Pennsylvania Gov. Tom Wolf on Monday affixed what he hopes will be a final patch on a $2.3 billion budget deficit by signing into law sweeping new gambling provisions.
The state has doubled-down on its investment in the commercial gambling market, with new expectations of revenue from Internet-based games and a second string of casinos scattered around the Commonwealth.
The Pennsylvania Senate passed the far-reaching gambling expansion bill Wednesday that would legalize Internet games, authorize a new set of casinos across the state, and permit legal games at highway truck stops.
The Senate vote was 31-19, with 18 Republicans and 13 Democrats voting in support. The bill then moved to the state House, which voted 109-72 to pass the bill.
Now that the bill is enacted, Pennsylvania will — in a significant change from the gaming world it set up 13 years ago — for the first time sanction commercial gambling outside 12 original licensed casinos and racetracks.
The new casinos could be in secondary, but potentially attractive, markets like State College, Gettysburg and the Lake Erie waterfront. And the Internet games will turn virtually any online device into a betting position.
The bill was the result of a temporary truce in an intense battle over the introduction of VGTs, the slots-style games that many House members had hoped to make available to bars, restaurants and private clubs.
The Senate, which has fewer supporters of VGTs, moved from a no-VGT position that it had struck through most of the summer and fall to allowing the games at truck stops only in an attempt to meet the House halfway.
"There's no question that that was added to bring consensus between the Senate and the House," said Sen. Jay Costa, D-Allegheny County and the Democrats' floor leader.
The bill has also drawn vigorous opposition from some of the state's established casino operators.
Penn National Gaming Inc., operator of the Hollywood Casino at Penn National Race Course, argued the proposed satellite casinos will likely cannibalize the state's existing set without generating new net revenue.
Penn National's claim is it will be uniquely victimized, since proposed 25-mile buffer zones for existing casinos provide mega-buffers for most of its competitors, but leaves the bulk of Penn's more far-flung primary market exposed.
As a company document circulated to lawmakers states: "Robbing Peter to pay Paul may be a good idea when Peter is in Atlantic City and Paul is in Pennsylvania. But it certainly doesn't make economic sense when Peter is an established, tax-generating business employing 1,000-plus Pennsylvania residents in the heart of the Commonwealth."
Even Sen. Robert "Tommy" Tomlinson, a Bucks County Republican who helped spearhead passage of Pennsylvania's original casino gambling bill in 2004, said he was bothered by the proliferation of gaming in the new bill.
"I-gaming is not an expansion; it's an explosion," Tomlinson said, who voted against Wednesday's bill.
But in the end, leaders of the Republican-controlled General Assembly have collectively chosen this path — and its potential social costs — as a better way to close the budget deficit than increasing or imposing any other taxes.
Senate Majority Leader Jake Corman, R-Centre County, said he doesn't believe the package, as sprawling as it is, will dramatically change the character of Pennsylvania, in part because of the local controls embedded in the bill.
Corman also noted that the maximum of 7,500 slots allocated to the new string of casinos will fit within the original cap on slot machines contained in the original 2004 bill.
Details of the new gambling bill
Permits up to 10 new satellite casinos, with licenses awarded through a series of auctions open to the operators of the existing racetrack and freestanding casinos.
Successful bidders would win the right to claim a location, from which they would have to build a casino within a 15-mile radius. No casinos, however, could be located within 25 miles of an existing casino operated by a competitor.
Before the auctions, local elected officials across Pennsylvania will have until the end of this year to make their city, borough or township ineligible.
Minimum bids are $10 million for the ability to have both slots and table games at the new facilities, but the competition — especially in the first few rounds — could drive the prices higher.
The satellite casinos would be permitted to operate between 300 and 750 slot machines, plus up to 30 table games. That's about one-third to one-fourth the size of the typical existing casino in Pennsylvania.
Supporters say the new facilities will bring new construction investment into the state, create jobs and permit more localities to benefit from local shares paid to host communities.
A portion of the slots proceeds from the satellites will go to school property tax relief, just as with the existing casinos, while the table game taxes will go into the general fund.
Pennsylvania would become the fourth state in the nation to legalize online poker and other games, from platforms operated by Pennsylvania's existing commercial casinos.
The games would be available on any online device in the state, to players who can pass age-verification technology. Supporters say online games are a way for casino firms to reach a younger demographic than their typical customer.
Each licensee would have the ability to offer slots-style games, poker, other table games, or all of the above.
The games would be taxed at the same rate as the casinos pay for live play at their physical locations, with a portion of slots revenue earmarked for property taxes and the other i-games taxes going to the general fund.
Truck stop VGTs
The bill would allow truck stops to add up to five video gaming terminals per facility.
The games would be available only to sites that occupy at least three acres, have at least 20 parking spaces dedicated for commercial vehicles, and have sold 50,000 gallons of diesel fuel in the prior year.
Supporters said that should encompass about 120 locations statewide. But it could be significant new revenue; in Illinois, which has a fully-developed VGT market, truck stops are some of the busiest non-casino locations in the state.
County commissioners in counties that already have one of the state's 12 casinos would have the ability to opt-out by resolution. The new games would also be barred from Pennsylvania Turnpike service plazas.
Tax rates would be similar to the rates levied on slot machines at the existing casinos, with most of the proceeds going to the state's general fund.
The bill also contains a variety of smaller and less-controversial provisions, including state licensing and regulation of commercial fantasy sports businesses; permitting the Pennsylvania Lottery to sell numbers game tickets and new online instant games via the Internet; and allowing gaming tablets at passenger-access zones in commercial airports that serve at least 50,000 passengers per year.
In a potential boon to owners of bars and taverns, the bill contains a provision removing a provision barring the Pennsylvania Lottery from offering Keno games — a drawing game often played at taverns in other states.
It also carries an advance authorization to the Pennsylvania Gaming Control Board to issue certificates to in-state casino operators to permit betting on live sports events in the event that federal courts or the Congress overturn existing prohibitions.
And finally, it carries legislative fixes designed to preserve the host municipality payments the state's commercial casinos have been making over the last decade, but were disrupted by a state Supreme Court decision last year.
The end game for all of this is to try to raise quick licensing fees this year, an enhanced stream gaming taxes long-term, all the while protecting or growing jobs in the established casino industry.
Costa said estimates are that the bill will generate about $200 million to the general fund in licenses and fees in 2017-18, and then about $90 million to $100 million in 2018-19, most of which would be recurring revenue.
Paired with up to $1.5 billion in borrowing against future tobacco settlement payments, $500 million in one-time fund transfers and a small increases in certain taxes, leaders believe a gaming bill could be the final piece to solving a $2.3 billion deficit.