Colin McNickle: Gaming revenue trends worrisome
The modest increase over 2016 that Pennsylvania’s 2017 gaming-revenue numbers show belies a worrisome trend that Allegheny Institute for Public Policy researchers say requires deeper analysis.
State figures show table-game revenues increased 4.4 percent over 2016, to $890.6 million. However, slot machine income was down 1 percent, to $2.3 billion. These results are not encouraging for two reasons, say Frank Gamrat, a senior research associate, and Jake Haulk, president of the Pittsburgh think tank: “First, (growth in) table games revenues, on a year-over-year basis, have been slowing since 2014 — from 7.8 percent in 2015 to 5.6 percent in 2016 and the latest at 4.4 percent. … (S)lots revenue has been slipping slightly lower year-to-year since the peak 2012 reading of $2.47 billion to stand at $2.34 billion in 2017. Second, the implications for state tax revenue … are considerable.”
The Ph.D. economists remind that while table games’ gross revenue is taxed at 16 percent, slots revenue is taxed at 54 percent. To wit, gross slots revenue’s decrease from 2016 to 2017 of close to $24 million resulted in a nearly $13 million decline in taxes paid. Table-games revenue’s $37.4 million increase brought in an additional $6 million in taxes. But that leaves the commonwealth short $7 million of the year-earlier collection.
That said, Pennsylvania’s gambling landscape is changing. Last year, the Legislature approved allowing up to 10 new mini casinos that each could add between 300 and 750 slot machines and up to 40 table games. If all 10 open and each maximizes its gaming options, that would represent a 28-percent increase in slot machines, a 32-percent increase in table games.
“Presumably, the sheer number of additional slot machines and tables will lift tax revenues to some extent,” Gamrat and Haulk say. “But the question is whether or not the increase will be substantial or merely incremental and whether any upturn can be sustained. Clearly, the question of ‘saturation’ needs to be answered. Can Pennsylvania’s population and economy support in a profitable manner 22 casinos, gaming in airports, truck stops and on the Internet?”
Given that neighboring Delaware, Maryland, New Jersey, Ohio and West Virginia have gambling that significantly reduces out-of-state gaming dollars, Pennsylvania’s expansion could be quite risky. With most players likely coming from Pennsylvania, Gamrat and Haulk say, it’s important to note that every gaming dollar lost — the casinos’ gain — is a dollar not spent on other things, be they recreational, luxuries or necessities. And while new casino jobs are welcome, they cannot replace manufacturing and gas-industry jobs’ productivity and multiplier effects.
“Chasing gaming jobs by expanding gambling sites is a poor substitute for creating a far friendlier business climate that attracts manufacturing firms and encourages companies already here to expand,” they stress. “Addressing the overweening political power and costs of public-sector unions would be a great start. Coming to grips with economic reality is a must.”
Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (email@example.com).