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Internet gambling tempts Pa. with $113M tax gain

This Jan. 31, 2014, photo shows a game of Internet Texas Hold-Em being played on a computer screen in Atlantic City N.J. With Pennsylvania facing an estimated $1.2 billion budget deficit, a House-Senate financial report released on Wednesday says the state could gain $113 million in tax money annually from Internet poker and casino games.

Regulatory options

A report prepared for the Legislative Budget and Finance Committee suggests possible changes for Pennsylvania casinos:

• Allow alcohol sales after 2 a.m.

• Lessen approval time for new games

• Allow more flexibility in table game rules

• Allow for cash advances with credit cards on the gaming floor

• Let players cash third-party checks and personal checks over $2,500

• Decrease required state police presence

• Investigate potential for decreasing cost of regulatory body

• Allow flexibility for staffing requirements

• Remove or decrease non-gaming vendor licenses

Source: Legislative Budget and Finance Committee

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Wednesday, May 7, 2014, 12:33 p.m.

HARRISBURG — With Pennsylvania staring down an estimated $1.2 billion budget deficit, a House-Senate financial report released on Wednesday says the state could gain $113 million in tax money annually from Internet poker and casino games.

Depending on who's talking, that could mean plugging vital programs to avoid cuts and tax increases — or, from another perspective, putting children and vulnerable Pennsylvanians at risk of gambling addiction.

The state could gain millions more by tapping into sports betting, fantasy games and prediction markets, such as betting on the outcome of presidential elections, said the report prepared by Econsult Solutions for the Legislative Budget and Finance Committee. It said Internet gambling would have minimal effect on land-based casinos and might even complement them.

“The only way you can close a deficit of that size is with budget cuts in areas such as health care or education, or with revenue increases,” said Sharon Ward, director of the Pennsylvania Budget and Policy Center.

Money from a natural gas drilling tax might be needed, but online gambling won't raise enough to be significant, she said.

The American Gaming Association says Americans spent nearly $3 billion with illegal offshore Internet gambling operators in 2012, the most recent figures available.

Pennsylvania's 12 casinos generated $3.1 billion in total revenue and $1.4 billion in state and local gambling taxes in 2013, according to the report. Regulators are expected soon to award a license for a second Philadelphia casino, and a decision on a racetrack/casino in Lawrence County is anticipated this year.

Senate President Pro Tempore Joe Scarnati, R-Jefferson County, said the Legislature would explore online gambling. Options for utilizing such revenue “remain on the table,” his spokeswoman said.

Tax money from the casinos since their 2006 opening provides benefits from property tax reductions to aiding local governments, police and emergency services, and easing the strain on the state budget, Scarnati said.

Such gambling proposals would make high-stakes gambling available “on smartphones, tablets and computers,” putting kids at risk, said Tom Shaheen, vice president of policy for the nonprofit, nonpartisan Pennsylvania Family Institute.

The report suggests easing the regulatory climate for casinos, experiencing increased competition from surrounding states. The recommendations range from removing or lessening licensing standards for vendors to reducing state police presence in casinos.

The report says Internet gambling and traditional casinos cater to different markets. Internet gamblers generally are younger, predominantly male, with higher incomes and more education, and more likely to be employed, it says.

“The fact that iGaming caters to a market of new gamers presents casinos with an opportunity to attract new customers,” the report states.

Though Internet gambling cannot provide the social interaction and amenities of traditional casinos, online betting allows players to place smaller bets, play several tables at once, play from home and avoid crowds.

“This, combined with the fact that iGaming typically happens in the home in the afternoon or evening, suggests that for many this is a substitute for other forms of home entertainment, rather than a substitute for traditional offline casino gaming.”

Senate Majority Leader Dominic Pileggi, R-Delaware County, said the Senate will look at all forms of gambling revenue the report raises. He stressed that he does not support a particular proposal and thinks lawmakers need to evaluate the ideas carefully.

Still, he said, “it's not that complicated. Other states have done this.”

Nevada, New Jersey and Delaware have allowed Internet gambling since last year. Under federal law, users must be physically in the state to bet online.

The Coalition to Stop Internet Gambling issued a statement saying revenue from Internet gambling has fallen short of projections where it's legal.

Sen. Kim Ward, R-Hempfield, who chairs the Senate panel regulating casinos, said it would hold a hearing in early June. Ward supports regulating and taxing Internet gambling if it brings in hundreds of millions of dollars, as the consultants suggest.

It should be paired with pension reform, which is causing some of the state's budgetary problems, she said.

“We want to make sure we don't hurt the existing casinos,” said Ward, who chairs the Community Economic and Recreational Development Committee. She wants to hear from casino operators, the Department of Revenue and the Gaming Control Board.

Rep. Dwight Evans, D-Philadelphia, is skeptical that Republicans controlling the Legislature will move forward with expanded gambling.

“Gambling happened with (Ed) Rendell,” a Democratic governor, in 2004, Evans said. He believes Republicans like it “because it's a voluntary form of taxation” but that they remain wary overall.

Republican Gov. Tom Corbett was noncommittal. His spokesman said: “The devil is in the details.”

The $1.2 billion deficit projection is from the Independent Fiscal Office.

Brad Bumsted is Trib Total Media's state Capitol reporter. Reach him at 717-787-1405 or Staff writer Mark Gruetze contributed to this report.

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