The House and the Senate have been at an impasse over how best to proceed since early June. That is when the House passed a bill that differed in key respects from one previously passed in the Senate.
The two legislative chambers unofficially have only until June 30 to reach a consensus. But Pennsylvania being Pennsylvania, that date will likely come and go without a firm resolution, with the second week of July now representing more of a hard deadline.
What’s the holdup?
In short: video gaming terminals (VGTS).
The proposal allows up to five of these slot-like machines at bars, truck stops, and other locales possessing a liquor license. VGTs are a historic poison pill dating back to the 2016 legislative session. They are, once again, the main reason progress stalled in 2017.
The House narrowly passed an omnibus bill earlier this month, by a scant margin of 102 – 89. It included, among other provisions, one for VGTs and another for online gambling, taxed at 16 percent.
The Senate bill, which passed by a more convincing margin of 38 – 12, did not contain VGTs. Otherwise, it was similar to the House bill. The other notable difference is a proposed 54 percent tax rate on online casino games.
Those in favor of VGTs see it as a way to generate increased tax revenue in towns and counties where casino gambling is not currently present. They think it also spurs the growth of local bars and taverns. If passed in it’s current form, Pennsylvania could easily see the number of slot terminals present in the state double.
Opponents, of which Gov. Tom Wolf appears to be one, believe VGTs will only divert revenue away from casinos and toward local businesses, with no real revenue impact.
Evidence suggests that cannibalization is the more likely outcome. Nearby Illinois went live with VGTs in 2012, only to watch riverboat casino revenue stumble 13.7 percent from 2012 – 2016. A similar result in Pennsylvania, where land-based casino revenue is already trending slightly downward, seems likely.
Kicking the can down the road
The good news is that there’s at least a chance the spending levels for the $32 billion budget will be finalized before the fiscal year concludes.
However, the revenue sources to fund the budget will not likely be in place for another 10 days. According to Penn Live, it’s by then that “Wolf has to act on the spending bill to find the necessary taxes, fees and, this year, loan proceeds to make it all balance.”
The budget gap currently stands at $2.2 billion. The state needs “$700 million in new money needed to cover new spending in 2017-18.”
In all likelihood, the fate of VGTs will succumb to one of three possible outcomes:
- The provision is ditched entirely
- The provision remains, but the licensing fee increases dramatically, from $100 to somewhere along the lines of $10,000
- VGTs remain in the bill as is
The scenario in which VGTs remain as is seems unlikely, as the provision appears to be a non-starter in the Senate. More likely is a compromise, or as Penn Live points out, an alternative plan “to add up to six more casinos in “underserved” markets.”
Once (if) the VGT issue is resolved, talks about the online gambling tax rate could resume. Resolution is imperative if Pennsylvania hopes to fulfill the $250 million earmarked for expanded gambling over the next two years.