A deal to fund the state budget and patch a shortfall of more than $2 billion fell apart on Wednesday, leaving the state in what remains a pretty big mess.
That also meant the hopes of passing a gaming package in the state — which also would have legalized online gambling — took a hit.
But the dynamic in PA is such that conversations on a budget deal probably are not over. And that means iGaming will remain on the table as a way to generate revenue in the state.
The PA budget mess right now
Late last week, it looked like lawmakers and Gov. Tom Wolf were close to agreeing on a revenue package that would have ended a months-long stalemate on the state between House Republicans and the rest of the government. It seemed even closer when chatter had a vote planned in the House.
However, the positive momentum disappeared sometime Wednesday when House leadership could not whip a majority of votes on its revenue plan. That led to a chaotic day in Harrisburg, where Wolf rolled out a plan in which he would do what was in his power to fill the budget gap.
The linchpin of Wolf’s scenario included borrowing money based on profits from the Pennsylvania Liquor Control Board to the tune of more than a billion dollars.
That would certainly relieve a lot of the pressure on the cash-strapped state in the short term. But it’s also a plan that brings with it problems of its own.
Wolf’s plan: A closer look
Here’s where to start on the liquor plan that Wolf will pursue: It can’t happen immediately. Estimates put a timeline of two months on completing a securitization of the PLCB.
PLCB Board Chairman Tim Holden and Board Members Mike Negra and Michael Newsome issued a joint statement following Wolf’s press conference in which he floated the plan this week:
“As our recently released fiscal year 2016-17 financial statements indicate, we have a strong cash position, and both our net income and gross profit increased modestly last year. We can certainly understand the appeal of monetizing the PLCB as a commonwealth asset.
“Although we have yet to discuss the proposal as a Board or begin to delve into details of a potential arrangement, we pledge to work collaboratively with the Governor’s Budget Office to explore a revenue-backed contract to deliver significant immediate revenue while capitalizing on the PLCB’s long-term profitability.”
That’s obviously far from turning on the light switch on Wolf’s scenario. That means that a budget deal could still happen before this actually comes to fruition, something both Wolf and legislative leaders said they hoped will happen. Wolf said he is still open to a negotiated solution.
It’s also not a plan without its drawbacks, as think tank Commonwealth Foundation points out. And some also wonder aloud if this move is even with the governor’s power.
It all means the door is still ajar for a budget deal that includes a gaming package.
Higher education still a problem
Even Wolf’s plan, however, doesn’t solve all of the state’s problems. Nearly $600 million in subsidies for some of the state’s universities remain in limbo.
Pennsylvania Budget and Policy Center director Mark Stier said “if they can float this bond issue based on Liquor Control Board revenue, they’ll be able to pay for most of what is in the current year budget. They won’t be able to pay for the things that haven’t been appropriated yet, which are really important.”
That includes funding the state related universities of Penn State, Pitt, Temple, and Lincoln.
That’s another reason some of the impetus to fund the budget remains.
Money still not flowing?
No budget and no PLCB money in the short term still leaves a cash-flow issue in the state, as City & State PA relates:
It was not clear Wednesday whether or not the governor’s announcement would be enough to allow State Treasurer Joe Torsella to restart short-term borrowing to deal with the commonwealth’s cash-flow issues. Torsella’s office declined to comment on the immediate implications – relative to borrowing – of the governor’s plan to manage the state’s finances into balance.
Where does that leave online gambling?
Right now, the state legislature is taking a break until Oct. 16, which is probably the best thing that could happen. Tensions between lawmakers on the floor of the House were high on Wednesday. No productive budget negotiations were going to happen in the immediate wake of that contentious session.
If everyone returns to Harrisburg with clear heads and a willingness to compromise, then a budget could still get done. Everyone was close to agreement at one point, so it’s not impossible to get there again.
Conventional wisdom has said a gaming package would not happen until the larger revenue plan was finalized. Although Online Poker Report has no direct insight into this, there’s at least an inkling of a chance that iGaming and other gaming provisions could be passed independently of the overarching talks.
After all, it appears that lawmakers had agreed to the basic tenets of a gaming deal even as larger budget negotiations. Licensing for online gambling and poker in the state would generate an immediate infusion of cash. (Each license would be $10 million a pop.)
Anyway, online gambling appears not to be entirely dead in the water. But after a disastrous Wednesday, the path to legalization in 2017 looks murkier.