Report: High taxes, low profits. Tavern gaming licenses a bust for Pa. | Thursday Morning Coffee

Once hailed as a boon for saloon-keepers, the games haven’t lived up to expectations, new state data show

April 14, 2022 7:07 am

Good Thursday Morning, Fellow Seekers.

When it was pushed under the former Corbett administration in 2011, Pennsylvania’s tavern gaming law was pitched as a sure-fire way to allow Keystone State saloon-keepers to compete with the small games of chance that are a fixture at Elk and VFW halls across the commonwealth.

Nearly a decade on, the 2013 state law authorizing tavern gaming has proven to be less than a jackpot for bar owners, with a new report showing the number of license applications and tax revenue coming in far behind the state’s projections.

And according to a spokesperson for the industry’s main trade group, officials need to go back to the drawing board and come up with fixes.

“The report is a clear sign that the tavern gaming business model is broken, and not meeting the needs of both the state and tavern owners,” Chuck Moran, the executive director of the Pennsylvania Licensed Beverage and Tavern Association, said in a statement.

Indeed the report by the Legislature’s nonpartisan research wing, the Legislative Budget & Finance Committee paints a grim picture of the current state of the law.

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According to the report, through February, the Pennsylvania Liquor Control Board had approved 71 tavern gaming establishments, only 45 of which were active. The report concluded that “expensive up-front license fees, intrusive background checks, and an unfavorable tax structure have been cited as some of the reasons for low participation among tavern owners.”

So it’s not a shock that tavern games generated just $1.27 million in state and host municipality tax revenue — which is far below the wildly optimistic executive branch projections of $93.6 million a year. In the four years between 2017 and 2021, tavern games generated only $6.58 million in total tax revenue, according to the report.

And despite some fears, the games have not put a dent in Pennsylvania Lottery revenues. In fact, your odds of winning might be better with a scratch-off card than with a tavern game.

“The $1.27 million in tavern gaming revenue collected by the Commonwealth in 2021 represents about $1.95 million in patron losses as compared to about $1.86 billion in losses for persons participating in Lottery games, including iLottery play,” the report concludes.

And, “tavern gaming losses are one-tenth of one percent (0.10 percent) of the losses incurred in Lottery games, and tavern tax revenues are 0.07 percent of Lottery revenues [of $8.2 billion]. Because of this, we conclude tavern gaming did not have a material impact on State Lottery sales in 2021,” the report’s authors wrote.

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A similar report in 2018 by the legislative research panel showed equally anemic numbers. Just 51 establishments statewide were licensed to offer pull tabs, daily drawings and raffles as of May of that year, PennLive reported at the time. That was five fewer than in 2017, and by June of 2018, the number of active licenses had dropped to 49, the news outlet reported.

Then, as now, the high up-front costs, along with the huge tax bite, proved a disincentive for tavern owners to take a chance on the games, PennLive reported.

To offer the games, bar owners have to pay a $2,000 upfront application and investigation fee, according to PennLive. If they’re approved, they’re in for another $500, and annual license renewals cost $1,000, the news outlet reported.

The state, meanwhile, gets a a 60% bite of the net revenue from the games, with the host municipality getting a 5% share. The taverns get to keep the 35% balance of net revenue, PennLive reported.

On Wednesday, the tavern association’s Moran said his trade group had repeatedly warned lawmakers that the tavern gaming law needed to be fixed, stressing that high fees, the limited number of games, high taxes and low profit made them a loser for bar owners.

“As we have said in the past and will continue to do so in the future, if the state wants to see better results and collect more money for its general fund, then tavern gaming must be overhauled and made more attractive to establishments,” the trade group said.

Pa. Senate President Pro Tempore Jake Corman, R-Centre | Capital-Star file photo).

Our Stuff.
Senate President Pro Tempore Jake Corman, R-Centre, who briefly tried to end his gubernatorial candidacy on Tuesday, will stay in the GOP’s chaotic primary for the state’s top spot, though election logistics meant he probably couldn’t have dropped out even if he wanted to, Stephen Caruso reports.

Less than a week after its introduction and a month before the primary election, the Republican-controlled state Senate has pushed through legislation eliminating ballot drop boxesMarley Parish reports. As an added bonus, the GOP-controlled chamber also approved legislation prohibiting third parties from funding election operationsMarley Parish reports.

Meanwhile, more than 664K Pa. voters have applied for mail-in ballots ahead of primary election, Cassie Miller reports.

Democrat Enid Santiago, of Allentown, survived a challenge to her nomination petition, meaning her name will remain on the May 17 primary ballot for Lehigh County’s 134th House DistrictCorrespondent Katherine Reinhard reports.

Lawyers in a hotly contested drug-testing case related to horse racing confused Altoona, Iowa with Altoona, Pa., thus gumming up the legal works, our sibling site, the Iowa Capital Dispatch, reports.

The Voting Rights Act is hanging by a thread; a Florida ruling may allow the U.S. Supreme Court to cut it, our sibling site, the Florida Phoenix, reports.

On our Commentary Page this morningU.S. Sen. Pat Toomey’s, R-Pa., vote against now Supreme Court Justice Ketanji Brown Jackson set a dangerous precedent. Opinion regular Bruce Ledewitz explains why. And the loyal opposition is a key element of democracy, and we’re losing itJeff Kolnick, a history professor at Southwest Minnesota State University, writes in an op-Ed first published by our sibling site, the Minnesota Reformer.

Sen. Mike Regan, R-York, speaks during a Senate Law and Justice Committee hearing on legalizing adult-use cannabis on Monday, Feb. 28, 2022. (Screenshot)

Efforts to legalize adult-use cannabis in the state have exposed the depths of the opposition to such a move, the Inquirer reports.

Democratic Lt. Gov. John Fetterman has pulled ahead in a new Franklin & Marshall College poll, the Post-Gazette reports.

Harrisburg city officials are asking for residents’ cooperation as they move ahead with plans to convert Second Street, one of the city’s main arteries, to a two-way street, PennLive reports.

USA Today’s Pennsylvania State Capital Bureau profiles Republican U.S. Senate candidate Jeff Bartos.

City & State Pa. talks to Democratic U.S. Senate candidate Conor Lamb.

Without taking a vote, Republican commissioners in Lancaster County removed a mail-in ballot dropbox from the county building, LancasterOnline reports.

Lehigh County commissioners have unanimously appointed a new county coroner, the Morning Call reports.

Spotlight PA runs down the fundraising among the Republican gubernatorial candidates (via the Citizens’ Voice).

Philadelphia city officials hope a new summer activities program will help prevent a summer of gun violence, WHYY-FM reports.

A Starbucks in western Pennsylvania is the first one in the state to vote to unionizeWESA-FM reports.

Federal funds will help smooth the roads to Presque IsleGoErie reports. goes deep on how community colleges are trying to fill gaps in the labor market.

A Census undercount has jeopardized funding for Native American reservationsRoll Call reports.

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What Goes On
9:30 a.m., 60 East Wing: House Tourism & Recreational Development Committee
10 a.m., Kittanning, Pa: Senate Urban Affairs & Housing Committee

Gov. Tom Wolf holds a pair of events today. At 11 a.m., he’s in Stroudsburg, Pa., to pitch his plan to spend federal stimulus money on the state’s families. At 1:45 p.m, he’s in Philadelphia to pitch school funding increases in his budget proposal.

Heavy Rotation
Here’s a new one from reggae legend Horace Andy, who’s still going strong in his seventh decade. It’s his cover of Massive Attack’s ‘Safe from Harm.’ And it’s every bit as epic as you might expect.

Thursday’s Gratuitous Hockey Link
The New York Rangers blanked the Philadelphia Flyers 4-0 on Wednesday night, picking up some ground in the Metropolitan Division race.

And now you’re up to date.

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John L. Micek
John L. Micek

A three-decade veteran of the news business, John L. Micek is the Pennsylvania Capital-Star's former Editor-in-Chief.