States such as Pennsylvania, which rely on revenue from gambling to close monster deficits, are sure to be disappointed with future results, according to a new study released in April.

Casino tax revenue in 16 states focused on by the Rockefeller Institute study increased just 0.1 percent in fiscal 2015 compared with the previous year when adjusted for inflation. Maryland showed the largest increase at 17 percent, but that was mainly because of a new casino opening in Baltimore. Excluding Maryland, the other 15, including Pennsylvania, showed tax revenue declines of 1.2 percent."State officials considering expansion of existing gambling activities or legalization of new activities should weigh the pros and cons carefully," warns the Rockefeller Institute in its study.The study said that one of the biggest threats to states such as Pennsylvania is competition. For instance, New York is scheduled to have three new full-scale casinos by 2020, and New Jersey voters will decide this fall whether to add two new casinos in North Jersey. Such a move would have a significant negative impact on the Sands Casino in Bethlehem, which draws heavily from the New York City and northern New Jersey areas. The Sands is one of the most successful revenue-generators among Pennsylvania's 13 casinos.Despite this warning, one Pennsylvania legislator downplays the notion and is rushing headlong into expanding gambling in the commonwealth.Rep. John Payne, R-Dauphin, who heads the House Gaming Oversight Committee, predicts that his gambling-expansion bill will pass by next month."Look," Payne said, "we need revenue," citing the $2 billion deficit facing legislators as they tackle the 2016-17 budget. He said the Legislature will not get votes for higher taxes in an election year. "So I would think gaming will be a major part to any increase in revenues," Payne said.The Rockefeller report, however, said gambling expansion, while understandably appealing to officials wishing to raise revenue without raising taxes, is unpredictable and unsustainable in the long run. One of the main components of Payne's bill is Internet gambling, which recently came to New Jersey. Typically, players must be in the state in which they are playing, which limits revenue. Despite this, Payne sees a revenue bonanza in I-gambling.His bill would require a licensing fee of $5 million per license and would tax all gross interactive gaming revenues at 14 percent. This is significantly lower than the 55 percent tax paid by Pennsylvania casinos. Licenses would go to existing casinos, the same as New Jersey law requires."Right now millions of Americans, including Pennsylvanians, participate in illegal online gaming where no regulation currently exists," Payne said. "By enacting effective state policy, we can help curb the illegal market while ensuring strong safeguards are in place to protect consumers."In a report commissioned by the state's General Assembly and released last May, consulting company Econsult Solutions estimated that legalized online gambling in Pennsylvania would bring in $184 million in revenue in its first year and $307 million after that, adding significant tax proceeds.There are many skeptics about the accuracy of these projections and point to neighboring New Jersey as an example of pie-in-the-sky expectations.New Jersey Gov. Chris Christie signed his state's Internet gambling bill into law in February 2013, which was expected to bring an influx of revenue to Atlantic City as it tries to stave off competition from casinos in neighboring states, including Pennsylvania.But since its launch in November 2013, online gambling revenues have fallen far short of forecasts, with Christie initially predicting $160 million in revenue in the first year. He later revised the number to $34 million after a slow start. Revenues were expected to be better in 2015, although total numbers have not been verified.According to the Econsult report, Pennsylvania legalized gambling in 2004, and its casinos have generated $8.1 billion in tax revenue since then. The gambling industry generated a total of $3.1 billion in total revenue in 2013, earning the state $1.4 billion in taxes. The Rockefeller study identifies Pennsylvania as one of the most successful states in generating tax revenue from gaming.Casinos everywhere are feeling the effects of the generation gap, especially with slots. As young people seek more exciting electronic games, such as those they play on smartphones, this is going to be a problem not only for casino operators but for the 23 states, including Pennsylvania and New Jersey, which rely on casino tax revenue to balance their budgets."The research shows that most of the casino gamblers are the elderly," said Lucy Dadayan, senior policy analyst at the Rockefeller Institute. "The gaming industry is trying hard to attract a younger population."Daniel Sahl, associate director of the Center for Gaming Innovation at the University of Nevada at Las Vegas, said, "Gambling, as it exists today, is not as attractive to millennials as it is to their parents or grandparents." Millennials see leisure activities as "a social experience that you share with friends," Sahl said. "Gambling does not resonate with them as a particularly fun thing to do."By Bruce Frassinelli |

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