Video gambling machines in bars, restaurants, veterans’ social clubs and other establishments could add as much as $400 million to the state’s coffers, advocates say.
And that could be achieved without seriously harming the casino industry or increasing rates of gambling addiction.
That’s what a bipartisan group of state lawmakers said Monday in unveiling a proposal to legalize what they say are 40,000 illegal video gaming terminals already in operation across the state.
Their legislation would regulate and tax terminals that offer slot machine-type video gambling.
Pennsylvania’s 12 casinos — which have argued that expanding legalized gambling could “cannibalize” their businesses — would see a reduction in their slot-machine taxes to offset any costs of the expansion.
Backers of the bill described it as a move to regulate an activity rather than create a new one.
“These illegal machines exist in an unlicensed, unregulated, untaxed black market,” Sen. Guy Reschenthaler, a Republican sponsor, said during a news conference at the Capitol. “We need to legalize this industry to bring it out of the shadows.”
Many Lancaster County Republican lawmakers have been opposed to various forms of expanded gambling in the past, including video gaming terminals and separate online gambling proposals.
Rep. Bryan Cutler, a Peach Bottom Republican, said his constituents in southern Lancaster County seem to be split and he personally has some concerns.
“The revenue projections having historically missed,” Cutler said. “Every time we’ve counted on gambling in the budget those revenues have undershot it or something unexpected has happened, such as the decrease of the lottery fund in response to the expansion of table games.”
Still, he said everything is on the table — including this new bill — as lawmakers work with Democratic Gov. Tom Wolf to close a projected $3 billion state budget shortfall between this fiscal year and next.
Republican Rep. Mark Mustio, a proponent, estimated that revenue would total at least $100 million in the first year and $300 million to $500 million annually after that. Local municipalities would get a cut of the money flowing through the machines through the creation of a local share account for all 67 counties.
He said 25,000 to 35,000 video gaming machines could be operational in the state after full implementation.
Those machines would be limited to a $5 maximum bet and a $1,000 maximum payout — and there would be no structure for statewide jackpots that dish out large prizes that can lead to addictive gambling, Reschenthaler said.
Other protections would include limiting the number of terminals to five per liquor licensee and 10 per truck stop or off-track betting parlor. Only people 21 and older could use the terminals, and around $2 million of the revenue would go toward programs that combat gambling addiction.
Lancaster Democratic Rep. Mike Sturla, a co-sponsor of the House bill, said the penalties for having an unlicensed video gaming machine could also be severe: up to loss of a liquor license, Sturla said.
He and others said they think the bill, which will be introduced as House Bill 1010, will garner more bipartisan support compared to previous similar versions. The new proposal has not yet been referred to a committee.
The video gaming terminal (VGT) industry for Pennsylvania would be based on Illinois’ system, which is nearly five years old and pulled in more than $330 million in tax revenue in 2016.
Penn National Gaming, which operates the Hollywood Casino in Grantville, Dauphin County, participates in the Illinois video gaming industry and supports the similar steps in Pennsylvania, said spokesman Eric Schippers.
Schippers said Penn National Gaming saw an 8 percent to 10 percent drop in business its three casinos in Illinois during the video gaming legalization there. But Schippers said that wouldn’t happen here because of a few casino-friendly measures in the current version of the legislation.
Those measures include reducing the base tax rate on slot machines from 34 percent to 29 percent and capping regulatory fees that continue to put pressure on casinos here, Schippers said.
Richard Teitelbaum, president of the Pennsylvania Video Gaming Association, said the machines would be monitored and “every dollar will be accounted for and posted monthly online.”
“By bringing these machines out of the shadows, the Commonwealth of Pennsylvania wins,” Teitelbaum said.