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When Pennsylvania stared down the barrel of a $2 billion budget deficit last year, the state turned to gaming to help fill the hole.
The legislature passed a comprehensive gaming package in October, the centerpiece of which was the legalization of online gambling.
The gaming package accounted for only $225 million of the $2.2 billion deficit. Yet by all accounts, a budget funding compromise wouldn’t have been reached without the inclusion of the gaming package.
More importantly, as in Pennsylvania, online gambling could be something of a bargaining chip in New York to curry support for a larger revenue package.
New York has been flirting with legalizing online poker for several years. While it wouldn’t come close to solving the state’s fiscal issues, it could help.
Online poker would be something of a one-time fix for the state. As currently constituted, the legislation would authorize the state’s licensed casinos to offer online poker (not online casino games). A New York online poker license would come at a cost of $10 million, but that fee would be applied to future taxes owed.
In effect, the fee constitutes an upfront payment of taxes. The state would essentially receive the one-time fees (perhaps $60-$100 million depending on the number of licenses sold), followed by a trickle of tax revenue.
But it would certainly outstrip the roughly $3 million the state received from the first year of daily fantasy sports regulation.
New York isn’t the only state that might look to gambling to fill a budget deficit.
Rhode Island and Illinois are in the same boat. Both states could put gaming expansion on the menu in 2018.
Rhode Island is staring down a $60 million shortfall this year and a $230 million deficit going forward. It’s not the billions New York needs to find but still a significant amount for the tiny state.
Rhode Island State Sen. William Conley told local news station WPRI that the deficit has already landed online gambling on the legislature’s radar.
“Absolutely, I do think that the Senate President thinks that that’s something that we should look at seriously, and that it will bring in revenue,” said Conley.
Not long after Conley’s comments, another local news outlet mentioned online gambling as a possible budget fix, noting the governor already polled the issue:
“Online Gambling — Watch for the emergence of online gambling. It is in place in New Jersey and is being seen as a possible solution to the budget whole. Sources tell GoLocal that [Rhode Island Governor Gina] Raimondo polled the issue and that the public likes the expansion of gaming over marijuana.”
The governor is currently looking to sports betting to fill the budget gap.
Before pushing through a budget in July, Illinois hadn’t passed a budget since 2015. But that $36 billion budget didn’t touch the $16 billion in debt the state has racked up. Nor did it put an end to deficits. The budget is already said to be underfunded by at least a billion dollars.
One possible fix for Illinois is online gambling. Its Senate passed online gambling and DFS legislation last year, but it failed to get through the House.
With a population similar to Pennsylvania’s, Illinois would be an appealing place for online gambling operators to set up shop.
The state would receive a nice windfall from upfront licensing fees (well over $100 million) and solid ongoing revenue from taxes.
States across the country are increasingly turning to gaming to fix budget deficits. With most states already possessing terrestrial casinos, online expansion draws focus.
Last year it was Pennsylvania, and several states are already hinting at going down the same path in 2018.