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According to Marc Levy of the Associated Press, the Pennsylvania Legislature’s Independent Fiscal Office “lowered revenue estimates for the current fiscal year by $250 million,” leaving the state $700 million short of being able to properly fund its $31.5 billion budget.
The state has already employed a number of stop-gap measures in recent years, which have resulted in its credit rating being lowered five times.
Legislature has yet to come up with a feasible plan
The Democratic governor Wolf was elected in 2014 on a platform of fiscal responsibility and ending property tax increases. He vowed to balance the budget through, among other things, targeted tax increases.
The Republican-controlled legislature had other ideas, and so far it has won the battle.
While Wolf’s recent proposals focus on the more amenable spending cuts, tax increases can only be ignored for so long. The larger the deficit grows, the more likely sales or income tax increases are back on the table — unless the legislature and the governor can come up with an alternative funding source.
They could also save themselves some time and effort by finally acting on a funding source they already approved in 2016.
PA gaming reform package more necessary than ever
As former California Gambling Control Commissioner and current Bermuda Casino Gaming Commission Executive Director Richard Schuetz said on Twitter, the rising deficit will likely force the legislature to act on a number of gambling reforms that were proposed last year.
Online gambling and daily fantasy sports were part of a gaming reform bill passed by the Pennsylvania House of Representatives on two different occasions in 2016.
The Senate didn’t vote on either bill, but it did include the revenue projections these gaming reforms would generate as a funding source for the state’s budget. This was something most people took as a sign that the Senate would eventually pass the gaming reform package.
The Senate’s failure to act in 2016 was unsettling, but with the budget deficit growing, any holdouts may have to acquiesce.
If the legislature neglects to pass a gaming reform bill (the reforms would bring in an estimated $100 million in the first year thanks largely to the online gambling licensing fees), it would be adding $100 million more to the deficit, since the Legislative Fiscal Office is still counting this revenue in its projections.
The sooner PA online gambling is legalized, the better
Even though the bulk of the money will come from licensing fees, the tax revenue online gambling would generate isn’t exactly trivial. This is why time is of the essence.
It will take time to get the Pennsylvania online casino industry up and running. Even if the legislature passes the bill tomorrow, the first legal online gaming website in Pennsylvania is unlikely to launch before 2018.
Furthermore, it will take time for the industry to mature.
New Jersey online gambling sites generated:
- $123 million in 2014
- $149 million in 2015
- $197 million in 2016
Had the Pennsylvania Senate acted on the gaming reform bill passed by the House last summer, online gambling websites could have potentially been up and running before the end of spring.
Had this occurred, the state would have been collecting tax revenue on top of the licensing fees, and the industry would be six to nine months further along.
Depending on the final tax rate the state adopts for online gambling operators (anywhere from 15 percent to 25 percent), Pennsylvania could be losing anywhere from $3 million to $5 million a month in much-needed tax revenue.
Effectively, every day online gambling remains illegal, the state of Pennsylvania is losing revenue.
Upshot
The legislature’s inaction in 2016 has already cost the state as much as $35 million in revenue over the course of 2017. Continued delays are not only depriving the state or money; they make income and sales tax increases all the more likely.