Facing a huge deficit, Pennsylvania eyes gambling for help

Associated Press

HARRISBURG — Republican lawmakers in Pennsylvania who are resisting tax increases to balance a deep budget deficit are taking steps toward the state's third expansion of gambling in six years as an alternative source of cash.

Lawmakers who support it estimate that an expansion of some sort could mean hundreds of millions of dollars in one-time license fees plus collections from taxing a new stream of gambling profits. It also would keep the state's industry current in a competitive and fast changing environment, supporters say.

House Majority Leader Dave Reed, R-Indiana, gave gambling expansion a prominent place in his list of priorities. Exploring the possibility should come before lawmakers raise taxes, he said Wednesday after the House defeated a $2.4 billion tax package presented by Gov. Tom Wolf.

"I think we need to have a discussion first on what other revenues are on the table," Reed said. "We need to come to a conclusion on liquor reform. We need to address cost drivers like our pension system. We need to look at gaming options."

Pennsylvania state government has been in a partial shutdown for more than 100 days as the Republican-controlled Legislature resists Wolf's request for a multibillion-dollar tax increase that the first-term Democrat says is necessary to resolve the state government's budget deficit and begin correcting steep disparities in public school funding.

Top Republicans, however, have yet to say how large of a tax increase they will support.

The Wolf administration is open to a gambling expansion, if it is part of a comprehensive package that resolves what the administration projects to be a multibillion-dollar long-term deficit, a spokesman said.

"But I don't think we should confuse this with long-term sustainable revenue that's going to fully fix the budget deficit," Wolf administration spokesman Mark Nicastre said.

Top Democratic lawmakers have yet to voice support.

House Minority Whip Mike Hanna, D-Clinton, said he had yet to survey rank-and-file Democrats on it. Senate Minority Leader Jay Costa, D-Allegheny, was more resolute, saying his caucus is firmly against balancing the budget on the backs of gambling addicts and an unpredictable revenue stream.

"That's a path we don't want to go down," Costa said.

Even supporters acknowledge that balancing the budget on a gambling expansion is problematic: It is very difficult to estimate how much actual gambling revenue will materialize.

Case in point: Lawmakers legalized gambling in bars in 2013, using a state government estimate that a 60 percent tax on games of chance would bring in about $150 million a year to the state treasury.

Practically nothing has materialized. It contributed $554,000 in the fiscal year that ended June 30 out of $30.6 billion in total tax collections for the state's main bank account.

Still, gambling's role in financing state government is growing.

Table games, legalized at slot-machine casinos in 2010 to help buttress recession-wracked tax collections, contributed $96 million last year. The state lottery's $1 billion in revenue last year went to support programs for the elderly, including a record amount for costs that the state's general tax collections used to shoulder. Meanwhile, more than $1.2 billion in tax collections on slot machine gambling in the last fiscal year went mostly for school property tax reductions and horse racing industry subsidies.

The other problem is that the universe of gambling legislation is a jumble.

There is the prospect of Internet gambling, which is legal only in Delaware, New Jersey and Nevada.

A bill by Sen. Kim Ward, R-Westmoreland, would allow Pennsylvania's casinos to offer Internet gambling for a $10 million permit fee to people who register and are in the state.

Immediate revenue, however, could be minimal: New Jersey casinos reported $12.2 million in August receipts. New Jersey's tax rate is 15 percent.

Ward's bill also would allow casinos to station slot machines at off-track horse-racing betting parlors, while a bill by Rep. Nick Kotik, D-Allegheny, would allow casinos to station slot machines at Pennsylvania's six international airports.

Senate President Pro Tempore Joe Scarnati, R-Jefferson, said gambling bills may not have seemed like a great idea months ago. But with massive tax increases and the government's partial shutdown at stake, perspectives should change, Scarnati said.

"All of a sudden," Scarnati said, "gaming doesn't look that bad."