The Pennsylvania legislature met this week to try and resolve the $2 billion budget shortfall. On Thursday, the state Senate convened and voted on a $2.2 billion-dollar plan to address the gap. The measure passed by a narrow margin. It is now on to the House for a vote.
Budget proposal includes $200 million in gambling expansion funds
There are several elements in the Senate package. There is a tax on natural gas extraction as well as borrowing on anticipated tobacco settlements.
Additionally, there is $200 million earmarked as revenue from gambling expansion. In order to possibly meet that number, Pennsylvania will almost certainly need to pass a measure which includes online casinos.
It is certainly a positive development that Pennsylvania lawmakers are relying on revenue from iGaming. However, this is not the first time the legislature earmarked funds from online casinos. So, even though the online gambling law still has not come up for a vote, it is still very much in play.
Last year, the state set aside $100 million expected to come from a similar online gambling measure. The measure never passed though, which helps explain why the Keystone State is in such financial disarray.
Senate could be using online casinos to strike a deal
A recent report from Penn Live indicates the state is not exactly learning from its mistakes.
Many Pennsylvania lawmakers did not want to pass a budget measure which included tax hikes. After this budget barely squeaked through the Senate by a 26-24 margin, Senate leadership and Gov. Tom Wolf could be holding back online gambling until the House goes along with the plan.
After all, the two gambling measures passed by the House and Senate are wildly different. The Senate bill went very conservative, allowing online casinos, but at an incredibly high tax rate. Meanwhile, the House passed a massive bill which included daily fantasy sports (DFS) and the controversial video gambling terminals (VGTs) in addition to online gambling.
Penn Live suggests withholding the online gambling measure could be a bargaining chip. If the House is willing to drop VGTs, the Senate might give up some of the tax increases in their measure.
So what is next?
There is plenty of urgency to solve the budget problem quickly. In addition to the normal pressures of delivering a budget, lawmakers are also dealing with the threat that the state’s credit rating could plummet.
If the legislature cannot balance the budget, S & P Global Ratings has threatened to cut their credit rating. In a statement, S & P addressed why the company is so concerned with the state’s fiscal stability:
“While it is not uncommon for states to have periodic structural imbalance, Pennsylvania’s chronic misalignment and eroding general fund position, particularly during a period of economic growth, demonstrate a pattern of financial mismanagement.”
The GOP in the House is insistent tax hikes are not the answer, so do not expect the House to immediately pass the budget plans. However, unlike last year when lawmakers punted on the online gambling issue, this year there might just be too much pressure to ignore it.
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