VGTs remain controversial moving part in larger PA gaming bill
Online Poker Report

PA Senate Likely To Act Quickly On Online Gambling Because Of Budget Concerns, Lawmaker Says

PA gaming bill moving fast
A day after the Pennsylvania House of Representatives sent a gambling expansion bill back to the Senate with a couple of major changes, Rep. George Dunbar expressed confidence that the Senate will make a decision on the bill by June 19.

“It won’t be too long, as we have a budget to get done,” Dunbar told Online Poker Report on Thursday in a phone interview. “Gaming isn’t the most important part of it, but it is an important part. I’m sure the Senate is going to be taking it up next week, and I’m also sure it’s not going to get voted on as is. There will be some changes to it. I hope the changes will be minimal.”

Though the legislation – H 271 – isn’t Dunbar’s, it includes most of the language from his bill to authorize and regulate iGaming, daily fantasy sports and other activities.

“I think we did a heck of a job improving what the Senate sent over,” Dunbar said. “The product we put out yesterday at least is one that could function. It still needs some fine tuning and I’m not sure everything in there will remain in there, but at least it is a blueprint of something that would work.”

Why add video gaming terminals?

All indications have been that allowing video gaming terminals (or VGTs) in taverns are a non-starter in the Senate, so why would the House add them in on a bill that needs to move quickly?

“That’s what conventional wisdom is around the building, but I don’t know,” Dunbar said. “What we’re essentially doing is providing the Senate with options.

“I don’t believe it was put in as a poison pill to make the bill fail. You saw the product the Senate sent us. We sent them back a realistic product that if they want to put their stamp on, they can put their stamp on. I don’t see them rejecting it entirely. They can pull out VGTs or something else. Hopefully they will leave it all intact.”

While there are vocal opponents of VGTs – which would allow what are essentially slot machines to be placed in bars, truck stops and off-track betting parlors – in the Senate, there may be supporters who didn’t want to hinder progress on the first passage through the Senate, knowing the bill would return from the House.

Not that much difference between House, Senate on gaming?

“It seems like we’re worlds apart, but I don’t believe that is the case,” Dunbar said. “I think there’s support for a lot of things we have in our bill, but they just couldn’t reach consensus. Maybe this will help them reach consensus.”

The bill passed in the House by a vote of 102-89, and the relative closeness surely was due to the controversy regarding VGTs.

The terminals are opposed by the state’s casino industry, which is concerned that people aren’t going to travel to a casino when they can play at their local bar.

“If estimates of illegal machines are right, the impact on casinos shouldn’t be as dire as they say, but I understand their fears,” Dunbar said. “As we drafted the legislation, we limited it to the machines we think already exist.”

The bill permits for 40,000 VGTs to be licensed. While other activities in the bill such as iGaming would generate more money the first year because of upfront licensing fees, the VGTs are expected to be bigger revenue producers for the state in the long run.

Possible changes to PA gaming bill?

Dunbar indicated that he would like to see the upfront fees on VGTs increased 100-fold to $10,000 per machine.

“I’ve advocated that, at $100 per machine, I believe the upfront fee for bar owners to offer VGTs is too small,” Dunbar said. “That’s not fair to casinos.”

Another change he’d like to see is for a portion of the proposed 50-percent tax on off-track betting parlors to go to the Race Horse Development Fund.

“When we first legislated gaming in Pennsylvania, the only legal gaming was horse racing,” Dunbar said. “We knew they’d lose revenue, so that’s why they get a percentage of the taxes generated by casinos. I think it should be consistent.”

As currently set, if VGTs are pulled out by the Senate, Dunbar said it would only lower the overall budget projection for year one by about $20 million because of the low upfront fees.

Huge tax-rate differential for iGaming

After the Senate proposed the same 54-percent tax rate for online slots and table games that are assessed in the casinos, the House came back with the 16-percent rate all around that was in Dunbar’s bill.

The near 40-percent difference would seem difficult to overcome in a mere 10 days. Dunbar said the House did discuss putting in a higher rate so the sides wouldn’t be so far apart, but determined that 16 percent was necessary to get iGaming up and running with casinos wanting to invest.

“People have to understand the cost drivers they have in iGaming, as well as the marketing dollars they have to put into iGaming,” Dunbar said. “The whole idea we’re telling everybody with iGaming is you’re reaching a new audience, and the only way to reach a new audience – whether they are Millennials or whatever – is marketing that costs money.

“You can’t tax at a 54-percent rate because casinos won’t be able to grab them and bring them into the brick and mortar.”

Can the PA online casino tax rate change?

Sen. Mario Scavello, chair of the Community, Economic and Recreational Development Committee that put together the version of the bill passed by the Senate, is one of the strong supporters of having the online gambling tax rate equal the tax rate on slot machine revenue inside the casinos.

Dunbar is optimistic that there are less vocal members in the Senate who understand the difference between in-casino gaming and iGaming, and why the tax rates need to be different.

“I would hope that some reason will apply at some point in time here,” Dunbar said. “There are still people making those arguments in the Senate, but we heard those same arguments on the House floor.

“I don’t know if you can tell on TV that no one on the floor is really listening. We did well enough in caucus to make sure enough people understood what we were talking about.”

Path forward for gaming bill

The Senate is meeting Monday, Tuesday and Wednesday of next week, then Monday the following week. Dunbar expects that the Senate will address the bill in one of those sessions, with Wednesday or the following Monday most likely.

It’s also possible that rather than changing the bill, the Senate decides to issue a ruling of non-concurrence and sends it to a conference committee to be hashed out by leaders of the House and Senate.

He noted that, while there were additions to the bill, they were lifted from language in other bills that have existed long enough for the Senate to be familiar with them.

“This is going on already,” Dunbar said. “Let’s not kid ourselves. Online poker is going on, iGaming is going on, VGTs in bars are very prevalent in Pennsylvania. This is not some sweeping change or some large increase in the amount of gaming.”

Image credit: Abdul Razak Latif / Shutterstock.com

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Matthew Kredell
- Matthew began writing about legislative efforts to regulate online poker in 2007 after UIGEA interfered with his hobby of playing small-stakes online poker while working as a sportswriter at the Los Angeles Daily News. Covering the topic for Bluff Magazine, PokerNews and now Online Poker Report, he has interviewed four U.S. Congressmen and 20+ state legislators. His poker writing has been cited by The Atlantic, Politico.com and CNN.com. A freelance writer based in Los Angeles, Matt has written on a variety of topics for Playboy Magazine, Men's Journal, Los Angeles magazine, LA Weekly and ESPN.com.