June 30 is soft deadline for gaming package that PA legislature would like to hit

PA Senator Says Online Gambling Isn’t Slowing Down Gaming Package, It’s VGTs

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Senate and House leadership in Pennsylvania are having discussions to hash out their differences regarding legislation to expand gambling in the state, according to Senate Minority Leader Jay Costa (D-Allegheny).

“There have been a number of meetings take place in the past several days on trying to find a solution reconciling some of the differences between the House and Senate as it relates to an overall gaming proposal moving forward to the governor’s desk,” Costa told Online Poker Report in a phone interview. “Those conversations continue to take place, and we’re hopeful that we’ll be able to reach consensus before we leave on June 30.”

Video gaming terminals the more contentious issue

There were two major points of contention between the bills passed by the House and Senate over the past month. Amending H 271, the House added video gaming terminals (VGTs), machines on which patrons of private taverns could play slots and video poker, and changed the tax rate and fee structure to make them more realistic for a successful online gambling model.

“The House added a couple things that are having a difficult time getting through the Senate,” Costa said. “Video gaming terminals is an issue that I think a lot of members of the Senate are not supportive of, and that has become a roadblock, quite frankly, to reaching a consensus.”

Costa indicated that, thus far, the tax rate has barely come up as the parties focus on VGTs.

“The bigger issue right now is what role VGTs play and whether or not VGTs and ancillary sites will be in the mix, and if they are what the tax rate for all of those will be in the future,” Costa said. “If we reconcile the VGT difference, that will lead to the next level of issues that need to be addressed. As you knock off one, you go to the next one. The tax rate for iGaming has been discussed, but it may not be resolved until we have some other aspects resolved.”

The anatomy of VGTs in PA

Allowing gambling machines to be put in most places with a liquor license is opposed by 10 of the 12 casinos in the state (two are involved in supplying the machines), which fear that people won’t make the trip to their casinos when they can gamble at the local bar.

As a result, senators with these casinos in their districts are vehemently against VGTs. Costa’s district borders on the district that is home to Rivers Casino in Pittsburgh.

There are also senators who think it is too big an expansion of gambling to make the machines so widespread.

However, Pennsylvania is desperate for revenue that iGaming and daily fantasy sports alone are not going to fulfill. The state is looking to generate an additional $225 to $250 million from the activities added in this bill in the next fiscal year alone.

There is also an argument that these VGTs already exist illegally at many bars, so the state might as well recognize and make money off of them.

Room for compromise on VGTs?

That the chambers have spent several days discussing VGTs seems to indicate that the Senate is willing to consider their inclusion.

In a previous interview with OPR, Rep. George Dunbar, the gaming expert in the House, agreed that the VGT language in the bill passed by the House was not fair to casinos.

His solution was to increase the per-machine upfront fee from $100 to $10,000.

“I could see that happening,” Costa said of Dunbar’s proposal. “It’s one of a variety of things being discussed.”

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Online gambling tax rate still needs resolving

While VGTs are the topic being addressed first, there remains a huge gap in the tax and fee structures proposed by the chambers.

The House bill imposes an across-the-board 16-percent tax rate on online gambling, with a single up-front licensing fee of $8 million.

The Senate gaming package calls for a 54-percent tax on online slots and casino table games, with a 16-percent tax rate on online poker. The Senate also split the gaming licenses in two, with a casino license costing $5 million and a poker license costing the same.

Costa introduced iGaming legislation earlier this year that would impose a 25-percent tax rate across the board.

“I’m certainly willing to support a 25-percent rate on both items, but there’s been pushback on that as well,” Costa said. “Other folks want to see 16 or 19 percent on table games. I think 25 percent is a fair middle ground, but others think 54 and 16 is the right rate.”

A real deadline approaching

Dunbar had told OPR that he hoped the Senate would make its changes to the bill by June 19. That didn’t happen, but since the sides are negotiating the parameters of the bill together, the House won’t need time to address the Senate proposal.

“We don’t want it to be ping-ponging back and forth,” Costa said. “We want to reach a consensus and wrap everything up by doing what needs to be done. We’ll send it over to the House for their concurrence, but it will be something that would be agreed to.”

The good news is lawmakers have given themselves a deadline to reach an agreement on the gambling expansion before they go on their summer recess. Their last day before breaking is scheduled to be June 30, though they have been known to go longer.

The legislature won’t return until September, at which point Costa indicated that the state wouldn’t be able to collect revenue until July of next year.

“I think there is sort of a deadline in the sense that we need revenue for the commonwealth,” Costa said. “The idea is to get it done by June 30 so we can have expansion of the industry up and running by January 1 to begin enjoying some of the tax revenue coming in. If we don’t get it done before our summer recess, and we may go a couple days into July, we lost the opportunity to get the revenue we’re looking to get.”

Image credit: Andriy Blokhin / Shutterstock.com

- 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 40+ state legislators. His poker writing has been cited by The Atlantic, Politico.com and CNN.com. Matt also has written on a variety of topics for Playboy Magazine, Men's Journal, Los Angeles magazine, LA Weekly and ESPN.com.
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