Since opening its doors to the casino industry in 2004, Pennsylvania has enjoyed an influx of gaming revenue. But despite this widely praised venture, recent estimates suggest the state will face an imposing $1.2 billion budget deficit, or more, in the coming fiscal year. And now online gambling regulation is on the table as a way to cut into that deficit. Campaign promises haunting Wolf The deficit represents a quandary for Governor Tom Wolf (D), who campaigned on platforms of lowering taxes across the states middle class and prioritizing education spending. According to the Pennsylvania State Education Association, a labor union, Pennsylvania ranks 45th in support for public schools in the country. But prior to his election, Wolf was unaware a severe deficit loomed. In March, the governor responded to news of the deficit by proposing an array of tax hikes in the states 2015-16 budget, a plan criticized by Harrisburg Republicans as overbearing and unfeasible. Wolfs budget would have halved corporate tax rates while increasing personal income tax in the state from 3.07 to 3.7 percent, and increased education spending by over $400 million. But Republicans, in control of the state legislature, insisted they would not approve what Senate President Pro Tempore Joe Scarnati called the most massive tax rollout plan in recent history of the commonwealth. Forecast better than expected, but still turbulent That proposal, however, was tailored to bridge a budget shortage estimated in March at $2.3 billion. While it now appears the deficit will be $1.1 billion lower than previously thought, legislators are nonetheless scrambling for a workable solution to the still-sizable gap. Harrisburg lawmakers, tasked with building a cohesive budget by a June 30 deadline, have floated ideas including raising taxes on tobacco products and phone bills, and placing a severance tax on natural gas extraction. In proposing the severance tax, Wolf said the initiative would generate $1 billion for the state in its first year, revenue which the governor hoped to earmark for education. Possibly easing matters further is HB 466, a bill to privatize the states liquor operations, which supporters say will trim costs. The bill cleared the Pennsylvania House in February, and is currently before the Senate. A proposed overhaul of the states employee pension system has also gained traction, recently clearing the state senate and currently awaiting action in the House. The Harrisburg-based Patriot-News has spoken favorably of the bill, which it says will lead to savings for taxpayers. Last week, Scarnati said firm agreements on both pension reform and liquor privatization bills were imminent. But complicating matters is the states extended budgetary forecast. Early estimates predict a deficit of over $2 billion in 2016-2017. And while Wolf still hopes to increase education subsidies, it is unlikely schools will receive the $500 million increase first pitched by the governor. Gaming a key revenue factor Legalized online gaming, meanwhile, remains an alluring option for lawmakers seeking to triage the deficit without resorting to tax hikes. Five regulatory bills have already been proposed in 2015, and debates on the subject have intensified in recent months. This option is supported by a number of key Pennsylvania legislators, including Kim Ward, chair of the Senate Community, Economic & Recreational Development Committee. Ward is the prime sponsor of one such regulatory bill, SB 900. The bill is co-sponsored by several key committee members, including Senator Robert Tommy Tomlinson. Each of the states land-based casinos, with the exception of Sheldon Adelsons Sands Bethlehem, supports the venture. To operate within the state, online casinos would need to partner with brick-and-mortar operations. While critics say online gaming would lead to cannibalization in the marketplace, analysts have said the arrangement would be mutually beneficial. There are still hurdles to clear if the bill is to become law. Senators on the CERD still seemed to have serious questions about Wards bill, and seven casinos recently came out against SB900, which is a wide-ranging gaming bill that includes internet gambling. While online gaming regulation would certainly help the deficit problem of coming years, its not clear if that budget relief will come from iGaming in 2015. Photo by Jerchel used under license CC BY 2.0.
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The Pennsylvania House of Representatives considered legislation to legalize and regulate online gambling on Tuesday, but after a series of votes, iGamings future is still uncertain. What happened in PA on iGaming The effort to move online gambling regulation forward in the state cropped up suddenly this week after reports that it would be considered in June. The old vehicle HB 649 was left behind. Lawmakers made an attempt to add the massive omnibus gambling expansion iGaming included to HB 1925. At first, an amendment was offered that included a contentious provision that would allow private establishments outside of casinos to offer video gaming terminals. That amendment was defeated, 122-66. Next, another amendment this time with no VGTs was brought forward by Rep. John Payne. (Payne chairs the House gaming committee and also is the architect of the gambling expansion effort.) After a lengthy debate, that amendment was also defeated, 107-81. That left observers wondering if online gambling had drawn its last breath, at least temporarily. Wait, not so fast on iGamings obituary Online gambling isnt dead yet, however. The House approved motions to reconsider both gaming amendments right after they were defeated. The best guess for whats happening? Its a bit of a gamesmanship between lawmakers who want to authorize VGTs and those that do not. The VGT provision has long been thought to be a poison pill for the gambling expansion if it reaches the Senate. Whats next for PA online gambling? The amendments could be considered and voted on again, as soon as Wednesday. Online gaming proponents would like to see the non-VGT amendment get through. The gambling expansion and online gambling are seen as a way to deal with a deficit in the states pension system. Previously, online gaming had been a part of budget talks in the state because it could generate tens of millions of dollars in revenue annually. Pennsylvania has long seemed like the front-runner for the next state to authorize online gambling. While its difficult to handicap the efforts chances right now, its still not dead.
While online casino games and internet poker may not be in the cards for 2015 in Pennsylvania, they could be part of an even larger battleground that includes online lottery and daily fantasy sports. Committee hearings coming on new subjects After a flurry of bills were introduced earlier this year that included portions on online gambling and online poker, more iGaming fronts will be considered in Pennsylvania before the end of the year. First up is a hearing in front of the House Gaming Committee called Exploring the Potential of Online Lottery/Gaming in Pennsylvania. That hearing will take place on October 27. Then, on November 19, the same committee will tackle a variety of subjects, including daily fantasy sports. There are not yet bills that would accompany either hearing on these subjects. Online lottery in PA? Pennsylvania has not seriously considered an online lottery in the past. Back in 2012, Penn Live said the state would likely take a wait-and-see approach: Online lotteries arent terribly common yet in the United States, but there have been solid early growth and revenue numbers from the likes of Michigan and Illinois. It seems safe to say this hearing will be a predecessor to legislation, and Pennsylvania possibly dipping its toe into a possible online lottery. Daily fantasy sports in PA? The topic of daily fantasy sports (DFS) might be a little trickier. Currently, Pennsylvania is one of 45 states where most DFS operators accept players; the industry operates unregulated in jurisdictions throughout the U.S. There have already been some rumblings in PA centering around DFS. Penn National has said it has designs on getting into the market. In the spring, a bill that would allow brick-and-mortar casinos to offer DFS was introduced, although it made no progress. Again, the hearing appears to be informational/exploratory in nature. What form would a Pennsylvania DFS bill take? It seems unlikely a hearing would precede a bill that would simply legalize daily fantasy sports, in the vein of a bill that passed in Kansas and one that was recently introduced in Michigan. If thats the case, a bill that somehow seeks to regulate the DFS industry possibly in the form of issuing licenses and taxing operators seems more likely. Whats the endgame? Right now, online gambling isnt entirely off the table in the Pennsylvania during its current budget impasse. But no one is betting on iGaming happening this year, either. It seems far more likely that the legislature would package a suite of gambling measures together in an overarching bill, as it did on several occasions with online gambling and poker earlier this year. Depending on the outcomes of these hearings, we may see a push for online lottery and DFS measures in 2016.
I wrote about the oft-cited misconception that online gambling legalization is an expansion of gambling after two overly skeptical editorials appeared deriding the legislatures efforts to pass an online gambling bill. This week a third paper made the same mischaracterization, and its common for the states newspapers to blast the idea of online gambling. It even went a step further, invoking fears of the long-debunked myth of cannibalization. What this newspaper says about online gambling The new editorial makes the same mistake as its predecessors, as the Delaware County Daily Times echoes the thoughts of the Philadelphia Daily News and the Lehigh Valley Express Times. The editorial board falsely believing the legalization of online gambling in Pennsylvania would authorize something that doesnt currently exist, and somehow increase access to a form of gambling everyone in the state already has access to. The editorial board for the DelCo Times states: Getting it wrong on iGaming again As I noted in my rebuttal from last week, this line of thought just doesnt pass the smell test. A person living in Pennsylvania can gamble online from the privacy of his or her own home today, with or without the state passing a bill to legalize online gambling. Wherever you currently live in Pennsylvania, you can go online and start gambling. All legalization would do is:
Institute much needed consumer protections;
Place the industry in the capable hands of the states land-based casinos;
Allow the state to benefit from taxing the industry;
Bring the industry under the regulatory sway of the states gaming control board. But wait, theres cannibalization too But the DelCo Times also goes a step further, insisting that online gambling will not only increase access to gambling, but that it will cannibalize the states existing casinos: No one ever seems to mention what might happen next, and what kind of effect and decreased revenue such a move would have on existing casinos if people no longer have to get off their own sofa to visit a casino. Many, in particular Harrahs right here in Chester, are struggling now. We would imagine the thought of online gaming might not exactly be music to their ears. Someone should tell the editorial board that this theory has been debunked, and the notion Caesars would be against PA online gambling legalization is absurd. Despite the baseless speculation of the DelCo Times editorial board, the owner of Harrahs Chester, Caesars Entertainment, is not concerned about cannibalization. It has stated many times at Pennsylvania hearings how beneficial online gambling has been to their properties in New Jersey. In April of 2015, Michael Cohen, the senior vice president and general counsel of Caesars Interactive, testified in front of the Pennsylvania House Gaming Oversight Committee that the practical effects that we have seen is it has not cannibalized our business. If anything, it has enhanced our bricks-and-mortar business. He repeated the companys line in a Senate hearing. Old and tired arguments about online gambling Maybe if these editorial boards attended some of these hearings (or at least read some transcripts), they would have a better understanding of the impact of online gambling. Instead, they just trot out old arguments that have long since been discredited. And maybe theyd be able to avoid the embarrassment of making s statement such as: Many, in particular Harrahs right here in Chester, are struggling now. We would imagine the thought of online gaming might not exactly be music to their ears. That same propertys parent company is pushing for online gambling legalization because it has helped bolster their business in New Jersey. Message to DelCo Times editorial board: It is music to their ears! Harrahs Chester wants online gambling. And while Harrahs may be down, most Pennsylvania casinos doing just fine, with eight straight record months. One does not have to look very hard to see how Caesars feels about online gambling legalization, but why bother looking, or reaching out and asking, when you can just guess? How does the saying go? Better to remain silent and be thought a fool than to speak and remove all doubt.
Pennsylvania is inching closer to legalizing online poker and gambling this week, when a bill containing iGaming regulation passed the House of Representatives. It sets up a possible mad dash to the finish line for a massive gambling bill in the state that would also regulate daily fantasy sports and authorize the expansion of slot machines at new locations. If the bill is passed, it will add to the nation-leading amount of revenue the state generates from gambling. Setting the stage for PA online gambling and the budget Pennsylvanias legislature is set to adjourn on June 30, the same day that the budget for the upcoming fiscal year is due. There had been indications that progress on the gambling bill would be coming sometime this month, although its becoming a last-minute proposition. At least on the House side, the gambling expansion (HB 2150) and online gambling are being counted on to provide revenue for the state budget. Whether the Senate and Gov. Tom Wolf will agree to that sentiment is an open question. Last year, of course, a full budget wasnt passed until nine months after that deadline. With 2016 being an election year, the sense is that the legislature will try to get a budget done, and may extend adjournment until a deal is reached. Gambling, in or out of the budget? Wolf, speaking generally about the budget plan and not specifically about gambling, said the House budget isnt balanced: There has been little public opposition to the gambling bill from Wolf or the Senate, but things can change quickly in the middle of budget negotiations. However, the appetite for significantly raising taxes in an election year is likely approaching zero, and the gambling bill can provide $200 million or more in revenue very quickly. Online gambling would likely provide $100 million in licensing fees, alone. The actions of the Senate today and tomorrow could tell us if they are prepared to send the gambling package to Wolf. One casino, still against it The casino industry is generally behind the online gambling bill. But one casino not shockingly is still against it. That is the Sands Bethlehem, which is owned by long-time online gambling opponent Sheldon Adelson. The shocking part is that Sands might take part in Pennsylvania online gambling, given the chance. From the Morning Call:
1 The latest on PA online gambling
2 The short timeframe for 2016
3 Still, online gambling appears to be a heavy favorite Pennsylvania is supposed to pass legislation that would formally legalize and regulate online gambling in the state this year. Unless it doesnt. The latest on PA online gambling Earlier in the summer, Pennsylvania passed a gambling expansion bill that included a number of measures; among them were provisions allowing online gambling and poker in the state. That was HB 2150. (That bill also contain language that would regulate daily fantasy sports.) The Senate did not take action on that bill, before it went on hiatus. However, the legislature did pass a budget package that counted on $100 million from gambling online gambling included. GamblingCompliance, however, reports that there is no guarantee the Senate will pass a gambling expansion until 2017 (paywall). From GC: The short timeframe for 2016 The Senate is scheduled to convene just nine times before the November elections September 26, 27, 28 and October 17, 18, 19, 24, 25, 26. That leaves precious little time to complete a gambling bill that has been contentious at times, even if the online gambling portion has not been particularly controversial. And if the Senate does pass a bill, the House would have to concur with that bill, if it is changed. It all adds up to the very real possibility that action must wait until early next year. Still, online gambling appears to be a heavy favorite Even if nothing happens this calendar year, theres not much reason to believe online gambling and poker arent in the cards. The problematic discussions around gambling have mostly centered around expansions of slot machines and video gaming terminals. And despite the protests of Sands Bethlehem, most of the casinos are on board with legalizing online gambling. And the fact remains the budget is counting on $100 million from gambling, and theres almost no way to arrive at that figure without online gambling revenue. So, whether its this year or next, online gambling proponents expect to see legalization of PA online casinos on the agenda.
1 What Wolf said about PA online gambling
2 Lobbyists are lobbying on online gambling
3 Meanwhile casinos, state both could use revenue Legalizing online gambling remains on the forefront of the minds of government officials in Pennsylvania. That includes Gov. Tom Wolf, who fielded a question about online poker and gambling during a recent interview. What Wolf said about PA online gambling Wolf, speaking during a Q&A on Facebook Live, took a question from the Poker Players Alliance about legislation dealing with iGaming. Wolf didnt have to field the question, at all, if he didnt want to. So the fact that he did is perhaps the most significant thing to note here. The comments came after Wolf included new revenue from gambling in his proposed budget, without saying online gambling would be a part of any package, directly. Heres what he said: I think there is real work being done in the General Assembly as to what enhanced gambling including online gambling, including possibly online poker would look like moving forward. The deal is that whatever we do on this enhanced gaming, it should not take business away from our casinos or the lottery. Otherwise why would we do it? Because were already getting revenues from that. It should be something that could be implemented cleanly, and the oversight we could do without being really that intrusive. There are a lot of details that have to go into this. I know other states have done online poker and have done it successfully. We need to keep learning from what we can from those states. Watch his comments here: Lobbyists are lobbying on online gambling A new report from GamblingCompliance (paywall) showed that online gambling is indeed a front burner item in the state. GCs report said that lobbyists representing Sands Bethlehem warned that federal law could be changed to make online gambling illegal under President Donald Trump. While thats at least possible, its perhaps not likely that there will be a change from the Trump administration regarding iGaming. Lobbyists for PA casinos that would like to see online gambling legalized pushed back against that angle. Regardless of what was said, the push and pull of lobbyists on both sides point to the fact that online gambling is very much a part of the debate regarding new revenue and gambling expansions in the state. Meanwhile casinos, state both could use revenue The backdrop of the discussions regarding PA online casinos is simple: Money. The state is trying to dig itself out of a budget mess, and it seems clear gambling will be a part of the equation. At the same time, the state is trying to stave off several months of dipping revenue from land-based casinos. Online casinos would clearly help the bottom line of nearly all operators in the state.
1 The latest on online gambling
2 Whats that mean for online gambling?
3 Next year for iGaming? The hopes of Pennsylvanias legislature passing online gambling regulation and a massive fix to a tax on casinos in the state appear to be on hold until next year. The latest on online gambling Last week, the PA House once again passed an omnibus gambling expansion bill, piggybacking on language it passed this summer. That included both a fix for the casino host tax that the state Supreme Court struck down which has an impact of greater than $100 million and online gambling legalization. That put the ball in the Senates court, which has been slow to act on any gaming issues in the current calendar year. The latest? The Morning Call reports that the Senate wont vote on a gambling bill this year, but that the upper body of the legislature is prepared to deal with the casino tax problem: The court ruling stops tax payments based on the unconstitutional law near the end of January. Whats that mean for online gambling? Dealing with the casino tax is something that has an almost 100 percent certainty of happening in the legislature before the January deadline. The state is not going to let casino jurisdictions take a massive hit to their budgets. The question then becomes: Will online gambling, or any other gaming provisions, be tied to the casino tax? The prospects for action on iGaming had seemed dim before the November elections anyway, with a chance that action could still happen this month. The Senate has appeared hell-bent on not doing what the House wants to do. The gambling expansion bill the House just passed was originally sent there by the Senate, just as a casino tax fix. It amounts to the equivalent of an unending ping-pong rally, with the House wanting to take of a number of gambling issues in fell swoop, and the Senate being unwilling to do the same. More from the MC: That is despite the fact that the legislature still needs to pass a gambling bill that accounts for $100 million promised to the state budget, totally separate from the casino tax issue. Next year for iGaming? Online gambling could be taken up again next year, certainly. But that effort will run into several problems:
Legislation will have to start over from scratch, with a new bill being introduced, making its way through committee hearings and ultimately votes in the two chambers. At least the House appears to be happy with the language it has developed on iGaming, and that is the starting point.
Rep. John Payne the champion of online gambling in the legislature is retiring. He wont be around to push online gambling regulation forward.
The added time could give lawmakers a chance to find other ways to raise the $100 million promised to the budget, even though that may not be easy, either. But passing any type of tax increase would be more palatable after the elections than it is right now. It all adds up to the fact that the waiting game for PA online casinos and poker continues.