By Dick Miller
WE.CONNECT.DOTS: Expanded state-sponsored gambling began as a necessary program under Democrat Governor Ed Rendell. With Republican Governor Tom Corbett, the state has repeatedly opted to increase gambling to avoid tax increases. His latest program continues to extract gambling taxes from the poor. This time additional damage will be inflicted because tax revenue would replace charity endeavors in every town in the state.
That does not mean this is another issue where the Democrats are the good guys. The “so-called” opposition party sat silently by and allowed the latest program to become law. After all, this battle pitted local social and fraternal clubs (Moose, Elks, VFW, etc.) against the neighborhood taverns.
Republicans will, however, suffer the final damage of this saga. This time the “free market” – the GOP “go-to” defense for their existence — will deliver them a knockout blow.
This story begins with the election of Corbett as our latest and current governor. He promised to never raise taxes, a foolish campaign plank but never seriously challenged by the Democrats.
Corbett ignored serious budget problems. First, “borrow-and-spend” Rendell left some bills to be paid. Second, Obama stimulus money flowed freely as part of the economic recovery effort, but ran out just as Corbett took office. Third, the sluggish economic recovery deterred tax fund growth, normally there to take care of ordinary program cost escalations.
Corbett added problems of his own making. To date he has cut over $1 billion in business taxes (but none for people). He also has pushed privatization programs – state stores, lottery, and charter schools, regardless of economic consequences.
Corbett’s latest program to allow establishments with liquor licenses to run small gambling games would have awakened the opposition political party – if one existed in Harrisburg. At one point, Corbett minions predicted 2,000 bars would apply for a license – each paying $2,000 in a non-refundable application fee, followed by a $2,000 license fee, followed by a $1,000 per year fee to operate under the license.
Corbett predicted in his 2014-15 budget that this program would generate $156 million in new state revenue. No one asked how this number was developed.
The new small games license was an add-on. Non-profit social and fraternal clubs had exclusive reign over local territory for these types of gambling. However, regulations required these clubs to expend more than half of the profits on community benefits.
As Mayor of Greenville in the last decade, I learned to count on these clubs to pitch in to help pay for playgrounds, commercial district decorations, sponsor little league ball teams and basketball tournaments. The new program, that makes room for taverns, requires 65 percent of proceeds go to Harrisburg in the form of new taxes. One bar owner forecast taverns would see about eight percent net on the gambling, hardly enough to spend the time or front money.
Corbett hopes to balance his new budget by stripping out moneys that benefited local communities and using same for his state programs. Still no uproar. Not only did the Democrat “opposition” keep lips sealed but so did several thousand local municipal officials.
This is one explanation for such silence. Bar owners write campaign checks because they own a business regulated by the state. Fraternal and social organizations are mostly non-profit corporations and are barred from political contributions. Why would you openly oppose a new revenue program that could also enrich those who donate to your campaign?
Here is where Corbett and the Republicans may lose this round in its constant battle to screw citizens. As of last week, only six bars had applied for a license.
Now Corbett must accelerate efforts to rape another program, less popular and therefore more likely to fall.
A solid economical byproduct of Rendell’s racetrack and casino program (“racinos”) helped breathe life into another dying industry, horse racing. Purses had grown so small that it was no longer practical to invest in horses and pay all the necessary expenses to train and race. PA existing tracks were not doing too well, financially, either. Small purses followed small crowds and small betting.
In Rendell’s scheme, most of the taxes from gambling went to subsidize public education and other vital programs. However, the 2004 legislation contained a provision directing more than 11 percent of gross revenues from slot machines to be earmarked for horseracing. This has amounted to about $250 million annually. Prize money has raised interest in the industry and created thousands more jobs. Farmers actually make a living growing hay for the racehorses.
Unfortunately, a horse owned by a billionaire Dubai Sheik won the 2012 Pennsylvania Derby. Now the Republicans want to scrap that program and use the funds to help balance Corbett’s budget. No one will calculate the potential loss of jobs in the horse racing industry. The current program has been called “Fools Financing Foals.”
Defense of the current program – at least at its existing size – is unlikely. Horse racing is part of the state’s largest industry, agriculture. A 2012 study by Rutgers University revealed what we stand to lose if racing-related training and breeding farms revert back to pre-casino levels. Rutgers academics claim almost $350 million in business activities and over 6,000 jobs and $7 million a year in state taxes would vanish.
Bottom Line: My friend, Richard Wukich, wrote in the Pittsburgh Tribune-Review “The sheik of Dubai and the Queen of England own racehorses. Like them, we dream that a foal raised on our Slippery Rock farm will run for the roses.”
