Gambling bill summarized

The Senate Budget and Taxation Committee has approved the administration's gambling expansion bill with minor amendments. It will likely receive a favorable vote in the full Senate and a hearing in the House Ways and Means Committee today, with House action occurring next week.

Senator Richard Madaleno of Montgomery County - one of the legislature's leading fiscal experts -  has prepared a clear and succinct summary of the administration's bill to expand gambling in the special session. The good Senator has agreed to let us share it with you: 

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"Background

During the 2012 Legislative Session, the General Assembly reviewed, and the Senate passed, two bills providing for the expansion of legal gambling in Maryland. As a result of a constitutional amendment passed by voters in 2008, state law currently allows five slots facilities located in the following jurisdictions: Allegany County, Anne Arundel County, Baltimore City, Cecil County and Worcester County. Three of these sites are already open and producing revenue for the state, while the other two sites – Baltimore City and Allegany County – are still in the conceptual phase. The two bills introduced during the 2012 Legislative Session would have allowed the current sites to additionally offer a range of table games, as well as authorized a sixth site to be located in Prince George’s County near the Woodrow Wilson Bridge, with National Harbor and Rosecroft Raceway both potential sites.

During the regular session, the legislature and the Governor could not come to an agreement on a gaming expansion package, resulting in neither of the two bills introduced passing into law. However, there was consensus regarding the need for additional work to properly assess gaming expansion proposals, which could provide additional revenue for state funded public education. Under the provisions of the 2008 constitutional amendment, any expansion beyond the five authorized gambling sites is automatically subject to a statewide voter referendum during the next regularly scheduled general election. Since general elections in Maryland only occur every two years, there was a predictable push to finalize a proposal before the August 20 deadline to place referendum issues on the 2012 General Election ballot.

As such, on May 21, Governor O’Malley announced the formation of a special “gaming” workgroup of eleven members to review the various expansion measures in preparation for a second Special Session in July/August. Together with two other Senators, [Senator Madaleno] was appointed to the “Workgroup to Consider Gaming Expansion”, which began its work on June 1 and issued its final recommendations on June 20. Despite broad consensus amongst workgroup members on a majority of recommendations, a unanimous agreement could not be reached on the conditions related to the addition of a sixth gaming site in Prince George’s County.

However, recognizing a significant opportunity to improve the effectiveness of the state’s gaming program and expand investment in public education, over the past several weeks the Governor has utilized the workgroup recommendations as a framework for continued discussions with members of the General Assembly and relevant stakeholders. With the recent announcement convening a Special Session, the Governor appears confident that a newly crafted gaming bill – based upon stakeholder and workgroup input - will pass the legislature. Below [is a summary of] the main provisions of the bill, a draft copy of which was released this week.

Bill Summary

As proposed, the Governor’s gaming legislation adopts a majority of the recommendations supported by the “Workgroup to Consider Gaming Expansion”, with several key additions:

• Establishes that 100% of all state proceeds from gaming revenue will be invested directly in public education, deposited in the Maryland Education Trust Fund. It is estimated that the Education Trust Fund will receive approximately $200 million per year once all six sites are functioning in 2016.

• Authorizes a sixth casino in Maryland, to be located in Prince George’s County, with the caveat that a majority of both Prince George’s County voters and statewide voters must approve the issue at referendum. If Prince George’s County voters reject the ballot question in November, a sixth casino site is not authorized. Should voters in Prince George’s County approve the issue at referendum, a competitive bidding process for the operating license will be administered by the State. Should Prince George’s County voters reject the ballot initiative but voters statewide approve, all legislative provisions unattached to the sixth site will go into effect.

• Authorizes table games (i.e. blackjack, poker, etc.) at all state gambling sites at a tax rate of 20%. Video Lottery Terminal (VLT) or “slots” will continue to be taxed at the current rate of 67%. However, if a sixth site is approved by voters, negatively impacted facilities in Baltimore City and Anne Arundel County may retain an additional 5% of VLT proceeds for advertising and capital improvement costs.

• Transitions “slots” procurement responsibilities from the State to casino operators. Currently the State is responsible for purchasing and leasing the “slots” machines at casino sites at a cost of 13% of total revenues. By transferring this responsibility, the State will generate significant savings for the Education Trust Fund. As compensation for the transfer, casino operators will receive an additional 6% of proceeds if they own or lease the VLTs and associated equipment/software.

• Establishes a Gaming Commission, under a reconstituted State Lottery Agency, to review and protect the State’s interests. The seven member commission would be appointed by the Governor with the advice and consent of the Senate and led by an “expert” Executive Director. Other stipulations require that the commission be bi-partisan, reflect the demographic diversity of the state, and consult with a third party consultant to provide continual analysis of the Maryland gaming industry. Additionally, with legislative oversight, the newly formed Gaming Control Commission may adjust the Baltimore City and Anne Arundel casino’s VLT revenue percentages by no more than 5%.

• Bans political donations from gambling companies.

• Allows the state’s casino’s to operate 24 hours a day, seven days a week. However, facilities would still have to abide by local liquor laws, so that while gaming operations could continue they would still have to close their bars.

• Incorporates a “hold harmless” provision, specifying that local jurisdictions currently authorized to host casino sites will not see a reduction in local impact revenues due to the addition of a sixth site. Under current law, local jurisdictions hosting one of the five authorized gaming facilities receive 5.5% of “slots” proceeds to compensate for additional public safety and transportation costs."

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Gambling Expansion does NOT Guarantee Increased School Funding

As we noted in yesterday's blog post, even though the largest piece of gambling revenues "will be invested directly in public education, deposited in the Maryland Education Trust Fund," that does not automatically mean more money for schools. In the past, gambling dollars paid to schools have merely offset reductions in other state funds. This has helped balance the overall state budget, but has not increased resources for education. This is exactly what the legislative staff's analysis assumes will happen again with the revenues from this special session (take a careful look at Appendix I on page 21).

MBTPI joins the Maryland Education Coalition and the Maryland State Education Association in calling for the Governor and legislature to commit to assuring that increased gambling revenue actually increases state funding for local public schools.