Updated: Monday, September 25, 2017, 8:45 AM
Pennsylvanians in the future will surely look back on 2017 as the year the state legislature crossed the line from desperation to madness.
Its desperation over balancing the budget has led to folly after folly. One will be the imposition of a $1 billion debt to meet the state’s operating expenses – a debt our children’s children will still be paying off.
Another is the raiding of funds reserved to pay for such items as job training, environmental safety, and transportation under the delusional belief that the money is just sitting there, untouched and unneeded. The folly of that maneuver will be evident soon, when local and state agencies cut back services when the funds are needed.
The final act of insanity will be a major expansion of gambling in the state. Now limited to the state’s 12 casinos, it could spread into as many as 13,000 bars, fraternal clubs, and other establishments with liquor licenses. Under an idea being bandied about in Harrisburg, your neighborhood taproom would be allowed to install up to five video gaming terminals (VGTs) with poker, slots, and other games of chance – with cash payouts.
What will become evident – if this VGT explosion comes to pass – is how much it will hurt the revenues of existing casinos. Last year, the state’s 12 casinos had $3.3 billion in revenue and provided $1.4 billion to the state in various ways, but primarily via a 34 percent “state share” of the take from every slot machine.
VGTs will take a bite out of casino revenue – how much is unclear. There’s a graphic word for this in the business world – cannibalism – one business feeding off another, eating its share of the pie.
The state will get a cut of the revenue the VGTs will generate, but what happens if casino revenues decline by that amount or more? By cannibalizing one form of gambling with another, revenue that goes to the state could decline. Supporters have suggested that one way to avoid this cannibalization would for the state to reduce its take on casino slots by 34 percent to 29 percent.
In that way, the casinos could be made whole for their loss in revenue. The bar owners will be happy with their VGT revenues – it will help make up for the loss in six-pack sales that happened after the state allowed supermarkets to sell wine and beer. (Another instance of cannibalization, by the way.)
The only losers will be the taxpayers. But, hey, someone’s got to lose. Right?
As of now, everything about the VGT gambit is up in the air. It changes every few days as the Republican-led House and Senate leaders try to raise the money needed to pay for the state’s $32 billion budget, which has already been passed. They are about $2 billion short. And the gap has been hard to fill because one chamber – the House – has declared tax increases taboo.
We are against expansion of gambling – particularly until the pros and cons are carefully weighed, and until local communities — and not just local bar owners – have their say.
This is not a decision to be made while the legislature is scrambling for money in the thrall of madness.