[toc]Pennsylvania Gov. Tom Wolf has expressed strong concerns regarding the proposed legalization of video gaming terminals (VGTs) at taverns, truck stops, and other locations.
His main fear: that revenue gains from VGTs will be offset by losses elsewhere.
VGTs remain a point of contention
VGTs is the main sticking point in getting a gaming expansion package across the finish line. Going into the last week of the current fiscal year, the House and the Senate still remain divided on the issue.
In late May, the Senate passed an omnibus gaming bill – H 271 – that called for the legalization of online gambling, online lottery games, and the regulation of daily fantasy sports, among other provisions.
Two weeks later, the House passed an even more massive bill. The bill included everything in the Senate bill plus the implementation of VGTs. The House bill also called for a significantly lower tax rate (16 percent vs. 54 percent) on online slots and online table games. It also features a different licensing fee structure for online gambling.
Since, the House and the Senate are at an impasse over VGTs. The two chambers hope to resolve their differences before July 1, which signifies the end of the current fiscal year.
Earlier this year, Wolf earmarked $100 million from new gaming initiatives to fulfill a portion of the state’s 2017-18 budgetary shortfall. Another $150 million from gaming expansion is marked for the following year.
Wolf has his doubts about VGTs
With his statement on Wednesday, Wolf indicated which side of the VGT debate he resides on:
“I want real revenue, and I want net revenue. I don’t want anything that we do in gaming or gambling to interfere with the revenues that are already in place. If it just cannibalizes and takes from one bucket called gambling to another, the commonwealth isn’t doing anything more than it has in the past.”
Wolf’s cannibalization fears are not necessarily misguided. In Illinois, which implemented VGTs in 2012, riverboat casino revenue is down 13.7 percent over the past four years.
Pennsylvania’s casino industry is already starting to show the first signs of wear. Year-over-year slot revenue is down each of the last eight months. The effective doubling of physical terminals in the state will likely fuel the recent downswing. After all, VGTs do not drive any land-based casino revenue.
Wolf isn’t the only top-dog that feels this way. Sen. Majority Leader Jake Corman also indicated that he was “a little nervous about the size and scope” of the VGT provision.
Even the House wasn’t gungho on the prospect of VGTs. The bill only passed by a slim margin (102-89).
Online gambling may be the perfect solution
The answer to Pennsylvania’s problems, at least with regard to gaming expansion, may already be staring lawmakers in the face.
Projections suggest online gambling could generate $126 million in upfront licensing fees. That is more than enough on its own to fulfill the $100 million earmarked for the upcoming fiscal year.
In addition, online gambling is a proven reliable and burgeoning revenue stream in New Jersey. There the industry already generated over $100 million in tax dollars for the state. As a significantly larger state, Pennsylvania would likely reap even more benefit: $46 million in first year revenue, scaling up to $77.3 million in by 2022 by our internal estimates.
If Wolf’s main concern is cannibalization, then online gambling poses the best possible path forward. It’s been proven time and time again, most recently in a study commissioned by newly-minted trade group iDEA, that online gambling is complementary to land-based.
In other words, online gambling would produce the “real revenue” from gaming that Wolf seeks.
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