Gambling on Culture in Hungary, 1992-1995

The story of the "Gambling on Culture" dates back to the beginning of the nineties in Hungary, when attached to the political transformation processes, a rather ad hoc decision created a National Gambling Fund. The way the Fund was born is similar how it -after four years of granting activity- disappeared through another ad hoc decision in 1995[1].

The concept, the structure

In Hungary gambling has had two traditional forms "totó"[2] and "lottó"[3] in the last decades. The State has had a monopoly on these games, from which in the pre-transitional times the revenues were flowing to the Central Budget of the State and also to the National Sport Authority.

In the agitated years of the transitional period new and new plans appeared to improve the financing of the fields in public interest. In September 1991 such a new idea, an unusual partisan action of some interest groups resulted in the establishment of the Gambling Fund[4]. The aim was to let some of the gambling income flow into the budgets of spheres in public interest. Several foreign models were observed at the time of structuring the Hungarian system, because there didn't exist any internal traditions.

The spheres supported by the Fund were pointed out after a process of long discussions among the affected pressure groups. The health care, social, cultural, educational, youth and sport fields were taken into account.

Thanks to political pressure and mostly to the strong sport lobby, the Fund was divided into two separated funds in 1993[5]: the National Game Fund and the National Sport Fund. The latter took the subvention of sports and horse racing in its hands, while all other fields -such as culture- remained under the provision of the National Game Fund.

The fact that the sport lobby could achieve its goal and established an own fund motivated the other areas to increase their own lobbying activity. Each of them felt a possibility to gain a more direct support from the gambling revenues - either through the government or through an own fund. These were the first signs that showed that if the decision makers are to liquidate the Fund there would not be any unified forces to fight against this will.

Revenues of the Fund

In general the Gambling Fund's and the National Game Fund's revenues came to about 6-8 million USD per year. There were four main financial sources of the Funds. Most of the revenues originated from gambling (96-97% of total revenues). The second part of the incomes consisted of the prizes won, but not taken over by the players (0,5-2% of total revenues), and thirdly there were other revenues, mostly interests on investments (1,5-1,6% of total revenues). A fourth source appeared after the first year, when the first refundable grants had to be paid back (0,4-0,7% of total revenues).

After the reorganisation, when the National Game Fund came to existence the revenues were also divided between the two new Funds. From the original 10 percent of gambling organisers' payments, 7 remained at the National Game Fund, and 3 were placed to the National Sport Fund.

The policy of support

From its revenues -as mentioned above- the Fund supported several fields. The announcements for the applications were open, the subvention was either non-refundable or refundable under favourable financial conditions. Natural and legal persons could apply, including foreigners. 

The grants were allocated by a Council of nine members, who were experts from each field referred to the Fund. They were charged by the Minister of Finances, who prenominated them as those in whom he would have confidence to cooperate with; later on, the respective ministries also confirmed their designation. All decisions of this Council were made public.  For these resolutions the Minister of Finances was responsible, and he reported on the activity of the Fund each year to the Government and the Parliament.

Although a board of counselors worked with each of them, the experts were the real decision makers in granting. The determinant person on the cultural field was Mr. József Zelnik, an ethnographer, generally thought to be the mastermind behind the entire project.

The grants to the supported areas were distributed in the following way:

As the table shows, culture got special attention in spite of the original aim to transmit the resources equally to all the supported fields; the character of the person responsible for an area determined the amount that a field obtained.

  The cultural field and the Funds  

There weren't any strong principles given for the long run on the granting policy in the cultural field. Mr. Zelnik, responsible for the cultral area set each year priorities for the decision making process according to the actual problems, the actual political and cultural questions. These were the following:

1992         Hungarians abroad, theatre, socio-cultural activities[8], children and youth cultural programs 

1993         anniversaries, libraries, complex programs

1994         cultural programs, camps, socio-cultural complex programs

1995         festivals, complex cultural programs, socio-cultural programs

The next table shows how different were the supported programs by area and by financial aim[9].

As seen from this table, Performing Arts stood in the focus of the granting policy (although this does not directly derive from Mr Zelnik's priorities). The fact that the Cinema, Media and Audio-Visual sectors were not supported may be due to the existence of a national foundation for audio-visual activities. Most of the supports were assigned for Project Based Funding (58,1%), and there was as much money devoted for Ongoing Operation (19,4%) as for Funding for Capital Projects (18,8%).  

In the transition years, several public funds began their activity as a symbol of decentralisation. In 1994, a fund was established for cultural granting on a conceptual basis: this was the National Cultural Fund (NCF). Differently from the National Game Fund, the NCF had an elaborated policy of support, with clear conditions on the applicants, clear aims of projects. As years passed by this fund became the main channel of cultural subventions, the other funds or foundations lost their importance or were eliminated.

There wasn't any strategical agreement between the two Funds, but there was certain coordination. Mr. Zelnik checked by each decision the list of the programs, organisations supported by the National Cultural Fund. This helped to avoid paralels or excesseive financing of projects and to promote co-financing.

It is worth to compare the amounts granted for culture by the two funds, and to examine their relation to the central state budget.

To evaluate the activity of the Gambling Fund one can see for the first sight from the this table, that in comparison to the government expenditure from the central budget on culture the decisions of this Fund had no crucial emphasis on the cultural policy in Hungary. Moreover, this small impact has declined throughout the years. 

The liquidation of the National Game Fund

As a result of the Fund's reconstruction the lobbying activity of the other fields in question has strengthened. Each of them wanted to dispose of "their share" of gambling revenues directly, through the respective Ministry and not through the Fund. In the case of culture, also the National Cultural Fund started to fight for the revenues from the gambling sector. No unified forces existed, which could have struggled for the maintenance of the Fund.

The financial sources of the Fund were ceased gradually. From July 1995, the organisers had to pay just 4 percent to the Fund of the amount available for prizes -instead of the 7 percent before. The revenues of the Fund from the "totó" game also decreased radically by the division of the incomes between the National Game Fund and the National Sport Fund: the revenue was shared 5 - 5 percent between the two Funds. It had a deep impact on the incomes.

At the end of 1995 the Financial Restriction Package of the government (the so-called Bokros Package) lifted all revenues of the Fund. Almost all other public funds were liquidated, in compliance with IMF recommendations. Just those could stay alive, which had a strong lobby force.

The last year of granting was 1995 for the National Game Fund. Today there are no juridical prescriptions for the organisers how much of their revenues to spend on granting activity. The amounts for the support of these areas are fluctuating in accordance with the actual financial situation of the enterprise. These are unforeseeable sources for the cultural sector - similar to the PR sources of any major enterprise, whether state-owned or private.

Concluding remarks   

What are the implications of the analysis of the Hungarian story of "Gambling on Culture"?

The creation of the Gambling Fund enabled for the first time small cultural institutions, organisations to apply for and receive state subvention, as they don't have access directly to the central state budget. Luckily, this channel of cultural subvention didn't disappear with the termination of the National Game Fund since the National Cultural Fund took over this role in today's Hungary.

Another interesting point is to examine whether renewed tapping of the gambling revenues would be feasible in Hungary. The answer can't be given exactly. The Ministry of Finance would surely object, and a never-ending fight would begin among the fields in public interest for the creation of a fund of their own. It is ambivalent whether the record of the Gambling Fund would serve as an argument for or against such a renewed initiative.

[2] Game of betting on football matches

[3] Lottery

[4] Law XXXIV / 1991 on the „Organisation of Gambling"; 172/1991 (27th December) Decision of the Government on the Gambling Fund

[5] Law XXVII / 1993, Law XXVIII / 1993 on the establishment of the National Gambling Fund and the National Sport Fund

[6] For Culture and Education the average of 1993-1995.

[7] No separate data are available.

[8] In Hungarian "közművelődés", a term covering community culture, amateur arts, voluntary cultural work etc.

[9] This table is based on the data of 1993, a year chosen as a representative one. The cultural activities have been selected in accordance with the questionnaire of Circle.

[10] We distinguished between Acquisitions and Capital Based Funding to make a differencedistinguish between the supplement purchase of  smaller instruments , mechanines and from building and s, renovations renovation.

[11] For this year separate data for the cultural sector were not available.

[12] The National Cultural Fund began its granting activity in 1994.