Pennsylvania Governor Tom Wolf, for the second year in a row, has allowed the state budget to lapse into law without his signature, without a plan to pay for the $32 billion in expenditures. As state lawmakers consider moves like borrowing money to close a $2.2 billion budget deficit, advocates of a package of bills to expand gaming in the state are faced with more uncertainty.
Wolf’s budget figures $250 million in revenues from expanded gaming in the state, to include legalized and regulated online gaming and daily fantasy sports, tablet gaming at state airports, online lottery sales and satellite casinos at off-track betting locations. However, in a repeat of last year’s negotiations, the final bill stalled in the state Senate over amendments added in the House, the most contentious being a plan to legalize video gaming terminals, or VGTs, at up to 8,000 bars, taverns and restaurants across the state.
Proponents in the House—led by the measure’s sponsor, Pittsburgh-area Rep. Mark Mustio—say revenues from VGTs would boost local revenues in their districts by replacing what are now unregulated, “gray-area” machines with five to 10 games per establishment that would be taxed at 37.5 percent, plus a 4 percent local-share assessment. The measure is vehemently opposed by the state’s 12 land-based casino operators, who view what could be as many as 40,000 newly regulated slot machines as competition that could cannibalize their casino revenues.
There also are major differences in the tax rates applied to online gaming in each chamber. The Senate is pushing a 54 percent tax on iGaming revenues that many deem unworkable, while the House is pushing a tax of 14-16 percent.
In any event, the state Assembly adjourned last week without addressing the gaming expansion package. Wolf is faced with quickly coming up with a way to balance the budget, as state creditors warn of a new credit downgrade and higher borrowing costs if the state doesn’t address its budget deficit.
“In the coming days, it is my hope that the General Assembly will come together to pass a responsible solution to balance our books,” Wolf said in a statement. “There are many options available to balance the budget in the long term, like those I presented earlier this year. Our creditors and the people of Pennsylvania understand a responsible resolution must take real and necessary steps to improve Pennsylvania’s fiscal future.”
Whether this urgency will result in a deal on gaming legislation in the coming weeks, or whether the issue will be left until the fall, is not clear. However, one part of the legislative gaming package will need to be addressed much sooner—later this month, the first payment of the new fiscal year will come due on the local municipal host fee paid by casinos to host communities.
Part of the gaming package is a measure to replace the host fee declared unconstitutional by the state Supreme Court last September. The old fee of 2 percent of revenues or $10 million, whichever was higher, is replaced in the bill with a flat $10 million fee, to be paid in four installments. While a challenge is expected to the new fee on the same grounds as the original fee—it places a disproportionate tax burden on smaller properties—lawmakers were expected to have the new fee in place in time for the regular payments.
The Pennsylvania legislature returned to Harrisburg after the Fourth of July holiday with the intention of finalizing the budget agreement and agreeing on the gaming package, but according to several press reports, VGTs remained a sticking point, with House members insisting on their inclusion and not enough votes in the Senate. The Assembly is in recess, but lawmakers are on call for special sessions.
