The Pennsylvania Senate approved a $2.2 billion revenue package by two-vote margin, including a $200 million gambling expansion. The bill now heads to the Pennsyvlania House, where it faces an uncertain future.
The spending bill is an addendum to the $32 billion budget passed earlier this month. The budget had a $2.2 billion deficit, leading to weeks of negotiations between the Republican-led Senate and House, as well as the Democrat governor, Tom Wolf.
Pennsylvania Gambling Expansion in Revenue Package
Besides the gambling provisions, the revenue package includes a natural gas extraction tax that Pennsylvania Democrats long have supported. Gov. Wolf supports the bill, because GOP Senate Leader Jake Corman included the severance tax on the Marcus shale oil reservoir.
Gambling, shale oil, and a fund transfer represents about $970 million of the revenue package. Authorization to borrow from future tobacco settlement payments represents the remaining $1.3 billion of the deficit.
To raise the $1.3 billion, the state would raise a *bond issue on the 1988 national tobacco settlement payments. Since those payments are guaranteed, selling bonds on those payments is a safe way to raise cash by borrowing on the future. Democrats and moderate Republicans have been concerned that House Speaker Mike Turzai’s idea for raising cash through borrowing would lead to Pennsylvania’s credit rating being downgraded.
Omnibus Gambling Bill
In earlier forms of the bill, the gambling provisions included a wider-ranging package of gaming. Online poker and online casinos are still being negotiated, though sources say that online gambling and satellite casinos are close to being included in the package.
If online gambling were legalized, land-based casino and racetrack operators in good standing could buy online gambling licenses. A poker-only license would cost $7.5 million for 7 years. A poker and casino license would cost a total of $10 million for 7 years. Funding for the renewal after the 7-year period would be taken out as credit from online gambling tax revenues.
Will Online Gambling Be Included in the Budget?
Most speculation suggests the Senate Leader Jake Corman and Governor Tom Wolf want to keep the discussion of gambling to a minimum at present, because they want to secure House approval of the $1.3 billion in tax increases. It is possible the Senate bill’s emphases on higher taxes and less gambling might be a negotiating position.
If so, then the future of legalized and regulated online gambling in Pennsylvania might hinge on how much difficulty House Speaker Mike Turzai (pictured) gives the Senate and the governor.
While online gambling appears to have wider support, it is still a possibility that it is not included in the final budget law. After weeks of discussion that gambling and alcohol taxes might represent as much as $700 million in revenues, having only $200 million included in the current Senate bill is a bit worrisome. Penn Live somewhat derisively referred to the gambling expansion as a “tail of the dog”.
Pennsylvania Daily Fantasy Sports
Daily fantasy sports would be legalized along similar lines. DraftKings, FanDuel, and similar DFS sites would need to apply for a fantasy sports license, but that licensing would be cheaper than an online casino license.
Gaming Kiosks
Another provision allows for gaming kiosks at major Pennsylvania airports. The gaming kiosks would have tablet computers with slots-style games on them. The term “major” applies to all international airports in the State of Pennsylvania, as well as Arnold Palmer Regional Airport about 30 miles from Pittsburgh.
Pennsylvania Online Lottery Sales
Also, the Pennsylvania Lottery gains the right to sell lottery tickets online. The online lottery sales represent a sizeable expansion of revenues for the Pennsylvania Lottery, while giving U.S. senators and representatives who represent Pennsylvania in the US Congress one more reason to support online gambling.
No Satellite Casinos
The Senate revenue package contains no evidence of the much-discussed satellite casino bill. Speculation is it might be added later, as a deal to include this provision is “near agreement”. Under previous iterations of the Senate bill, the state would approve 10 satellite casinos for mid-sized cities around the state. These would be smaller casinos with 100 to 500 slot machines and no more than 40 gaming tables.
Once again, already-existing casino and racino operators could apply to develop satellite casinos. Those gaming venues would be built outside a 25-mile radius of existing casino locations. The satellite casino provision, while potentially lucrative, apparently did not gain enough support to be included.
No Video Gambling Terminals (VGTs)
The bill also contains no reference to video gambling terminals or VGTs, a form of gambling which fell out of favor earlier in the legislative process. The VGT legislation would have added up to 40,000 new gaming machines to the state, mainly in bars and taverns. Lawmakers were concerned that VGTs would have cannibalized slot machine revenues in casinos and racinos, a concern that Governor Tom Wolf had discussed at some length.
Pennsylvania House Speaker’s Role
Gov. Wolf supports the Senate bill, meaning that the proverbial ball is in the court of the Pennsylvania House of Representatives. House Speaker Mike Turzai is opposed to taxing the Marcus shale oil interests, so online gambling legalization faces one major hurdle.
Mike Turzai has called for no new taxes and seems to have a majority of representatives behind his stance. Turzai plans to run for governor against Tom Wolf in 2018, so the current standoff has wider political implications which should not be discounted.
In recent days, Philadelphia and Pittsburgh newspapers have floated the idea that the House will not approve the Senate bill before the current legislative session ends. That means the Senate bill might not be approved until September or later — if at all.
Tobacco Settlement Bond Issue
While Turzai is almost certain to oppose the Marcus shale tax, it is unknown how the differences in raising taxes through borrowing money might be settled. House Speaker Turzai’s plan included borrowing up to $1.5 billion, while the Senate calls for borrowing $1.3 billion.
*The bond issue remains controversial. For the current fiscal year, tobacco payments fund six programs: health care for workers with disabilities, nursing home care for low-income elderly and disabled citizens, pro bono hospital care, smoking prevention and cessation programs, a fund to help senior citizens remain in their homes, and state-funded medical research.
Paying down the deficit with a tobacco payment bond issue necessarily would cut into funding for those six programs. The likeliest outcome would be to see proponents of each program scramble to maintain their funding, at the expense of others.
