Pennsylvania Budget Stalemate Cripples 2017 Online Gambling Hopes

Pennsylvania Senate Unlikely to Pass Online Gambling Bill This Month

The Pennsylvania House of Representatives passed a bill that would legalize online gambling in the state last week, but this week, The Morning Call reports that the Senate is unlikely to continue that bill’s momentum. When the Senate reconvenes on November 15th after the current election break, it will “almost certainly” let the bill die.

The online gambling legalization portion of HB 1887 – which includes internet poker – would hopefully fill a $100 million gap in the state’s 2016-2017 fiscal year budget. The problem is that while the House passed the bill 108 to 71, there is much less agreement in the Senate on internet gambling. And because the main purpose of the newest gambling bill was not to deal with online gaming, the Senate probably won’t pass it in a week and a half.

pennsylvania-stampThe biggest issue facing Pennsylvania legislators when it came to the gambling was how to handle brick-and-mortar casino “host fees.” There are a dozen land-based casinos in the Commonwealth of Pennsylvania, nine of them outside of Philadelphia. These nine casinos were required to fork over a “local share assessment” of the higher of two percent of slots “gross terminal revenue” or $10 million. This tax would go to benefit the cities and counties in which the casinos are located or that are in close proximity. These host fees amounted to $142 in the past year and went to 157 municipalities. It is a significant source of funds for local governments and their budgets count on it.

The owner of the Mount Airy Casino & Resort took exception to the host fees, though, and sued the state, claiming they amounted to an unconstitutional tax. Because none of the casinos generate more than $500 million in slot revenue, they all, by default, end up paying the $10 million fee. This fee is a much bigger relative hit to the smaller casinos than it is to the larger ones. In late September, the state Supreme Court sides with Mount Airy, but because local budgets relied so much on these host fee payments, it gave the state legislature 120 days to come up with a legislative fix.

In The Morning Call article, it says that the Senate came up with a plan to remove the two percent slot tax and just make the host fee a flat $10 million fee regardless of revenues, which supposedly would not have the same legal problems the previous host fee rules did. Of course, it still affects the smaller casinos the same way it did before, but from this writer’s untrained legal eye, if the problem was that because the host fee was based on slot revenue (a tax) and therefore since all casinos ended up paying the $10 million, it equated to an unconstitutional, unequal tax, then I guess I can see how this works.

When Senate sent its amendment over to the House, the House added the online gambling portion, which also includes legalizing fantasy sports, something that did not sit well with the Senate. Online gambling has lots of support in the House, but the Senate, not so much. Thus, the Senate will probably let the bill die when it reconvenes for a single day on November 15th.

“We told the House before, we don’t have consensus on I-gaming, yet they chose to load it into the host fee bill,” Senator Jake Corman, Senate majority leader, told The Morning Call. “That basically killed it for this session.”

Thus, with no solution likely to be codified before the January 26th deadline set by the Supreme Court, one would think that the municipalities counting on the host fee revenue would be in dire straits. State Senators believe, though, that it should not be a problem, mainly because of how the host fee payments are scheduled. The fourth quarter payments are set for January 15th, just before the Supreme Court’s deadline, so between then and when the next quarterly payments are scheduled, legislators feel confident that they can get the matter resolved.

“Any municipality preparing their budget can book the casino number they we’re expecting because it’s probable revenue,” Senate Appropriations Committee chair Pat Browne told The Morning Call. “We may not have a deal before the court deadline, but we’ll have it settled before they miss a check. I believe that.”

Bethlehem Mayor Robert Donchez said, “If our senators feel it will be resolved, then I believe them. I’m an optimist by nature. I’ll prepare the budget with the casino money in, but I’ll have a backup plan, just in case.”

Bethlehem receives $8.8 million in host fee funds, an amount that equates to 12 percent of the city’s budget.

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