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Approval had been expected Wednesday night, but as the legislative session ran late it became apparent that was not going to happen. A motion to recommit the bill to the House Gaming Oversight Committee almost worked. Dunbar indicated that it actually had more yes votes than no, but there wasn’t a plurality in the chamber to get it passed due to absences.
At 10:45 p.m., he called his wife and told her it was not going well and he wasn’t going to make it home that night. When he woke up, he was pleasantly surprised that everyone seemed pretty comfortable with and accepted the parts of the bill he had worked on with online gambling and daily fantasy sports. The only questions were coming on local-share tax and video gaming terminals.
The legislation, H 271, ended up passing relatively easily by a vote of 109-72, one day after being passed by the full Senate. It now heads to the desk of Gov. Tom Wolf, poised to end online gambling’s five-year journey through Pennsylvania’s legislature.
“Politics never change,” Dunbar said. “There were so few people who understood this issue well enough to know what they were deciding, but in the end it’s done. It’s not exactly the perfect product that we wanted, but it got internet gaming established in Pennsylvania. Now we can actually sit down and play.”
Anyone who has watched a live stream of a legislative session in Pennsylvania this year knows that it’s a frustrating, yet highly entertaining, slapstick comedy of lawmakers profoundly articulating rhetoric on issues they don’t really understand.
Every once in a while, things will get heated, the video will cut to the chandelier on the chamber’s ornate ceiling, and you imagine that legislators are coming to blows. But they’ll come back and everyone will be chummy again.
The two legislators who thoroughly understood internet gambling and put the most effort into seeing this legislation pass over the years were Dunbar and former Rep. John Payne, who retired at the end of last year.
Neither will get the credit they deserve, as H 271 was not their bill. Introduced by Rep. Jason Ortitay, it started as essentially a shell bill to be filled out by the Senate, a strategy undertaken by the House in response to the Senate not acting on Dunbar’s gaming expansion bill last year.
“It’s five years I’ve been working on this damn thing, and when it was done I walked down to the leaders and said it was like birthing a baby, except now I had to give it up for adoption,” Dunbar said. “Because I had worked on it so long, and it had been such a painful process, but in the end it ended up in someone else’s bill.”
Much of the daily fantasy sports language in H 271 originated in Dunbar’s bill, while much of the online gambling language came from Payne’s bill that had merged into Dunbar’s legislation last year. Payne spent countless hours working on the issue as chair of the House Gaming Oversight Committee.
If Dunbar could change one thing about the bill, it would be the tax rate for online slot machines. In his own bill, Dunbar assessed a 14 percent rate across the board, with an additional two percent for the local share tax.
Expressing fears that online gambling would cannibalize brick-and-mortar gambling, which would then lessen Pennsylvania’s take, despite evidence to the contrary, the Senate insisted that the rate be the same as inside the casinos – 52 percent for slot machines, and 14 percent for table games (like blackjack) and peer-to-peer games (poker), with the additional two percent for local share.
By comparison, New Jersey has established a successful market with a flat 15 percent tax rate for all online gambling.
“The rate for slots is high, and I don’t know how well casinos will do with that,” Dunbar said. “It’s something they’ll have to figure out internally. Hopefully we didn’t put too high a number that will be prohibitive. The more casinos that are involved, the better finished product that we’ll have.”
The Senate opted to limit the video gaming terminals to truck stops. Dunbar indicated that his only concern with that was whether revenue projections will be reached.
“The way they chopped up VGTs, I haven’t really had a chance to figure out how successful that will be,” Dunbar said. “It’s hard for me to decipher what VGTs will materialize, and if they will reach projections or not. We’ve had a huge structural deficit in the past because we’ve over-projected revenues, and the last thing I want is for gaming to get a black eye because we overestimated.”
It will be interesting to see how the licensing applications play out in Pennsylvania. The state’s 12 existing casinos have the option of getting a license for all forms of online gambling for $10 million, or to get separate licenses for poker, slots or table games at a price of $4 million each.
In 2004 when the state passed the Pennsylvania Race Horse Development and Gaming Act that legalized casino gambling, prospective operators complained that the slot machine tax rate was too high for the industry to be successful.
Yet, the revenue model proved to be one of the most successful in the nation, with the state raking in more than $13 billion in taxes and licensing fees over the first decade of play, according to the PA Gaming Control Board.
Pennsylvania casinos made the rates work for their brick-and-mortars, and all indications are they will give it a go on making them work online.
“I didn’t see anybody complaining, and I did not get any emails from casinos or anyone like that saying we don’t support this, so I think they will do their due diligence, look at it closely, and as long as they can figure out a way to make a profit on it, as well as bring new people into their brick and mortars, they’ll be happy,” Dunbar said.
The Senate added consequences if the casinos opt not to participate that may put pressure on them to take part. If any of the licenses go unused, the state may give those licenses to anyone it chooses, including entities based outside the state.
“The interesting thing the way the Senate did it is if casinos don’t want in, an outside third party can come in and do it as well,” Dunbar said. “That makes it interesting because you know they certainly want to limit outside competition as much as they can.”
It was a long, frustrating process with an imperfect result, but the Pennsylvania legislature passed an internet gambling bill. Lawmakers in California have been working just on online poker for more than a decade and seem as far from completion as ever.
“I think the greatest aspect of it is consumer protection,” Dunbar said. “Pennsylvanians who want to play online poker will now have the ability to do it and have some protections on it.”
Dunbar gave credit to the House Republican leadership, particularly majority leader Dave Reed, for seeing online gambling as a viable product and pushing for its inclusion.
“I think it took almost a perfect storm of things to happen for it to come about, and needing revenue was certainly one of them,” Dunbar said. “It’s easy to get both sides of the aisle to agree that we need more revenue, but difficult to get any sort of agreement on revenue that both sides will accept.
“This is one of the few types of revenue that appealed to both sides of the aisle, and I think something our House Republican leaders stood up strong for and demanded be part of the final package.”
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The bill is headed to the governor’s desk, and he will have ten days to sign, veto or let it pass by taking no action. Given that Wolf has been part of the discussions to fund the budget with iGaming, a veto would be shocking.
Once the bill goes through the governor, it would be off to the PA Gaming Control Board to finalize regulations and begin the licensing process. The state is counting on the licensing fees to come in before the fiscal year concludes at the end of June.
“I have no idea when it will launch,” Dunbar said. “The governor still has to sign it, or at least let it go into law. I did have some discussions with Gaming Control Board members, and they’re anxious to get started.”
As a poker enthusiast who played on PartyPoker and Full Tilt prior to 2011’s Black Friday, Dunbar looks forward to returning to the virtual tables sometime next year.
“It’s some type of legacy for me, where down the road when online gaming is a successful part of Pennsylvania, I can say I played a part in that,” Dunbar said. “Someday I’ll be playing online poker and there will be table chatter, and I’ll say, ‘You know what, guy, you wouldn’t be here without me so just shut up and fold.’”