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Pennsylvania eyes leap to internet for casinos, lottery

| Saturday, April 22, 2017, 12:03 p.m.
The Pennsylvania state Capitol building in Harrisburg.
The Pennsylvania state Capitol building in Harrisburg.

HARRISBURG — Facing huge deficits, Pennsylvania could become the first state to allow both its casinos and lottery to take its games online in a quest for money from new and younger players.

The state government has a slew of fiscal challenges, made worse by sluggish tax collections and one of the nation's oldest average populations.

A Republican-controlled Legislature trying to avoid a broad tax increase under Democratic Gov. Tom Wolf has instead turned over other rocks in search of alternatives. There they have found a slew of ideas to expand gambling offerings in what is already the nation's No. 2 commercial casino state behind Nevada.

“Legislators have put out a smorgasbord of gambling expansion options that we're not seeing anywhere else in terms of a whole platter of possibilities,” said Joe Weinert, the executive vice president of Spectrum Gaming Group, an Atlantic City, New Jersey-based consultancy.

One leading idea would allow Pennsylvania's licensed casinos to control new online gambling sites. It is legal in just three states: Delaware, Nevada and New Jersey. Pennsylvania lawmakers were confident enough last summer that the legislation would eventually pass that they penned $100 million into the state's operating revenues to reflect the fat licensing fees they figured casinos would pay for the privilege.

Now, with the Pennsylvania Lottery headed for its first annual drop in revenue since the recession, Wolf's administration wants to expand the lottery's reach to cyberspace. Just four states - Georgia, Illinois, Kentucky and Michigan - allow that, according to the National Conference of State Legislatures.

But it's not clear how much help state government will get from allowing casino and lottery gambling online.

New Jersey's online gambling market - the only one in the nation with any real traction - took in $18.7 million in February sales, a jump of roughly 25 percent over the same month the year before. The Michigan Lottery has forecast about $60 million in annual sales from online lottery play, the NCSL said.

For Pennsylvania, the stakes are high.

State government is facing a potential shortfall of nearly $3 billion through next summer, based on January projections by the Legislature's nonpartisan analyst, the Independent Fiscal Office. That's almost 10 percent of approved spending this year. Meanwhile, some 600,000 more Pennsylvanians are expected to turn 60 in the coming decade, a 20 percent increase, according to state estimates. That will put even more strain on a lottery fund that is set up to fund programs for the elderly.

Casinos are hungry for new revenue. Slot-machine revenue, the workhorse of the gambling dollar, is flattening in an increasingly competitive market.

Still, passing any sort of gambling expansion in Pennsylvania is far from assured.

Pennsylvania's 12 casinos typically oppose any sort of expansion of gambling that they don't control. That means one prominent alternative, allowing slot machine-style games in bars, faces strong headwinds.

The casinos also have competing priorities as their lobbyists roll out new ideas for allowing gambling in airports, horse-racing betting parlors or satellite sites in rural areas. It's not even clear whether the casinos will go along with a developing Senate proposal for online gambling that could demand tax rates that are commensurate with tax rates in force on slot machines and table games receipts.

Plus, casinos are squirming over what they see as the Wolf administration's overly broad definition of online games the lottery could offer. It is, they suggest, an encroachment onto casino territory.

Meanwhile, the House and Senate GOP majorities do not see eye to eye on gambling.

A House GOP budget plan that passed earlier this month ordered up deep and wide cuts in spending and suggested that a broad gambling expansion could resolve the remaining $800 million gap. Senate Majority Leader Jake Corman, R-Centre, said Thursday that expanding gambling should be about smart policy, not about fiscal needs.

“That doesn't mean we can't expand and modernize, I just don't think the budget should drive that discussion,” Corman said.

The debate will be complicated by rank-and-file lawmakers who want to deliver primarily for their district.

“In the end, the plan that causes the least disruption and the most and quickest revenue is going to come out on top,” said House Gaming Oversight Committee Chairman Scott Petri, R-Bucks.

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