Pennsylvania Casino Tax Deadline Looms, as State Scrambles for Revenue Solution

Posted on: May 22, 2017, 06:00h. 

Last updated on: May 22, 2017, 08:43h.

Casino.org Staff Writer Read More
Expertise: Commercial Gaming.

The elimination of a casino tax in Pennsylvania is putting the state in a fiscal bind. With the 2017 session of the General Assembly ending this week, lawmakers must find at least a quick fix to the revenue woes they’ve known about since last fall, when the state Supreme Court ruled elements of the current casino tax structure were unconstitutional.

Pennsylvania casino tax
Pennsylvania counties risk losing $120 million from a casino tax that’s been declared unconstitutional. Gov. Tom Wolf wants a bill on his desk ASAP to remedy budget troubles resulting from the state Supreme Court ruling. (Image: Gov. Tom Wolf)

When the state legalized some forms of casino gambling in 2006, they did so with the promise that each casino would pay 2 percent of gross slot revenues to the townships where they’re located.

That share was to encourage communities to welcome new casino construction, and help offset additional costs associated with having a gambling venue in their backyard. If any casinos did not meet a $10 million minimum, however, it was on them to make up the difference. And that is where the slot machine minimum tax created a problem for the courts.

Courtroom Bust

In 2015, the Mount Airy Casino and Resort in the Poconos protested, when 2 percent of their slot revenues amounted to only about $2.8 million, leaving them $7.2 million short.

The Supreme Court ruled in September 2016 that the formula for calculating a minimum slots tax violated the state’s uniformity law. Since one casino generates different slots revenue from the next, they ultimately end up paying different tax rates to reach the $10 million mandate.

That left the state scrambling for ways to relieve municipal governments that had come to rely heavily on the $10 million payments to cover substantial chunks their budgets. In January, legislators were given 120 days to find a solution. And when that deadline passed, the court extended it another 120 days, presenting a May 26 deadline this Friday.

Deadline Pressure

Lawmakers in both chambers have been considering a variety of gambling expansion measures with the potential to make up the lass, particularly as a growing $1.2 billion budget deficit looms. But so far they have been unable to reach any agreements.

State Rep. Pat Harkins’ (D-Erie County) HB 1301 calls for a change to a simple flat host fee of $10 million.

Meanwhile, waiting in committee is SB 271, a more comprehensive gambling reform and expansion package that could provide the legislative framework for a fix to the host-fee dilemma.

With more than $120 million at stake, the Pennsylvania casino tax is understandably a crucial concern, especially for lawmakers with casinos in their districts. But with just two scheduled legislative sessions remaining before the Friday deadline, politicians are already trying to downplay trepidation from local officials.

“If it’s not done by Friday, we’ll just make it retroactive,” State Sen. Lisa Boscola (D-Northampton) told the Allentown Morning Call. “The local municipalities are going to get their money. There is no doubt about that.”