Capitolwire: Facing budget woes, online gambling getting a serious look

June 3, 2014

By Kevin Zwick

HARRISBURG (June 3) – A top Senate Republican says internet gaming should be allowed to help address the dire budget situation facing the commonwealth.

But Gov. Tom Corbett remains concerned with expanding internet gaming, known as iGaming.

“It’s a lot less painful than some of the other choices that are going to be out there at the end of June,” Senate President Pro Tem Joe Scarnati, R-Jefferson, said Tuesday. “I’m pretty close to the point right now where if we’re looking (to help) our casinos, if we’re looking to continue to build revenue for gaming and not lose revenue, and we want to add revenue to the general fund, then this is the trifecta.”

GOP legislative leaders are caucusing with members Tuesday to discuss a no-new revenue budget scenario. Pennsylvania tax revenues will fall $1.35 billion short of Gov. Tom Corbett’s own projections for the 2013-14 and 2014-15 fiscal years, according to the Independent Fiscal Office.

Econsult Solutions Inc., an economic policy consulting firm, told the Senate Community, Economic and Recreational Development Committee that Pennsylvania would see direct tax revenues of $68 million in the first year, and at least $110 million annually thereafter. The total doesn’t include license fees. Scarnati said some current legislation puts the license cost at about $5 million.

Gaming revenues would be roughly $180 million in the first year and $300 million annually.

New Jersey imposed a 15 percent tax on internet gaming, essentially taxing it higher than land-based casinos who had invested capital.

The firm also found that iGaming would “compliment” the existing casino industry in Pennsylvania rather than cannibalize it, finding that iGaming could lead internet players to brick and mortar casinos and chip away at illegal online gaming, which costs the U.S. hundreds of millions of dollars annually.

“It is a possible hook to a group that is not hooked yet,” said Stephen Mullin, president of Econsult Solutions.

Corbett and others are concerned about what iGaming would mean for gambling addicts and minors. 

“The governor has expressed concerns with the expansion of any type of internet gaming, particularly with respect to access of gaming for minors or other individuals,” said Jay Pagni, spokesman for Corbett.

Sen. Tommy Tomlinson, R-Bucks, said the issue raises a number of questions for regulators on policing iGaming and lawmakers seeking the expansion. 

“How can you be sure that person is not underage? That person is not a compulsive gambler? That that person is who they say they are? Do you really believe that we have the technology to follow this person, to make sure that we know who that person is? And make sure we know who this person is. Is this person operating under a false identity? It seems to me that iGaming creates a lot of considerations that we didn’t have before,” Tomlinson said.

“There’s a lot of controls that the bricks and mortar casinos have that the iGaming doesn’t have,” he added.

“I don’t think that they’re insurmountable challenges,” said Pennsylvania Gaming Control Board executive director Kevin O’Toole. He said there are controls when a person sets up their account, but acknowledged that underage persons could use an adult’s pin number. He also said problem gamblers who may be on an exclusion list at brick and mortar casinos could still be controlled in iGaming.

“Further research has to be undertaken to have a greater level of confidence,” O’Toole added. 

Gaming Control Board Chairman Bill Ryan said if the Legislature and governor pursue iGaming, the board would want at least a year to set up regulations to address some of the concerns regarding minors and gambling addicts. He also said the licenses to operate online gambling should be limited to existing licensees.

Sen. Pat Browne, R-Lehigh, expressed some big-picture concerns with the evolution of gaming in Pennsylvania: race tracks needed slots in 2003, then race tracks and slots needed table games in 2009, now casinos need iGaming?

“The way it looks now, it doesn’t look like it’s going to approach the brick and mortar casinos, it’s just not there,” Ryan said. “On the other hand, we can never tell how many people over time who do go to a casino just decide ‘hey I don’t have to go, I can gamble from home.’”

“It’s just like anything else. The internet has become a medium to provide convenience,” Browne said, like Main Street shopping compared to online shopping. “It’s a matter of convenience, the same thing with gaming. It’s good for us to anticipate whether that’s the case.”

“I’m not so sure it won’t if time goes by. I’m no expert, but it’s certainly possible that there would be change,” Ryan said.