Chairman Payne, Chairwoman Ward, Chairman

House Gaming oversight Committee and Senate Community, Economic & Recreational Development Committee Testimony Eileen McNulty, Secretary Pennsylvania Department of Revenue May 17, 2016

Chairman Payne, Chairwoman Ward, Chairman Kotik, Chairman Farnese and members of the House Gaming Oversight and Senate Community, Economic & Recreational Development Committees, thank you for the opportunity to submit remarks today concerning the role of the Department of Revenue in collecting the administrative assessments on casinos required by statute. Joining me is Christin Heidingsfelder, the department's Deputy Secretary of Administration.

The Department of Revenue has a limited role under Title 4. Our responsibilities are confined to collecting and distributing taxes and fees and maintaining the Central Control Computer System which allows the department and the Pennsylvania Gaming Control Board to monitor the activity of every slot machine in the state, as required by law.

Title 4 provides administrative responsibilities for the Pennsylvania Gaming Control Board, Pennsylvania State Police, Attorney General and Department of Revenue. Further, under Chapter 14, the law requires the slot machine licensees to reimburse the commonwealth for the cost of performing those duties. Section 1401 provides for each licensee to have a special account at the Treasury Department, commonly referred to as a 1401 account. A fixed amount is maintained in each licensee's 1401 account to provide for administrative expenses as well as sums necessary to repay loans made from the General Fund.

The budget process is determined under Section 1402 of Title 4. As required by the statute, the department, board, state police and Attorney General submit annual itemized budgets for their expenses to the Appropriations Chairmen of the House and Senate. In addition, a copy of each budget is provided to the Pennsylvania Gaming Control Board for review and to make recommendations to the Legislature.

The Legislature enacts and the Governor signs separate appropriations for each of the four gaming oversight agencies. Based on the enacted budget, the Department of Revenue assesses the 1401 accounts for the total amount of the appropriations and distributes the appropriated funds to each of the four agencies. The department's role is to collect these funds from the 1401 accounts of the licensees and distribute those funds to the four agencies with gaming responsibilities. We have no authority to oversee the use of the budgeted funds by other agencies. The portion of the appropriation assessed to each casino is based on their share of the total gaming revenues generated by all the licensees. The percentage rate of the regulatory assessment is calculated by dividing the total of the appropriations by the total estimated gaming revenues.

As with any budgeting process, there is an annual reconciliation of budgeted amounts to actual expenses. That process results in unused appropriated funds from the prior year being carried into the next fiscal year. In past years, the unspent budgeted amounts that were carried forward were substantial enough to maintain the regulatory assessment rate at 1.5 percent of revenues generated, despite increasing costs for some agencies. By fiscal year 2012-13, the amount carried into the fiscal year reached $35.4 million, or more than 63 percent of the amount required to meet the four appropriations for that fiscal year. The department suspended the regulatory assessment for the months of May and June in 2013 to reduce the accumulation of funds that would be carried forward into fiscal 2013-14 by $10 million.

Since fiscal year 2012-13, the 1.5 percent assessment has not been sufficient to fund the four agency budgets at the appropriated amounts. Rather, the accumulated amount carried forward from prior years was being used to offset portions of the appropriated budgets, enabling the regulatory assessment to remain unchanged despite budget increases. For the current fiscal year, almost 20 percent of the funding for the four agency budgets was derived from funds collected in advance during prior years. ($71.3 million in appropriations are being funded from $57.3 million in regulatory assessments at 1.5 percent and $14 million in funds carried forward from prior years.)

Those funds have now been depleted and the regulatory assessment must be adjusted to reflect current costs. When we reviewed the budget forecasts in February it was determined that at the current assessment rate of 1.5 percent, there would be an estimated negative balance of $9.4 million by the end of fiscal year 2016-17. The rate of the assessment needed to be adjusted for the fiscal 2016-17 budgets. The rate of 2.0% was calculated as described above.

The Department of Revenue's gaming budget request has remained flat since fiscal 2013-14 and is declining as a share of the overall budgets. For fiscal year 2016-17, the department ~ s portion of the gaming regulatory budgets is 12.8 percent or $9.513 million of the $74.1 million in total appropriations proposed to regulate the industry. The Pennsylvania Gaming Control Board portion of the total budget is 47 percent or $34.864 million. The Pennsylvania State Police portion is 38.4 percent or $28.491 million. The Attorney General portion is $1.2 million or 1. 7 percent.

The Department of Revenue's budget request for fiscal 2016-17 includes $2.2 million in personnel costs. Our gaming complement includes seven fiscal management positions to handle the assessments for gaming taxes and statutory assessments as well as regulatory assessments and refunds of gaming promotional expense deductions. Our audit staff of five positions performs audits of the 12 licensed gaming venues. Seven positions provide pre licensure compliance reviews of gaming licensees and six positions provide IT support for the Central Control Computer System. The 2016-17 budget request continues funding for these 25 authorized positions amounting to $2.2 million. Additionally the budget requests $7.3 million in operating costs which is primarily the cost of the CCCS.

When preparing the fiscal year 2016-17 budget we kept our request level with the prior fiscal year. Although we were anticipating reduced costs for the CCCS contract with GTech, we had been unable to estimate what the reduction would be at that time. The prior contract was a flat rate of $535,000 per month. The new contract is based on the number of slot machines connected to the system after the cutover to the upgraded CCCS. While the contract was effective in August of 2014, the billing continued at the flat rate until the slot machines were able to be connected to the upgraded system which did not come online until spring 2015. Since the budget was presented, we have estimated reduced costs for GTech services under the new contract. We will revise our budget request accordingly and provide that information to the Appropriations Committees and the PGCB.

In summary, funds collected in advance have been used to cover costs since fiscal year 2012-13. The department is aware that funding regulatory costs represents an additional expense to the licensed casinos. We plan to update projections and review the assessment rate again later in the fiscal year to include more updated information. Going forward our approach will be to more closely align the assessment to current levels of expenditures and maintain a reasonable balance to avoid the need to make frequent revisions to the assessment rate.

I would like to thank the chairs and the members of the committees for providing an opportunity for us to address this important matter and welcome the opportunity to answer any questions you may have. I .'f~ ~ :1·~ · W1LlJ () MOt-I L:GAN I SUN q 'I I . Harralis. f• C'< t lr ,. ( I PHILAOELPHIA • '•• • • •• "I • '

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By E-Mail & US. First Class Mail

The Honorable Eileen H. McNulty Secretary of Revenue Commonwealth ofPennsylvania Department of Revenue 333 Walnut Street Revenue Tower - 11th Floor Harrisburg, PA 17128-1100 Re: Sectiop 1401 Accougt Assessment lgcrc11e

Dear Secretary McNulty:

On behalf of all twelve (12) casinos currently operating in the Commonwealth, we are writing in response to your March 31, 2016 letter (attached) regarding the Department of Revenue's ("Department") announced intention to raise the Section 1401 Account Assessment percentage from 1.5% to 2.0%.

At the outset, we want to register our significant disappointment at the way in which this issue has been handled. With no advance warning to or consultation with the casino operators, the Department has unilaterally made a determination to increase the gaming industry's regulatory costs by 33%. Based on 2014-2015 Gross Terminal Revenue ("GTR") and Gross Table Games Revenue ("GTGR ") totals, ifthe Department follows-through on its announcement, we estimate that the industry's collectiv!' regulatory expenses will rise from approximately $56,002,931 to more than $74,670,575 in one fell swoop, an increase of at least $18,667,644. The increase is unplanned, not included in our operational budgets, will wreak havoc on our financial projections and related financial obligations, and most importantly, weaken our competitive position in the face of ever-increasing out-of-state competition.

Further, it is unfortunate that the assessment increase announcement occurred after the Department's and the other Section 1401 Account funded agencies' Senate and House 2016-2017 budget hearings, thereby limiting the scrutiny and oversight that the General Assembly is constitutionally and statutorily obligated to undertake. We are gratified, however, that at least The Honorable Eileen H. McNulty Secretary of Revenue April 28, 2016 Page2 the House Gaming Oversight Committee will conduct a hearing on May 17, 2016 regarding the Section 1401 Account Assessment increase so that a measure of legislative supervision can commence.

Importantly, the Department's action is - at a minimum - premature and - at worst - in non-compliance with state law. Section 1402.1 of the Gaming Act ("the Act") states:

§ 1402.1. Itemized budget reporting. (a) Submission.-The board, department, Pennsylvania State Police and Office of Attorney General shall prepare and annually submit to the chairman of the Appropriations Committee of the Senate and the chairman of the Appropriations Committee of the House of Representatives an itemized budget consisting of amounts to be appropriated out of the accounts established under section 1401 (relating to slot machine licensee deposits) necessary to administer this part. The department, Pennsylvania State Police and Office of Attorney General shall provide copies of their itemized budgets to the board at the same time they are submitted to the chainnen of the committees. (b) Analyses and recommendations.-As soon as practicable after receiving copies of the itemized budgets submitted under subsection (a), the board shall prepare and submit to the chairmen of the committees analyses of and make recommendations regarding the itemized budgets.

As we have not been provided with copies of the same, we are presently unaware as to whether the Gaming Control Board (the "Board"}, the Department, the State Police ("PSP"} and/or the Office of Attomey General ("OAG") have prepared and submitted to the Senate and/or House Appropriations Committee Chairs the itemized budgets required under Section 1402.l(a) of the Act. In addition, we are also unaware as to whether the Board prepared and submitted to the Senate and/or House Appropriations Committee Chairs the analyses and recommendations regarding the itemized budgets that are required under Section 1402.l(b) of the Act.

In addition, Section 1402 of the Gaming Act states:

§ 1402. Gross terminal revenue deductions. (a) Deductions.-After determining the appropriate assessments for each slot machine licensee, the department shall determine costs, expenses or payments from each account established under section 1401 (relating to slot machine licensee deposits). The following costs and expenses shall be transferred to the appropriate agency upon appropriation by the General Assembly: The Honorable Eileen H. McNulty Secretary of Revenue April 28, 2016 Page3

(I) The costs and expenses to be incurred by the department in administering this part at each slot machine licensee's licensed facility based upon a budget submitted by the department under section 1402.1 (relating to itemized budget reporting). (2) The other costs and expenses to be incurred by the department in administering this part based upon a budget submitted by the department under section 1402.1. (3) Sums necessary to repay any loans made by the General Fund to the department in connection with carrying out its responsibilities under this part, including the costs of the initial acquisition of the central control computer and any accessories or associated equipment. (4) The costs and expenses to be incurred by the Pennsylvania State Police and the Office of Attorney General and not otherwise reimbursed under this part in carrying out their respective responsibilities under this part based upon budgets submitted by the Pennsylvania State Police and the Attorney General under section 1402.1. (5) Sums necessary to repay any loans made by the General Fund to the Pennsylvania State Police in connection with carrying out its responsibilities under this part. (6) The costs and expenses to be incurred by the board in carrying out its responsibilities under this part based upon a budget submitted by the board under section 1402.1. (7) Sums necessary to repay any loans made by the General Fund to the board in connection with carrying out its responsibilities under this part. (b) (Reserved). Section 1402 makes clear that payments made from each casino's Section 1401 account can only be made after: (i) the Department, PGCB, PSP and OAG have submitted the itemized budgets required to be prepared under Section 1402.1; and (ii) "upon appropriation by the General Assembly." As discussed above, the casino operators are unaware as to whether the required itemi7.ed budgets, analyses and recommendations have been prepared and submitted to the Appropriations Committee Chairs. Regardless, there can be no doubt that as of the date of this letter "appropriation by the General Assembly" has not occurred. As such, the Department's unilateral detennination to raise the Section 1401 Account assessment percentage from 1.5% to 2.00/o has not been established to be necessary and is therefore entirely premature. 1

1 The premature nature of the Department's action will be enhanced if the Section 1401 Account percentage rate increases on July I" without the FY 2016-2017 Commonwealth Budget having yet been enacted Recent experience suggests that this scenario is a realistic possibility. ~ lb2 Section 1799-E(f) of the 20l0-2011 Fiscal Code: The Honorable Eileen H. McNulty Secretary ofRevenue April 28, 2016 Page4

While the casino operators certainly recognize that the Act bas always envisioned that the gaming industry would provide the funds necessary for the Department, the Board, the PSP and the OAG to engage in their regulatory duties, it is equally well-established that the costs and expenses passed on to the casino operators for payment must be both actual and reasonable. ~ e.g. Section 1202.2(a) of the Act. Otherwise, these costs and expenses that the casino operators are required to pay become, in part, an impermissible tax that has not been legally authorized.

Given the dramatic 33.3% increase in the Section 1401 Account assessment percentage that the Department seeks to unilaterally impose, the casino operators have no confidence that the regulatory costs and expenses identified for Section 1401 Account reimbursement are indeed both actual and reasonable. Therefore, prior to the Department moving forward with any increase in the Section 1401 Account assessment percentage, the casino operators request that they be provided with the following information and that the following action be taken:

1. lnfonnation Request: For Commonwealth Fiscal Years 2016-2017, 2015-2016, 2014-2015, 2013-2014, 2012-2013 and 2011-2012, we request copies of the itemized budgets submitted by the Department, the Board, the PSP and the OAG to the Senate and/or House Appropriations Committee Chairs as required under Section 1402.l(a) ofthe Act;

2. Infounation Request: For Commonwealth Fiscal Years 2016-2017, 2015-2016, 2014-2015, 2013-2014, 2012-2013 and 2011-2012, we request copies of the analyses and recommendation prepared by the Board in accordance with Section 1402.1 (b) of the Act;

3. lnfonnatiop Request: For Commonwealth Fiscal Years 2016-2017, 2015-2016, 2014-2015, 2013-2014, 2012-2013 and 2011-2012, we request that each casino operator be provided with a detailed accounting of all transfers made from its Section 1401 Account, including, but not limited to the costs and/or expenses associated with each such deduction;

(f} Appropriations solely from assessments.-Beginning in fiscal year 2010.2011 and each fiscal year thereafter, all funds for the operation of the Pennsylvania State Police. the Department of Revenue and the Attorney General shall be appropriated solely from an assessment on gross terminal revenue from accounts under 4 Pa.C.S. § 1401 (relating to slot machine licensee deposits) in an amount equal to that appropriated by the General Assembly for that fiscal year. The Pennsylvania State Police, Department of Revenue or Attorney General shall not assess any charge, fee, cost ofoperations or other payment from a licensed gaming entity in excess of amounts appropriated in any such fiscal year unless specifically authorized by law. The Honorable Eileen H. McNulty Secretary of Revenue April 28, 2016 Pages

4. lnfonnatiop Reguest: For Commonwealth Fiscal Years 2016-2017, 2015-2016, 2014-2015, 2013-2014, 2012-2013 and 2011-2012, we request that each casino operator be provided with a detailed accounting of any surplus existing in its Section 1401 Account at the end of any Fiscal Year Quarter;

5. lnfonnation Reguest: With respect to the OAO, Section 1517(c.l) of the Act mandates that the Attorney General shall establish a "gaming unit" to investigate and institute criminal proceedings related to illegal gambling. A review of the most recent Commonwealth Telephone Directory prepared by the Department of General Services (February 2016) appears to indicate that the OAG no longer maintains a formal gaming unit as is required under the Acl If this correct, please confirm the date on which the unit was discontinued, and explain how any OAG costs and expenses are legally paid out of the Section 1401 Account(s). If this is not correc~ please provide the number of OAG employees whose salary and benefits are paid out of the Section 1401 Accounts, along with an indication of what percentage of their time is spent working on illegal gambling and other gaming related matters.

6. lnfonnation Reouest: For Fiscal Years 2014-2015 and 2015-2016, the Department's Gaming Fund Appropriation was $9,513,000. That amount was again requested (but not yet approved) for Fiscal Year 2016-2017. We note that the Department has entered into a contract with GTECH Corporation for the operation and maintenance of the Central Control Computer System ("CCCS") relating to slot machine gaming. It is a five (5) year contract commencing on August l, 2014 and ending on August l, 2019, with a total Base Term price of $18,679,617 or $3,735,923 per year (subject to potential cost reductions if the number of connected slot machines is lower than projected). We acknowledge and agree that the Department's actual and reasonable CCCS costs are appropriately reimbursed from our respective Section 1401 Accounts. Nonetheless, an annual CCCS expense of $3,735,923 requires that the Department have additional gaming-related regulatory expenses of $5,777,077 annually. Please provide itemized budget information that establishes that the additional costs and expenses ofSS,777,077 are appropriately charged to our Section 1401 accounts.

7. lnfonnation Request: With respect to the PSP, we seek detailed information explaining the basis and rationale for PSP1s Gaming Fund Appropriation to rise from $22,995,000 in Fiscal Year 2014-2015 to $28,491,000 in Fiscal Year 2016-2017, an increase of $5,496,000 or nearly 24%.2 We specifically seek infonnation regarding the total number of

2 The PSP appropriation request is even more disconcerting when one considers that in Fiscal Year 2006-2007 the PSP appropriation was approximately $7 million, more than half of which it actually transferred to the Board for its expenses. Even after considering its full appropriation in that Fiscal Year, PSP's requested Gaming Fund Appropriation for2016-2017 represents an increase of307% over a ten-year period. The Honorable Eileen H. McNulty Secretary of Revenue April 28, 2016 Page6

Troopers and non-uniformed PSP personnel assigned to the PSP Bureau of Gaming Enforcement, including the ranks of the assigned Troopers and their respective years of service. Based on the staffing patterns we have observed at our respective casino facilities, we believe that PSP has assigned eleven (11) troopers to each location. This equates to 132 Troopers in total, at an annual cost of $215,840 per Trooper (based on the 2016-2017 PSP Gaming Fund appropriation request).

8. lnfoanation Request: For the Department, the Board, the PSP and the OAG, please provide the agency-wide average per-employee cost for salary and benefits. For the PSP, please provide such information for both uniformed (swam) and non-uniformed persoIUJel.

9. Actjop Reauest; Pennsylvania holds the distinction of having one of the most expensive gaming regulatory cost structures in the country.3 This fact alone warrants an open and full dialogue before such a drastic increase is even considered, much less announced by fiat. Within ten (10) days of this letter, we request that the Department commence a meeting of all appropriate stakeholders - including the casino operators - to discuss these matters in detail and develop an appropriate way forward. 4

In concluding this correspondence, we once again note that the unprecedented success of Pennsylvania's gaming industry over the last decade has been built on an effective partnership between the Commonwealth and its casino operators. The benefits of this partnership to the Commonwealth's citizens could not be more direct. As you are aware from your time as the Board's Chief Financial Officer, the Commonwealth maintains one of the highest gaming tax structures in the nation, and receives 55% ofGTR. and 14% of GTGR to fund property tax relief, economic development initiatives, local share and other programs. The Department's swpriset unilateral determination to increase regulatory costs and expenses by 33% is a regrettable departure from that history of partnership that must be reversed.

3 ~ May 2014 Econsult Solutions Report: "The Current Condition and Future Viability of Casino Gaming in Pennsylvania," commissioned by the Legislative Budget and Finance Committee, pages I 16-1 I 7.

4 Given the Wolf Administradon's pledge to conduct the affairs ofgovernment with opeMCSS and ttanspareocy, we assume that the requested documentation I infonoation will be provided without the need to engage in the fonoal Right-to-Know process. This is particularly important given the Jtme 30, 2016 deadline for enactment of the Fiscal Year 2016-2017 Budget. Out of an abundance of caution, however, fonnal Right-to-Know requests will be submitted to each of the Section 1401 Account funded agencies in coordination with this letter. But again, in the interests of fairness, timeliness and efficiency, it is our hope that such needless formality can be avoided. The Honorable Eileen H. McNulty Secretary of Revenue April 28, 2016 Page7

Thank you for your attention to and consideration of these important issues. We look folW81'd to your reply.

Sincerely,

Michael Bean Tony Ricci President CEO Mohegan Sun Pocono Pan Casino

Ron Baumann Jeff Favre VP & General Manager VP & General Manager Harrah's Philadelphia Casino and Racetrack Presque Isle Downs & Casino

Sean Sullivan John Culetsu VP & General Manager EVP & General Manager Meadows Racetrack & Cuino Mount Airy Casino Resort

Frank Quigley Marlc Juliano General Manager President Hollywood Casino at Penn National Race Course Sands Casino Resort

Craig Clark Wendy Hamilton General Manager General Manager Rivers Casino SugarHouse Casino

JimRigot Richard Laudon President & CEO VP & General Manager Valley Forge Casino Resort Lady Luck Casino Nemacolin The Honorable Eileen H. McNulty Secretary ofRevenue April 28, 2016 Page8

Copies to:

Governor Tom Wolf Mary Isenhour, Chief of Staff to the Governor Will Danowski, Secretary of Legislative Affairs Senator Joseph B. Scarnati, ill, Senate President Pro Tempore Senator Jake Corman, Majority Leader Senator Jay Costa, Minority Leader Senator Patrick Browne, Majority Chair, Appropriations Committee Senator Vincent Hughes, Minority Chair, Appropriations Committee Senator Kim L. Ward, Majority Chair, CERD Committee Senator Larry Farnese, Minority Chair, CERD Committee Repre~entative Mike Turzai, Speaker ofthe House Representative Dave Reed, Majority Leader Representative Frank Dermody, Minority Leader Representative William Adolph, Majority Chair, Appropriations Committee Representative Joseph Markosek, Minority Chair, Appropriations Committee Representative John Payne, Majority Chair, Gaming Oversight Committee Representative Nick Kotik, Minority Chair, Gaming Oversight Committee David M. Barasch, Esquire, Chairman, Pennsylvania Gaming Control Board Kevin F. O'Toole, Executive Director, Pennsylvania Gaming Control Board R. Douglas Sherman, Esquire, Chief Counsel, Pennsylvania Gaming Control Board Colonel Tyree C. Blocker, Commissioner, Pennsylvania State Police Kathleen G. Kane, Attorney General, Office ofAttorney General

Attachment COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF REVENUE HARRISBURG, PENNSYLVANIA 17128-1100 THE SECRETARY (717) 783-3880

March 31, 2016

Dear

We are writing to inform you that the 1.5% assessment for S~tion 140 l account will be raised to 2.0%1. This increased rate will be effective July 1, 2016 for the week ending July 10, 2016 administrative fees billing on July 12, 2016.

The 2.0% assessment rate is to fully fund fiscal year 16/17 appropriations from the Section 1401 accounts. The increase is necessary due to cost increases such as benefit, pension, and contractual salary increases. The assessment rate is subject to future review and adjustment.

If you have any questions regarding this matter, please contact Jenn Heckert, Acting Gaming Office Director, Department of Revenue, at (717) 346-4004 or [email protected].

Sincerely, ~~LJL Eileen H. McNulty 0- Secretary ofRevenue lle.\WN\t PeJ\;.). TABLE OF CONTEN'l'S -, TITLE 4 AMUSEMENTS

PART II . GAMING Chapter 11. Genera1 Provisions

§ 1101. Short title of part. § 1102. Legislative intent. § 1103. Definitions. Chapter 12. Pennsylvania Gaming Control Boa.rd

§ 1201. Pennsylvania Gaming Control Board established. § 1201.1. Applicability of other statutes. § 1202. General and specific powers . § 1202.1 . Code of conduct. § 1202.2. Expenses of regulatory agencies. § 1203. Temporary regulations. § 1204. Licensed gaming entity application appeals from board. § 1205. License or permit application hearing process; public input hearings. § 1206. Board minutes and records. § 1207. Regulatory authority of board. § 1208. Collection of fees and fines. § 1209. Slot machine license fee. § 1210. Number of slot machines. § 1211. Reports of board. § 1212. Diversity goals of board. § 1213. License or permit prohibition. § 1214. Specific authority to suspend slot machine license. Chapter.13. Licensees

§ 1301. Authorized slot machine licenses. § 1302. Category 1 slot machine license. § 1303. Additional Category 1 slot machine license requirements. § 1304. Category 2 slot machine license. § 1305. Category 3 slot machine license. § 1306. Order of initial license issuance. § 1307. Number of slot machine licenses. § 1308. Applications for license or permit. § 1309. Slot machine license application. § 1310. Slot machine license application character requirements. § 1311. Additional slot machine license requirements. § 1311.1. Licensing of principals. § 1311.2. Licensing of key employees. § 1312. Divestiture of disqualifying applicant. § 1313. Slot machine license application financial fitness requirements. § 1314. Alternative Category 1 licensing standards. § 1315. Conditional Category 1 licenses. § 1316. Bond for issuance of slot machine license. § 1317. Supplier licenses. § 1317.1. Manufacturer licenses. § 1317.2. Gaming service provider. § 1318. Occupation permit application. § 1319. Alternative manufacturer licensing standards. House of Representatives and the chairman and minority chairman of the Gaming Oversight Committee of the House of Representatives. (5) All counties and municipalities receiving distributions of local share assessments under this section shall submit an annual report to the Department of Community and Economic Development on a form prepared by the Department of Community and Economic Development that sets forth the amount and use of the funds received for the prior calendar year. The report shall set forth whether the funds received were deposited into the county•s or municipality's general fund or committed to a specific project or use. The report shall be submitted by August 31, 2010, and by August 31 of each year thereafter. (f) De£initions.--As used in this section, the following words and phrases shall have the meanings given to them in this subsection: "Community college." The term shall have the meaning ascribed to it in section 1901-A(4) of the act of March 10, 1949 (P.L.30, No.14), known as the Public School Code of 1949. "Local share assessment." Two percent of a certificate holder's daily gross table game revenue. Cross References. Section 13A63 is referred to in section 13A62 of this title.

CHAPTER 14 REVENUES Sec. 1401. Slot machine licensee deposits. 1402. Gross terminal revenue deductions. 1402.1. Itemized budget reporting. 1403. Establishment of State Gaming Fund and net slot machine revenue distribution. 1404. Distributions from licensee's revenue receipts. 1405. Pennsylvania Race Horse Development Fund. 1406. Distributions from Pennsylvania Race Horse Development Fund. 1407. Pennsylvania Gaming Economic Development and Tourism Fund. 1406. Transfers from State Gaming Fund. 1409. Property Tax Relief Fund. Enactment. Chapter 1 was added July 5, 2004, P.L.572, No.71, effective immediately. 5 - 1•0~. Slot macbin• licensee deposits. (a) Account eatablished.--There is established within the State Treasury an account for each slot machine licensee for the deposit of sums under this section. (b) rnitial dapoait of funds.--Not later than two business days prior to the commencement of slot machine operations by a slot machine licensee, a slot machine licensee shall deposit and maintain the following sums in its account to guarantee the payment of funds to the Commonwealth under this part and as security for its obligations under section 1405 (relating to Pennsylvania Race Horse Development Fund): (1) For a Category 1 or Category 2 slot machine licensee, $1,500,000. (2) For a Category 3 slot machine licensee, $1,000,000. No additional minimum deposit shall be required from a slot machine licensee if a slot machine licensee is granted a table game operation certificate under Chapter 13A (relating to table games). (c) Weekly depo•its.--Each slot machine licensee shall deposit funds into its account on a weekly basis equal to the amounts deducted by the department under section 1402 (relating to gross terminal revenue deductions) and for reimbursement of any funds expended due to the slot machine licensee's failure to comply with its obligations under section 1405. The department shall notify each licensee of the amounts deducted. If at any time the amount held in the account attributable to a slot machine licensee is not sufficient to make the payments required of the licensee under section 1402 and for reimbursement of any funds expended due to the slot machine licensee's failure to comply with its obligations under section 1405, the department shall notify the slot machine licensee, and the slot machine licensee shall immediately deposit necessary funds into the account as directed by the department. (d) Return of funds.--The funds deposited into its account shall not be returned to a slot machine licensee unless the slot machine licensee ceases conducting business under its license and relinquishes all rights to do so in the future. In that case, the balance of funds in the account attributable to such licensee, minus any unpaid amounts due and payable to the Commonwealth under this part or due and payable under section 1405, shall be returned to the licensee. (Jan. 7, 2010, P.L.l, No.l, eff. imd.) 2010 Amendment. Act 1 amended subsec. (b). See section 19.1 of Act 1 in the appendix to this title for special provisions relating to payments to Category 1 and Category 2 slot machine licensees. Cross References. Section 1401 is referred to in sections 1402, 1402.l of this title. § 1402. Gross terminai revenue deductions. (a) Deductiona.--After determining the appropriate assessments for each slot machine licensee, the department shall determine costs, expenses or payments from each account established under section 1401 (relating to slot machine licensee deposits) . The following costs and expenses shall be transferred to the appropriate agency upon appropriation by the General Assembly: (1) The costs and expenses to be incurred by the department in administering this part at each slot machine licensee's licensed facility based upon a budget submitted by the department under section 1402.1 (relating to itemized budget reporting) . (2) The other costs and expenses to be incurred by the department in administering this part based upon a budget submitted by the department under section 1402.1. (3) Sums necessary to repay any loans made by the General Fund to the department in connection with carrying out its responsibilities under this part, including the costs of the initial acquisition of the central control computer and any accessories or associated equipment. (4) The costs and expenses to be incurred by the Pennsylvania State Police and the Office of Attorney General and not otherwise reimbursed under this part in carrying out their respective responsibilities under this part based upon budgets submitted by the Pennsylvania State Police and the Attorney General under section 1402.1.