Gambling on Revenues

Given last year’s contentious budget debate, the Pennsylvania Legislature and Governor were very quick to settle a budget for the current fiscal year (2016-2017).  So quick in fact, that they didn’t cement the revenue side of the ledger.  While they did enact new taxes to help cover the increase to spending such as on internet downloads, or expand existing taxes on cigarettes, they also proposed revenue sources on services that may or may not materialize—the largest sums coming on the coattails of the gaming industry.

According to a recent news report, the Legislature counted on selling licenses to the twelve Pennsylvania casinos, for $1 million each, to sell liquor on a 24/7 basis (currently liquor sales end at 2AM and begin at 6AM).  The problem, as the article notes, is that casinos are not interested in purchasing these licenses.  They cite liability concerns as well as staffing costs as reasons for turning the licenses down which means that the proposed revenue stream just took a $12 million hit this fiscal year alone.  As one CEO was quoted, “Who advises these legislators?”  And that’s a great question, if casinos aren’t clamoring for expanded liquor sales, why was the proposal put forth?

The Legislature is also counting on money from the expansion of gaming in Pennsylvania.  HB 2150 outlines the case for expanding gaming to include online gaming (see Policy Brief Volume 16, Number 27) and the expanding of slot parlors to international airports and other off-track betting parlors.  But as of late July this bill, which passed the House of Representatives on June 28th, is sitting in the Senate Committee on Community, Economic and Recreational Development.  Not only has it not yet been passed, it may not pass in its original form.  In another article, the bill’s primary sponsor claims that when the Legislature reconvenes in September, that the provisions in HB 2150 that legalizes online gaming is a better lock to pass than the expansion of gaming into off-track betting parlors.  Even if the online portion becomes law, will all twelve casinos jump aboard?  It is not clear that this is an avenue that many, if any casinos, are willing to go down at all.  And if they do, our Policy Brief notes that the state may not realize the amount of tax revenue they are counting on.  And if the off- track parlors do not pass, the hole to the projected revenue stream becomes even larger.

So for all the congratulations Legislators have been giving themselves for passing a budget that was not too long after the deadline, they still do not have the revenue side shored up.  They are relying on gaming to carry the weight of the revenue increases.  But given the casinos’ cool response to increased liquor sales and the incomplete gaming expansion bill, there may be more holes than they care to patch come September.  This is one gamble they may lose, and that will not be good for Pennsylvanians.