PA Senate Open To Grouping Online Gambling With Local Casino Tax Fix
Online Poker Report

The Outlook For PA Online Gambling Remains Hazy Heading Into Session’s Final Two Weeks

Sun setting PA online gambling
When Pennsylvania Senators reconvene this week they’ll have a lot on their plates and not much time to clear them, as the Senate is only in session from Oct. 17-19 and Oct. 24-26.

Among the more pressing issues the legislature will address are two related to gaming:

  1. The legalization of online gambling
  2. recent Pennsylvania Supreme Court ruling that abolished the local share tax land-based casinos pay on slot machine revenue.

Online gambling legalization is a central component of a larger gaming reform bill (HB 2150passed by the House of Representatives in July.

Online gambling the less urgent issue

HB 2150 has been in a holding pattern in the Senate, despite both chambers passing a budget that included the revenue projections from online gambling as a funding mechanism.

The bill doesn’t have to pass in 2016 to remain a budget funding source — it could still be passed in the spring of 2017 — but this greatly complicates the situation.

On the other hand, the Pennsylvania Supreme Court decision does need to be tackled, and tackled in short order. The court found that the local taxes paid by Pennsylvania casinos was unconstitutional, and the legislature was given 120 days to come up with a fix.

If it doesn’t act, casinos will no longer have to pay these taxes, and towns and counties across Pennsylvania will be looking at budget shortfalls. For this reason, the local tax fix has a far greater sense of urgency than online gambling.

However, a number of lawmakers believe the best way to deal with the tax issue is to roll it into some version of the gaming reform bill.

The overarching question is, will enough lawmakers agree to this approach?

Recapping Pennsylvania’s push toward online gambling legalization

2015: The foundation is laid

After some brief flirtations with online gambling in 2013 and 2014, Pennsylvania got serious about online gambling legalization in 2015, and began what has been a two year process towards legalization.

In early 2015, Pennsylvania Rep. John Payne laid the foundation for online gambling when he introduced a bill, HB 649, that sought to legalize and regulate online gambling in Pennsylvania.

As Chairman of the House Gaming Oversight Committee, Payne was more or less the gatekeeper of gambling legislation in the House, and was able to drive the online gambling conversation. Payne’s predecessor as Gaming Oversight chair, Mauree Gingrich, was extremely hesitant when it came to online gambling.

With a new hand on the tiller, the House Gaming Oversight Committee held “something like 54 meetings and hearings in the last 18 months,” Payne told Online Poker Report in July. “We’ve traveled all over, and we’ve gotten input from everyone.”

Despite an attempt at the tail-end of 2015 to use online gambling to end a budget stalemate, 2015 was mainly used to inform lawmakers and build support for an online gambling push in 2016.

Throughout 2015, Payne had doubts that online gambling revenue would be applied to the 2015/2016 budget, saying multiple times that online gambling revenue has always, and continues to be earmarked as a way to close the state’s pension deficit.

The pension deficit is something he said would be broached in the spring of 2016.

2016: A lot of waiting with brief moments of anxiety

Over the course of 2015 and 2016, Payne’s bill morphed into an omnibus gaming reform bill, with everything from video gaming terminals (VGTs) to daily fantasy sports added. But online gambling remained the central issue.

Throughout early 2016, the bill sat relatively untouched, and online gambling proponents grew increasingly impatient.

Then, on May 24, online gambling had an extremely turbulent day, as dueling bills both failed in the legislature because lawmakers had confused them. Because of the confusion, the House voted to reconsider both measures at a later date.

A version of the bill permitting VGTs failed once again some four weeks later. But within minutes a new bill emerged, HB 2150, that didn’t include provisions for VGT’s in bars or taverns. The House passed HB 2150 by a vote of 155-80, and sent it to the Senate.

Despite agreeing to use the revenue the online gambling bill would generate to fund the budget, HB 2150 has sat untouched ever since.

Why is the Senate sitting on the bill?

The Senate is stuck in the classic rock and a hard place scenario.

The House may have been able to pass a comprehensive gaming reform bill, but the Senate is looking to pass a diluted version of the bill, stripping out the more contentious policies it contains, but still leaving enough meat on the bone to cover the $100 million in revenue the bill is supposed to create.

Reaching $100 million in revenue without online gambling doesn’t seem possible.

Fortunately, the least contentious issue is online gambling. This doesn’t mean online gambling isn’t a point of debate. It’s just not as controversial as adding slot machines at off-track-betting parlors or some of the other gaming reforms HB 2150 contains.

With time running out, it seemed as if the Senate was going to kick the can down the road, and wait until 2017 to pass some version of an online gambling legalization bill.

But this is something it may be reconsidering now that the local tax issue has arisen.

What happens next in the House?

The House Gaming Oversight Committee has scheduled hearings for Tuesday, October 18, where it will discuss the local tax share decision, and on Wednesday, October 19, for what has been dubbed an update on online gambling and fantasy sports.

The House seems intent on combining the local tax issue with the existing gaming reforms, thereby dealing with all of the gaming issues in one fell swoop. It is the hope that the Committee can apply enough pressure on the Senate to do the same.

As representative Rosita Youngblood told OPR in September:

“We have 12 voting days before the November general election. That creates a tight time frame to navigate, but when we left Harrisburg in July there was an agreement to get $100 million from gaming. If we do not pass something this fall, the taxpayers of this Commonwealth will be on the hook for that $100 million.

“In January we will have a brand new legislature: new house members and maybe new senate members. We will definitely have two new chairmen of the House Gaming Oversight Committee. So we have to start the whole process from scratch. That lends to it additional delays in getting something passed, and with $100 million on the line that’s a risk we cannot take. Not to mention we will have a brand new attorney general, and it is not clear where they would stand on the legality of daily fantasy sports in the Commonwealth. There is a lot at stake by waiting.

[…]

“The issue has been vetted by the current membership of the House and Senate. The leaders of all four caucuses, plus the governor, agreed to include $100 million in revenue from iGaming fees and taxes. So there is no reason to wait to pass something next year when we will have a brand new legislature. It makes no sense.”

House Majority Leader Dave Reed also thinks the two issues would best be solved togethertelling the Pittsburgh Post-Gazzette, “This [the Supreme Court decision] adds a new wrinkle, but it’s probably an opportunity to maybe bring gaming as a whole to a head and resolve both issues at the same time.”

In a recent interview with OPR, Payne called online gambling’s 2016 prospects “50/50”. Payne is retiring at the end of the session.

What happens next in the Senate?

The House has been imploring the Senate to act on the gaming reform bill they passed in June, but thus far its pleas have fallen on deaf ears.

Governor Tom Wolf‘s office hasn’t been silent either. According to the Pittsburgh Post-Gazette, he expects the Senate to act on online gambling. “The governor has been clear he expects the Legislature to work on this matter, as it was part of the budget agreement,” Wolf spokesman Jeff Sheridan told the paper.

Based on comments by Senate Majority Leader Jay Costa, the Senate is now open to the idea of passing online gambling in conjunction with the tax fix, but it could still decide to pass a local tax bill independent of online gambling.

According to a recent report from Gambling Compliance (paywall) Costa said that while combining the local tax fix with online gambling is a possibility, anything beyond online gambling would be a deal-breaker.

The good news is, Costa’s position has softened over the past week or so, as he previously told the Post-Gazette that the tax issue could only get done independent of wider gaming reforms. The Post-Gazette paraphrased the Senate Majority Leader as saying, “… a fix can be completed in October if the Legislature does not also venture into the broader issues of gaming expansion.”

It appears that the Senate’s decision on online gambling will be predicated on how it deals with the local tax share court decision.

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Steve Ruddock
- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.