Behind those Pa. gaming numbers

Sign up for one of our email newsletters.Updated 3 hours ago Is the bloom off the supposed rose that has been legalized gambling in Pennsylvania? Number crunching by two scholars at the Allegheny Institute for Public Policy suggests that could be the case....

Behind those Pa. gaming numbers

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Updated 3 hours ago

Is the bloom off the supposed rose that has been legalized gambling in Pennsylvania?

Number crunching by two scholars at the Allegheny Institute for Public Policy suggests that could be the case.

The Pennsylvania Gaming Control Board says gross total gaming revenues — combining slot machines and table games — exceeded $3.2 billion in 2016.

While slot machine revenue was slightly down in 2016 from 2015, the board says table-games revenue reached a record high.

And while it is true that combined revenues reached the highest level to date, some perspective on the number is needed, say think tank researchers Frank Gamrat and Jake Haulk.

Indeed, gross gaming revenues reached $3.213 billion last year. But that's only a small gain (1.25 percent) over 2015, they note.

And notwithstanding 2016's increase, gaming revenue has risen by a mere 1.7 percent from 2012's $3.16 billion figure, they add.

“To put this in context, consumer prices have climbed just under 5 percent over the (same) four years which means in real, inflation-adjusted terms, 2016 revenue was about 3 percent below the 2012 reading,” Gamrat and Haulk remind.

And there's another factor to consider as the fortunes of slots wane and those of table games wax, the Pittsburgh scholars say.

“It is important to note that while the popularity of table games is driving the gaming revenue gains, the tax rate on table games is about a third of the rate leveled on slots revenue,” Gamrat and Haulk note.

Table games are taxed at 14 percent.

Slots revenue is taxed at 54 percent.

Twelve percent of table-gaming taxes goes into the commonwealth's general fund, while 2 percent goes to local government.

Thirty-four percent of slots taxes goes into a state gaming fund that, among other things, pays for property tax relief.

Otherwise, 11 percent of slots taxes goes into a fund for the horse racing industry, 5 percent goes into a state economic development/tourism fund, and counties and municipalities receive 2 percent each.

But Gamrat and Haulk also remind that each dollar decline in slots revenue results in a 54-cent drop in tax receipts for the commonwealth.

“By the same token, a dollar increase in table games revenue generates only 14 cents in additional tax receipts,” they add.

“Therefore, on a net basis, the $110 million decline in slots revenue and $170 million gain in table games revenue have lowered the total tax receipts from the gaming industry over the last four years.”

That trend suggests further erosion of the gambling industry in Pennsylvania, the institute says.

“At this point, it appears gaming activity in Pennsylvania is topping out as growth gets harder and harder to come by,” Gamrat and Haulk say, “and that is all generated by table games that produce much less revenue for the state and are most likely more expensive for casinos to operate than slots per dollar of revenue produced.”

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

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