Consider the innocuously labeled SB 1256 the opening salvo of the Pennsylvania budget battle: Part Two.

The bill would allow each of Pennsylvania’s casinos to bid on a minicasino license allowing up to 750 slot machines and 30 table games. Bidding would start at $7.5 million, with a table games. House Bill 271 Printer’s Number 2652: Memo from the Chair November 14, 2017 - Page 1 TO: House Democratic Members and Staff FROM: Rep. Joseph Markosek, Chairman. SUBJECT: Gaming Expansion, Act 42. DATE: November 14, 2017. Gaming Expansion Under Act 42 of 2017.

When the Pennsylvania Senate left Harrisburg for their home districts on Sept. 22, lots of unfinished business remained. Chiefly, that’s passing a state budget for the rest of the fiscal year after having approved a stopgap spending measure at the end of May covering only part of the year.

So brace yourselves for a dark and bumpy ride.

The state’s second budget season commences on Oct. 5. The biggest and heaviest lift is passing a budget during November, likely not until sometime after Election Day on Nov. 3. And a reminder: PA has a long, strange tradition of sometimes bizarre last-minute deal-making on the eve of passing a budget.

As the Pennsylvania Capital Star put it in a recent opinion piece:

“A fall debate on the commonwealth’s budget is going to be painful for everyone in Pennsylvania. Relations between the Administration and the Republican majority in the General Assembly are frayed, making negotiations difficult.”

Senate holds a hearing on VGTs and skill games bill Oct. 6

As part of the windup, the Senate goes back to work in the capital on Oct. 5. And while it’s not strictly a budget measure, there’s a much-anticipated hearing the next day on an important bill, Senate Bill 1256.

That’s pet legislation of Sen. Jake Corman, the Republican majority leader (pictured, lead image). The 29-page legislative proposal focuses on expanding video gaming terminals, or VGTs, and expressly legalizing games of skill.

But the bill assigns no taxation level to the machines it seeks to allow and does not state how many devices might be allowed.

SB 1256 gets first hearing in public after a lull

Through July, Republicans secretly discussed the bill behind closed doors. But it failed to gain traction. Despite the shroud of backroom secrecy, Spotlight PA scrutinized some of the machinations.

Corman had characterized the bill to Spotlight as a way to control and license the proliferation of illegal gambling machines in PA. He claimed expanding VGTs’ presence was somehow a matter of fairness, given the bill’s aim to widely allow skill games.

Pa Gambling Expansion Bill 2019

He also said the move would raise revenues but never named an amount.

Corman now has a casino coming to his district

Since Corman spoke to Spotlight in late June, there’s been one significant change and two additional developments.

First, a mini-casino license was auctioned off in his Centre County district for $7.5 million to Philadelphia real estate development and financial consultant Ira Lubert.

Next, Spotlight has written more recently about Corman and a so-called “dark money” fund overseen by a lobbyist he’s connected with. And then there was also his hiring of a lobbyist with deep ties to out-of-state VGT makers to lead his staff.

Meanwhile, the VGT and skills games bill has lain dormant since July.

That’s about to change.

Senator from Philly suburbs plans a hearing

Republican state Senator Thomas Killion‘s Community, Economic and Recreational Development Committee is holding a hearing on Bill 1256 beginning at 10 a.m. on Oct. 6.

Killion, who represents part of the Philadelphia suburbs in Delaware and Chester counties, is running for re-election in November. He did not respond to a request for comment. Neither did the committee’s co-chair, state Sen. Lindsey M. Williams, a Democrat who represents the Pittsburgh area.

Casinos and POM hate SB 1256

Proving that politics makes for strange bedfellows, all 13 PA casinos, which include the yet-to-open Live! properties, have opposed the Corman bill, but then so has Pace-O-Matic, the PA company that makes and distributes Pennsylvania Skills games.

The industry letter went out on Sept. 17 and was signed by the leaders of casino properties employing more than 20,000 Pennsylvanians. The casinos are:

• Mohegan Sun Pocono
• Harrah’s Philadelphia Casino and Racetrack
• Meadows Racetrack and Casino
• Hollywood Casino at Penn National Race Course
• Valley Forge Casino Resort
• Rivers Casinos in Pittsburgh and Philadelphia
• Parx Casino
• Presque Isle Downs & Casino
• Mount Airy Casino Resort
• Wind Creek Bethlehem, Lady Luck Casino Nemacolin
• Live!

Casinos’ position on SB 1256

In part, the casinos’ letter opposing the bill reads:

Pa Gambling Expansion Bill Vote

“Expanding VGTs to liquor licensees would result in as many as 85,000 gambling machines being added to the state — which is more than three times the current number of slot machines in all of Pennsylvania’s casinos combined. Similarly, legalizing (and thereby rewarding) the currently illegal skill game slot machines that are prevalent in bars, convenience stores, gas stations and other businesses would cause tremendous damage to our industry and the nearly 20,000 Pennsylvanians we are proud to employ, as well as negatively impact the Pennsylvania Lottery and the public interest. SB 1256 does exactly that.”

The letter also points out the recent economic losses the licensed casino industry — and the state — are still struggling with:

“Collectively, casinos suffered approximately $968.8 million in revenue losses from slot machines and table games (due to the virus shutdowns), $424.2 million of which would have been payable to the Commonwealth.”

Casinos reference “good faith” by the state

Additionally, the letter claims:

• “Stores, golf courses, microbreweries and a variety of other businesses could all potentially become miniature casinos.”
• “This bill would come at the expense of the Commonwealth in the form of lost tax revenue, gaming industry job losses and lost local share revenue.”

The letter concludes by pointing out the Commonwealth is a better than 50% stakeholder in the casino industry via fees and tax revenue, and finally, that the casino license holders invested in PA with the state “a good-faith partner.”

Legislative leaders mum on SB 1256

All members of the legislature got the letter.

But the letter addressed Corman in particular, as well as:

• Senate President Pro Tempore Joseph Scarnati III
• Senate Democratic Leader Jay Costa
• Assembly Speaker Bryan Cutler
• House Majority Leader Kerry A. Benninghoff
• House Democratic Leader Frank Dermody

Pa Gambling Expansion Bill 2020

PlayPennsylvania sought comments from all of the legislative leaders. None responded.

But a spokeswoman for Scarnati referred the request back to Corman. “Any questions regarding VGTs and skill games would be best directed at Senate Majority Leader Corman’s office,” she said.

Scarnati is retiring at the end of the session in December. Corman is seen as his likeliest successor should the Republicans maintain their majority in the PA Senate.

Wolf also stays quiet

Governor Tom Wolf, a Democrat who is frequently at odds with the Republican-led Legislature, has expressed quiet opposition to expanding gambling further as contemplated in the bill.

His spokesperson did not respond to a request for comment.

Pennsylvania Skills game distributor has its say

Pace-O-Matic of PA, or POM, hates the bill.

The Williamsport company, which distributes Pennsylvania Skills machines, has been taking its opposition to rival skill games and VGTs to the streets. POM is outing what it says are illegal casinos openly operating in small towns around the state. POM is holding press conferences in front of the businesses. Dossiers on those businesses were handed off to district attorneys in Lancaster, Schuylkill and Beaver counties recently.

POM’s pitch is that its games are legal and its rivals’ are not. That’s because the Beaver County Common Pleas Court six years ago found that an element of skill was necessary to win the three games found on one seized POM device.

For a time, POM used that court win and a subsequent injunction as it distributed more machines and even sued a competitor, saying the rival did not offer a skill game.

But then another court in November 2019 labeled skill games as slot machines. The enforcement injunction was lifted in January 2020. POM has appealed the lifting of the injunction, but that case is plodding through the courts.

PGCB and PA State Police take stances against skill games

The Pennsylvania Gaming Control Board (PGCB) has definitively labeled skill games, including POM machines, as illegal slot machines under the state’s gaming laws.

The PA State Police unequivocally say all gambling devices outside casinos, other than licensed truck stop VGTs, are illegal and subject to seizure.

POM continues, though, to try to differentiate itself from rival wagering device companies, most recently at a Harrisburg press conference.

POM: It’s not us, it’s those other guys

Mike Barley, a spokesman for POM, issued a written statement to PlayPennsylvania when asked about SB 1256:

“While we believe the regulation of skill games will greatly benefit small businesses, restaurants, bars, fraternal clubs and the Commonwealth, SB 1256 promotes the widespread proliferation of VGTs on every corner of Pennsylvania. This legislation would kill the legal skill game industry and countless Pennsylvania small businesses, many [of] which are multigenerational family businesses, in the coin-op industry. SB 1256 puts the interests of large out-of-state companies over these family-owned small businesses.

“While Pennsylvania Skill games, powered by Pace-O-Matic, have been adjudicated legal and require skill, a VGT is a slot machine which directly competes with the games already offered in casinos. Illegal VGTs, masquerading as ‘skill games,’ are already on the street, many in unregulated mini-casinos, and were recently seized by the District Attorney of Berks County.

“The claims that the lottery or casinos have lost revenue due to skill games ring hollow when you examine the numbers. Before the COVID-19 pandemic, the revenues related to casinos and lottery were at record highs. That was at the same time the revenue for skill games [was] growing. We contracted with an independent economist who reviewed the data and found that our games have not had a negative impact on either the casinos or lottery revenues. The lottery’s study was conducted internally and the details have not been released.”

Lead image credit: AP Photo/Matt Rourke

The casino expansion bill that anxiously awaited review by lawmakers finally received approval on the PA Senate floor. It will be the first item on the House floor Thursday morning.

What this means

According to US News, this plan would expand gambling in the state to include:

• Truck stops
• Online portals
• Airports
• Satellite casino sites

Pennsylvania, the second-largest commercial casino state in the country, could increase the slot machine and table game numbers around the state in these various entities.

The PA Senate publicized the 470-page bill on Wednesday evening and passed it almost within the hour. The final tally came in at 31-19. PennLive reported that 18 Republicans and 13 Democrats in the Senate voted in support of the bill.

Senate Majority Leader Jake Corman said this package, along with the tax and borrowing package, could finish off this year’s spending and next year’s. The state government also tapped into $500 million from off-budget funds, according to Lancaster Online.

“This should bring closure to the budget,” Corman said.

Pa Gambling Expansion Bill List

What it could do for PA

The potential wins

• More than $200 million a year in license fees and taxes on gambling losses
• PA would be the first state to allow both casino and lottery games online
• Casinos pay $10 million annually to host communities
• A first: PA would allow commercial gambling outside the 12 currently permitted casinos and racetracks
• PA already raked in $1.4 billion in taxes from the gambling industry this past year
• The mini-casinos could host between 300 and 750 slot machines and 30 table games
• Truck stops get up to five video gaming terminals (VGTs)

The potential losses

• The proposed 25-mile radius distance from existing casinos exposes the primary market and may just alter current revenue, argues Penn National Gaming Inc. of Hollywood Casino at Penn National Race Course.
• Penn National threatened suit if the bill becomes law, due to its “punitive” nature
• Local controls may prevent widespread change for PA, according to Corman
• Bars are not included

In an effort to pacify the House, the Senate allowed the widely-debated VGTs in truck stops only.

Sen. Jay Costa, the Democratic floor leader, had this to say to PennLive:

“There’s no question that that was added to bring consensus between the Senate and the House.”

The House originally pushed the VGTs through in their gambling expansion plan, allowing for lower tax rates and a wider range of online gaming. The Senate, on the other hand, passed a more conservative plan with higher tax rates on online gambling.

Budget issues may still be on the horizon

Despite these wins and losses, some Republicans, previously in favor of the new bill, now see it as overwhelming.

“If you pass this bill, you will see an explosion of gambling in Pennsylvania like you’ve never seen before,” said House Gaming Oversight Committee Chairman Scott Petri to Lancaster Online.

Gov. Tom Wolf has yet to come out on either side. He vaguely stated that he will review the bills before him. Others on his desk include borrowing against future revenues, education code, and more than $600 million in aid to universities.

The budget’s issues began with a $2.2 billion hole. Lawmakers have attempted to fill this shortfall since they passed the $32 billion budget that began July 1.

Keeping the budget locked up in this standoff lost the state its credit rating. Now, after downgrading it, the state adds $50 million to borrowing costs per year.

Even so, the fact that a gambling expansion plan remains on the list of items for consideration remains big news.