Zero-Sum Game? PA Casinos Vehemently Oppose VGT Expansion Bill at Senate Committee Hearing

Posted on October 7, 2020 - Last Updated on October 18, 2020

What’s best for public policy, state revenue and law enforcement when it comes to possibly adding more slot-like video gaming terminals, or VGTs, outside of PA casinos? Or definitively allowing — or outlawing — skill games across Pennsylvania?

As always, the devil is in the details. Who will gain or lose with the proposed legislation, and how? After all, PA casinos, small businesses, bars and fraternal groups such as the VFW all have competing interests.

Those issues were the focus of a long preliminary hearing on noncasino wagering devices in Pennsylvania. The PA state Senate committee hearing on Tuesday was led by Republican Sen. Tom Killion.

Many competing interests in SB 1256

None of the competing interests are entirely happy with Senate Bill 1256, proposed by Senate Majority Leader Jake Corman, as it is now written.

Some who testified before the Senate Community, Economic, and Recreational Development Policy Committee against the bill predicted dire consequences if gambling is expanded to legalize those devices.

POM and casinos hate VGT expansion bill

Ironically, two forces vehemently against the bill are Pace-O-Matic, or POM, a skills game maker and distributor, and the casino industry.

POM operates in a gray area, having had a judge in 2014 rule that its devices were predominately skill games. But it received contradictory findings by another court. The PA State Police and Pennsylvania Gaming Control Board take the position that skill devices are illegal in Pennsylvania.

As a result of the murkiness, thousands of illegal machines have proliferated all over the state. Estimates used at the hearing began at 15,000. Many contend that such devices cut into casino slot revenue and Pennsylvania Lottery proceeds.

POM wants some oversight, but not SB 1256

Paul Goldean, a POM executive, was the first to testify:

“We are here testifying in opposition to Senate Bill 1256, as it would kill the skill game industry and dramatically put slot machines in every business across the commonwealth.

“To be clear, and this is important, this is not a VGT and skill games bill … This bill only supports VGTs. This lumps VGTs and skill games together, calling them hybrid video gaming terminals and taxing them at the same rate. We cannot and do not compete with VGTs or the slot machines in casinos.”

He concluded:

“I want to be clear: We support legislative efforts to regulate our industry [and] allow us to provide additional tax revenue, at a fair rate, based on the revenue our games generate. We also welcome additional enforcement and penalties aimed at cleaning up the illegal games and bad actors.”

Several people testifying for POM emphasized that the company is a PA business, mindful of employing locals, and makes charity a priority.

Casinos oppose VGT expansion, skill games legalization

Casinos collectively oppose the bill.

In written testimony, the gambling houses said:

“Gaming expansion will result in substantial losses of gaming tax revenue for the state and revenue for the Lottery, will result in lost jobs for Pennsylvanians and will put at risk hundreds of millions of dollars annually in investment in the commonwealth, revenues for thousands of local businesses and local share dollars for counties and local communities.”

They continued:

“Gaming expansion will not solve the commonwealth’s budget deficit. Gaming expansion is a zero-sum game, with any new lower-taxed VGT or skill game revenue being offset by losses in higher-taxed casino gaming tax revenue and Lottery revenue.

“We submit that it is never the right time to flood Pennsylvania with slot machines, placing them up and down every Main Street in the commonwealth, but it is particularly true that now is not the right time for expansion.

“Even upon reopening, we would impress upon this committee that being ‘open’ does not look like it did before the coronavirus pandemic began.”

The casino testimony concluded by saying the bill would flood the state with machines now deemed illegal:

“Expanding VGTs to liquor licensees would result in as many as 85,000 gambling machines being added to the state — more than five times the current number of slot machines in all of Pennsylvania’s casinos combined.”

No room for compromise at the current tax rate

Asked about a potential compromise, the casino representative told senators it’s not an option. That’s because of the 54% tax rate that licensed casino slots are subject to.

And Sen. Tommy Tomlinson, whose district includes Harrah’s Casino and Racetrack, likened a compromise to a legitimate bar owner agreeing to compromise with illegal bootleggers.

PA Lottery hates VGT expansion bill

Lottery Director Drew Svitko told the committee:

“I’d like to start my testimony by saying that we are opposed to this proposed legislation due to the extreme negative impact that games of skill currently have on the Pennsylvania Lottery and the potential for even greater harm if this bill were to become law.

“As of today, the Lottery estimates that these machines, which have been operating illegally in the commonwealth for years, are located in nearly 28% of the Lottery’s network of more than 9,600 retailers. Each day, these machines are taking in money that would otherwise be directed to Pennsylvania Lottery games.”

What’s next?

Despite all the opposition, most of the legislators appeared sympathetic to doing something to provide legal gambling machines to tavern owners and organizations such as the VFW to bolster their fundraising.

There was no announcement at the hearing about what comes next.

Photo credit: Dreamstime.com/Ivan Vukelic

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Kevin Shelly

Kevin C. Shelly is an award-winning career journalist who has spent most of his career in South Jersey. He's the former assistant city editor of The Press of Atlantic City, where he covered the casino industry and Atlantic City government as a reporter. He was also an investigative, narrative enterprise, and features reporter for Gannett’s Courier-Post.

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