VGTs still major sticking point
Pennsylvania’s new fiscal year officially began Saturday, July 1. As the budget deadline week drew to a close, a gaming expansion package on which Governor Tom Wolf relied for $250 million of revenues in his budget remained mired in the state Senate.
As the week ended, lawmakers in both chambers of the Pennsylvania General Assembly concentrated on passing a bipartisan budget bill, which was expected to be signed by Governor Tom Wolf by Saturday. The issue of gaming expansion—specifically, reconciliation of the differences between House and Senate gaming bills—will be addressed along with a few other crucial tax and code issues after the July 4 holiday.
Senators had hoped to pass the gaming package along with the budget, but lawmakers have reached a sticking point. The main reason for the delay is a set of amendments state House members added to a previous expansion package passed by the state Senate. That package provided for the legalization and regulation of online gaming and daily fantasy sports, online gaming via tablets at state airports, online lottery sales, and a replacement of the local-municipality casino host fee struck down last year by the state Supreme Court.
The House bill, passed with little debate, includes all that, plus satellite slot casinos at off-track betting facilities, and the main sticking point said to be holding up the entire package—legalization of video gaming terminals (VGTs) at up to 8,000 liquor-licensed establishments 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.
The other main difference between the House-passed measure and the Senate bill remained the tax rate for online gaming. The bill passed by the Senate would tax online gaming revenues at 54 percent, a rate many feel would torpedo the entire online gaming program, since operators have said they would not seek a license at that tax rate. The House returned the measure to the Senate with online gaming revenues taxed at 16 percent, plus a 3 percent local-share assessment.
Late last week, state senators worked furiously with House leaders to craft a compromise bill. “There have been a number of meetings that have taken place in the past several days on trying to find a solution reconciling some of the differences between the House and Senate as it relates to an overall gaming proposal moving forward to the governor’s desk,” Senate Minority Leader Jay Costa told Online Poker Report. “Those conversations continue to take place, and we’re hopeful that we’ll be able to reach consensus before we leave on June 30.
“The House added a couple things that are having a difficult time getting through the Senate,” Costa said. “Video gaming terminals is an issue that I think a lot of members of the Senate are not supportive of, and that has become a roadblock, quite frankly, to reaching a consensus.”
On the tax-rate issue, Costa said he is willing to compromise. “I’m certainly willing to support a 25 percent rate on both items (iGaming and DFS), but there’s been pushback on that as well,” Costa said. “Other folks want to see 16 or 19 percent on table games. I think 25 percent is a fair middle ground, but others think 54 and 16 is the right rate.”
Meanwhile, the local-area host fee is a looming problem. Both bills replace the fee struck down by the court last year—2 percent of revenues or $10 million, whichever is greater—with a flat $10 million annual fee paid by casinos to their host communities. While casinos have threatened to challenge that provision on the same grounds as the earlier one (it creates a higher-percentage tax rate for smaller casinos), local municipalities hope the new fee is in place by the time the next installment on the fee is due in late July.
While many casinos have pledged to continue the quarterly payments regardless of the progress on a new law, others—notably Sands Bethlehem—have made no such commitment
