Speculation that the regulation of online gambling in Pennsylvania may become a reality in the fall could prove to be more than a little optimistic.
It is not difficult to describe the current situation with regard to regulated online gambling in Pennsylvania – it is no closer to becoming a reality than when Senator Edwin Erikson introduced the state´s first online gambling bill in June 2014.
Sure, tax revenues from regulated online gambling have been included in the Senate´s proposals to balance the state budget; but, other than the removal of a bad actor clause in Erikson´s bill, only obstacles have been thrown in the path of regulation – obstacles that are proving difficult to shift.
Disagreements about tax rates, how to fix the local share tax issue, and the inclusion/exclusion of Video Gaming Terminals in any gambling expansion legislation have dominated the discussion for most of 2017, with little common ground being found. Now a new obstacle could take the conversation off the table for far longer than the couple of months being speculated by industry observers.
New Tax-Free Plan to Balance the Budget
Last week, Pennsylvania´s Senate narrowly passed a budget revenue plan that included $200 million of revenues from an expansion of gambling, around $700 million of revenues from various tax increases and $1.3 billion from future tobacco revenue payments. The plan was passed to the House to debate.
However, rather than debating the merits of the budget balancing bill, House Speaker Mike Turzai introduced an alternate “No-Tax Plan B” that relies on borrowing and reducing the amounts assigned to special funds in order to benefit activities such as farmland preservation and horse racing.
Turzai´s Plan B failed to gather the support it needed to pass, but many Republicans in both the House and the Senate are sympathetic towards a no-tax deal, and it is something that may be revisited over the coming weeks – pushing any passage of the Senate´s budget revenue plan (including the regulation of online gambling in Pennsylvania) back to the fall.
No Guarantee that a Consensus Will be Found
Due to the risk of the state´s credit rating being downgraded, the likely outcome is that a version of the Senate´s budget-balancing plan will eventually be passed. However, this does not guarantee the regulation of online gambling in Pennsylvania will be included in the final version of the plan – especially if a consensus cannot be found on the key areas of disagreement.
Neither the House (in favor of the inclusion of VGTs) nor the Senate (in favor of higher tax rates) seem keen to publicly discuss each other´s proposals other than to say they are a non-starter. The massive gambling expansion bill that was passed by the House in June – and that would raise $357 million in tax revenues – is yet to reach the Senate committee stage.
One possible outcome is that a compromise solution could be reached featuring the House´s gambling expansion bill (with VGTs included) and a lesser burden on Pennsylvanian tax payers. Brick-and-mortar casinos would be unhappy with this solution as it would loosen their grip on the control of gambling in the Keystone State. They would likely lobby against it and delay its passage even longer.
The irony of the situation is that it may not ultimately be the fault of PA´s legislators that regulated online gambling in Pennsylvania is kicked down the road, but the casinos they are trying to support. The question is, how far will they kick it?