That’s the conclusion of a recent State University of New York (SUNY) report about the Pennsylvania gaming industry. In the 40-page document, SUNY Rockefeller Institute of Government analyst Lucy Dadayan said while the state’s gambling-tax revenue is a boon for the budget now, history says that revenue will decline over time.
The report, titled “State Revenues from Gambling: Short-Term Relief, Long-Term Disappointment,” comes in the midst of the proposal of HB 649, a bill that would legalize and regulate Pennsylvania online gambling.
Bad times call for more gambling
According to Dadayan, history shows expanding gambling is one of the tools of choice for states who are struggling with revenue.
“States are more likely to expand gambling operations when tax revenues are depressed by a weak economy, or to pay for new spending programs,” she wrote.
Dadayan went on to point out “many states” augmented the gambling sector in response to the Great Depression.
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The report said a couple of other factors that have soured long-term revenues are:
- Consumers coming off the Great Recession are tighter with their discretionary spending.
- Those consumers are more prone to dial back the money they put toward casinos and racing.
- The continued expansion of gambling operations in Maryland, New York City and Ohio will continue to cut into Pennsylvania’s gaming revenue
Dayadan’s final conclusions were not positive. She said Pennsylvania’s gambling revenues “are short-lived and create longer-term fiscal challenges for the states as revenue growth slow or declines.”
Gambling revenues in the context of HB649
As mentioned earlier, the release of the study comes at an interesting time. The Pennsylvania House of Representatives Gaming Oversight committee approved HB 649 with a vote of 18-8 in November. However, the bill never made it through the House.
In December, the bill was tabled, the legislative equivalent of an airplane holding pattern.
Lawmakers “untabled” the bill this past March and now it is open for discussion once again. The most outspoken legislative proponent of the gambling bill is Representative John Payne, a Republican from Dauphin, Penn.
Payne leads the oversight committee which first approved the bill, and he is the prime sponsor of the bill.
Payne points to revenue as reason to pass bill
In an interview with The Morning Call, Payne said his main argument is that the bill will inject millions of dollars into Pennsylvania’s budget. He scoffed at Dadayan’s claims that gaming revenue isn’t sustainable over the long haul.
“We know people are going to gamble, so we might as well regulate it and tax it. I hope they didn’t waste too much taxpayer money on that study,” Payne was quoted as saying. “What we need to do is give casinos the tools to compete with other states.”
Payne’s disregard for the study was evident when he questioned whether or not the author had ever heard of Las Vegas.
Keystone state pulls in second-most tax revenue in nation
However, it’s easy to understand why the politician would feel confident that expanding the state’s gaming sector would bring in enough money to alleviate the state’s $2 billion budget gap.
According to numbers provided by The Morning Call, Pennsylvania lottery, land-based casino and off-track betting tax revenues rank second in the nation. Only New York earns more in those three areas, but around two-thirds of the state’s $3.2 billion take comes from lottery sales.
One of the big factors behind the state’s hefty tax revenues is its 55 percent tax on slot machines, a huge number compared to sub-10 percent rates in New Jersey.
Report says uncertain future ahead despite big tax revenues
Despite Payne’s optimism about the bill, Dadayan’s research points to skepticism. Revenues for several states dropped significantly between 2008 and 2015.
Though that time frame includes the recession, Dadayan said competition from new casinos in competing states played a sizable role taking a few states’ big revenue and distributing it to states with expanded gambling laws.