Pa. budget bets on tavern gambling, keno to avoid raising taxes
By Jason Cato
Published: Saturday, Feb. 22, 2014, 10:00 p.m.
Pennsylvania lawmakers will consider a budget proposal that would draw money from new forms of gambling, despite less tax money from casinos for the first time last year.
Gov. Tom Corbett's $29.4 billion spending plan for 2014-15 relies on money from tavern gaming that lawmakers approved last year, from keno that is not yet legal in Pennsylvania, and a bigger take from the state's 12 casinos, six horse-racing tracks and the lottery.
Corbett is wagering on gambling money and other revenue streams to avoid raising taxes, said spokesman Jay Pagni.
“A number of states are looking for ways to generate revenues without going back to hard-working families through tax increases,” Pagni said.
Yet gaming industry experts say competition from gambling outlets in other states might mean little gain from new and existing types of gambling.
“There aren't new gamblers showing up every day on our doorstep,” said Sean Sullivan, vice president and general manager at The Meadows Racetrack & Casino in North Strabane. “It's not creating a new experience. It's just going after the same customer.”
In 2007, Pennsylvania's first full year in the casino business, gross revenue for slot machine play reached $1.04 billion. The state received 55 percent through its tax. Casinos added table games in July 2010, taxed at 14 percent. The state has collected more than $8 billion since the first casino opened.
Tax collections from horse racing and table games grew from 2011 to 2012 and are projected to do so this fiscal year. But their combined take — $103.1 million — is much less than the $1.3 billion that slots generated last fiscal year. That amount was down from $1.35 billion in 2011-12, and slots play continues to drop, monthly reports show.
New casinos in Ohio, particularly one in Cleveland, have drawn customers from Pennsylvania, and seven casinos that will open in New York are expected to do the same, said Doug Harbach, spokesman for the Pennsylvania Gaming Control Board. The growth of Maryland Live could affect some Pennsylvania casinos, he said.
Sullivan said lawmakers should be cautious about expanding gambling, “to make sure you don't kill the golden goose. The money the casinos give the state of Pennsylvania will never be matched by these other forms of gambling.”
Gross revenue at The Meadows fell more than 2 percent, from $287.1 million to $280.7 million, in fiscal 2012-13 from the year before, records show. This fiscal year, which ends on June 30, gross revenue at the casino is down nearly 10 percent through January, compared with last year.
At Rivers Casino on Pittsburgh's North Shore, gross revenue increased slightly in 2013, to $352 million from $351.8 million in 2012.
“While it was small, it was growth,” General Manager Craig Clark said.
Expansion into tavern games, keno and other forms of gambling is inevitable, Clark said. “It's when they are implemented, not if.”
Corbett's budget includes $20 million from keno, a fast-paced video terminal game, and growth in the Pennsylvania Lottery from an estimated $1.8 billion to $1.93 billion.
Since its establishment in 1971, the lottery has raised about $24 billion for senior programs and services.
The Ohio Lottery introduced keno in 2008, and revenue from the game eclipsed $250 million by 2013, officials in that state reported.
Corbett included $102 million from tavern gaming such as raffles, pull-tab games and daily drawings. Lawmakers estimate such gaming could eventually produce $160 million a year in licensing fees and a 60 percent tax.
The budget includes a boost in horse-racing tax money from an estimated $19.4 million this fiscal year to $20.4 million, and a bump in table game tax revenue from $92 million to $94.7 million.
“This is no small chunk of change,” Pagni said, though he noted the administration suggested other means of raising money.
Online gambling ahead
Even with competition from nearby states, Pennsylvania ranks behind only Nevada in gaming revenue, Harbach noted, and remains the state with the highest tax on casinos. Nevada taxes casino games at 7.75 percent.
Pennsylvania uses the money for property tax relief, local and county government shares, a development and tourism fund, and to subsidize the horse-racing industry. The state's 2004 gambling law allowed 14 casinos; two are pending, in Lawrence County and Philadelphia.
Keno and tavern games could produce new gamblers because “this is a different group of people who play these games,” though there would be some overlap with casino players, said Paul Girvan, managing director of The Innovation Group, a New Orleans-based gambling, hotel and leisure consulting firm.
Internet gambling — which is legal in New Jersey, Nevada and Delaware — could offset declines in casino revenue, he said, as long as officials do not “over-project revenue from that industry.” New Jersey likely will reap as much as $200 million this year from online gambling, and $300 million to $400 million annually in a few years, Girvan said.
Online gambling probably will be proposed at some point, said Senate Majority Leader Dominic Pileggi, a Delaware County Republican.
“Not only in Pennsylvania but in much of the nation, whatever reluctance there was to legalize gambling has fallen by the wayside,” he said.
But he questioned what the state would gain from “dividing the same gambling dollar.”
Some states are challenging federal restrictions on sports betting, said Mark Nichols, an economics professor at the University of Nevada in Reno.
“The question would be: Do big sports states like Pennsylvania want to get into that?” he said.
Jason Cato is a Trib Total Media staff writer. Reach him at 412-320-7936 or email@example.com.
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