigrants from Ukraine, Goldstein built Alter Co., a family scrap-metal business in Quad Cities, Iowa. After 40 years of operation, he tried retirement but didn't enjoy it. "I'm a lousy golfer and I don't play bridge," he jokes.

At the time, Goldstein's city was a husk, with doors shuttered all over town and one in five residents unemployed. Someone in the state legislature suggested riverboat gambling excursion trips to revive the town, but it was Goldstein who sold the idea to voters. In July 1989, thanks to his efforts, Iowa became the first state between Nevada and New Jersey to permit gambling. Eight other states have since followed suit.

If the past is any measure, states' woes could unleash a tide of new gaming legislation. Goldstein has seen it happen before, and he'll be there for the windfall, like any other retiree poised at the payout tray, plastic cup in hand. He vows, "We'll move into any states that open up.