1 COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES APPROPRIATIONS COMMITTEE BUDGET HEARING GAMING CONTROL BOARD STATE CAPITOL HARRISBURG, PENNSYLVANIA ROOM 140, MAJORITY CAUCUS ROOM THURSDAY, MARCH 12, 2015 9:30 A.M. BEFORE: HONORABLE WILLIAM ADOLPH, MAJORITY CHAIRMAN HONORABLE JOSEPH MARKOSEK, MINORITY CHAIRMAN HONORABLE KAREN BOBACK HONORABLE GARY DAY HONORABLE GEORGE DUNBAR HONORABLE KEITH GREINER HONORABLE GLEN GRELL HONORABLE SETH GROVE HONORABLE WARREN KAMPF HONORABLE FRED KELLER HONORABLE TOM KILLION HONORABLE JIM MARSHALL HONORABLE KURT MASSER HONORABLE DAVID MILLARD HONORABLE DUANE MILNE HONORABLE MIKE PEIFER HONORABLE JEFFREY PYLE HONORABLE MARGUERITE QUINN HONORABLE CURT SONNEY HONORABLE MIKE VEREB HONORABLE MATTHEW BRADFORD HONORABLE TIM BRIGGS HONORABLE MICHELLE BROWNLEE HONORABLE MIKE CARROLL HONORABLE SCOTT CONKLIN 2 1 HONORABLE MARY JO DALEY HONORABLE MADELEINE DEAN 2 HONORABLE MARIA DONATUCCI HONORABLE EDWARD GAINEY 3 HONORABLE JOHN GALLOWAY HONORABLE STEPHEN KINSEY 4 HONORABLE MICHAEL O'BRIEN 5 NON-COMMITTEE MEMBERS: 6 REPRESENTATIVE DARYL METCALFE REPRESENTATIVE MARK COHEN 7 REPRESENTATIVE PAM DELISSIO REPRESENTATIVE VANESSA LOWERY BROWN 8 9 COMMITTEE STAFF: 10 DAVID DONLEY, EXECUTIVE DIRECTOR (R) RITCHIE LAFAVER, DEPUTY EXECUTIVE DIRECTOR (R) 11 CURT SCHRODER, CHIEF COUNSEL MIRIAM FOX, EXECUTIVE DIRECTOR (D) 12 ANNE BALOGA, CHIEF COUNSEL (D) 13 14 TRACY L. MARKLE, COURT REPORTER/NOTARY PUBLIC 15 16 17 18 19 20 21 22 23 24 25 3 1 INDEX TO TESTIFIERS NAME PAGE 2 WILLIAM H. RYAN, JR, CHAIRMAN 5 3 GAMING CONTROL BOARD 4 KEVIN O'TOOLE, EXECUTIVE DIRECTOR 22 GAMING CONTROL BOARD 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4 1 ---oOo--- 2 MAJORITY CHAIRMAN ADOLPH: Thank you, and 3 good morning. I'd like to reconvene the House 4 Appropriations Budget Hearing. Today's hearing is on 5 the Pennsylvania Gaming Control Board. 6 As is customary, we'll just take a few 7 moments for introductions and some ground rules. I'd 8 ask everybody, including the committee members, to turn 9 off their iPhones and iPads and all that electronic 10 equipment. It interferes with the hearings. 11 My name is Bill Adolph. I'm the House 12 Republican Appropriations Chairman, and we'll take a 13 couple minutes to introduce the members of the Board, 14 starting to my right. 15 (INTRODUCTION OF MEMBERS.) 16 MAJORITY CHAIRMAN ADOLPH: Thank you. I'd 17 like to welcome the Pennsylvania Gaming Control Board. 18 Obviously, this Board, the members are very familiar. 19 They have distinguished careers in their own right, and 20 they have a very tough job that they deal with on a 21 daily basis. 22 And just for background, the Chairman of the 23 Board is a constituent of mine; so he's well represented 24 here in Harrisburg. But Bill Ryan was a former 25 District Attorney in Delaware County and served in the 5 1 Pennsylvania Attorney General's Office for many years, 2 and he's doing an outstanding job as the Chairman of 3 this Committee, as is the other members of this Board. 4 What we're here to talk about today is your 5 budget request, obviously; but what the members would 6 like to know and the viewers would like to know is the 7 state of our casinos, how they're doing. I always like 8 to know how much revenue they are putting into the 9 Pennsylvania economy, the number of jobs, the number of 10 taxes paid, okay, the big picture, which sometimes, you 11 know, you start picking apart one program versus the 12 other. 13 But this was a big step for Pennsylvania, 14 not too long ago, when gaming became legal in 15 Pennsylvania. And you have a law-enforcement part of 16 this and also overseeing the operation, so it's always 17 been a very interesting hearing. We'll see some 18 interesting questions from the Committee. 19 So without further ado, Bill, if you would 20 give us a brief update and then I'm going to turn it 21 over to Chairman Markosek for opening comments. 22 MR. RYAN: Thank you. Good morning, 23 Chairman Adolph, Chairman Markosek, and members of the 24 Committee. My name is Bill Ryan, Chairman of the Gaming 25 Control Board. 6 1 Joining me today is Kevin O'Toole, the 2 gentleman to my left. Kevin is our Executive Director. 3 Also with us today are my colleagues on the Board, or a 4 couple of them: John McNally, Keith McCall, Annmarie 5 Kaiser, and Dave Woods, who are seated in the room 6 behind me. 7 For fiscal year 2015-16, the Board's budget 8 request as recommended by the Governor is 39,900,000. 9 This represents an increase of $1.91 million or five 10 percent over our current fiscal year appropriation, with 11 the largest cost drivers being increases in pension 12 rates, which are up 24.6, and employee rates increasing 13 10.6 percent. 14 The Board's budget request includes $34.5 15 million for personnel and benefits and $5.4 million for 16 operating and fixed asset expenses. The PGCB has not 17 budgeted specifically for any new salary increases for 18 employees for fiscal year 2015-2016. 19 However, the Board has budgeted an 20 additional 1.125 percent plus associated benefits to 21 cover the full year cost of the 2.25 increase for union 22 employees that was implemented in January 2015 pursuant 23 to the Commonwealth's collective bargaining agreement. 24 The full-year cost of this increase is 25 approximately $400,000. However, only $200,000 needs to 7 1 be budgeted in '14-15 because the increase took effect 2 at mid-year; so an additional $200,000 is requested in 3 '15-16 to pay for the rest of that 12-month 4 bargained-for increase. 5 The personnel budget supports 310 positions, 6 down from 326 positions at the end of 2011, despite the 7 opening of two casinos since that time; and each of 8 those two casinos required that the Board staff them 9 with seven personnel, for a total of 14. 10 In spite of this reduction in staff, the 11 Board anticipates benefit costs being $6.2 million 12 higher compared to fiscal year 2010-2011. Put another 13 way, the cost of benefits in 2011 were about 40 percent 14 of salary. For the next fiscal year, they'll be 68 15 percent of salary. 16 While reducing complement has played a very 17 important role in keeping our budget increases to a 18 minimum, lower operating costs have also helped achieve 19 this goal. In fact, the Board anticipates that 20 operating costs for fiscal year 2015-16 will be at their 21 lowest levels since fiscal year 2005-2006. 22 As you know, the operations of the Board are 23 not funded by general tax revenue. In fact, the Board's 24 budget is funded from assessments on the casino industry 25 required to be made pursuant to Section 1401 of the 8 1 Gaming Act and from fees and expenses billed to 2 applicants, licensees, and slot manufacturers. 3 That being said, the Board is very cognizant 4 of the need to regulate strictly but efficiently; and 5 our fiscal year '15-16 budget request reflects that 6 commitment. 7 We have provided the Committee with a 8 handout containing additional information on our budget 9 request, how Pennsylvania has benefitted from the gaming 10 industry and historical casino gaming revenue and tax 11 revenue on a fiscal-year basis. 12 Finally, as I realize that the Committee may 13 be interested in how Pennsylvania fared on a 14 calendar-year/over-year basis, looking at calendar year 15 2014, combined gaming revenue dropped to 1.44 percent 16 from 2013, but still marked the fourth straight year in 17 which the revenue figure topped $3 billion. 18 Slot machine gaming revenue for the 2014 19 calendar year remained above $2.3 billion but dropped 20 2.8 percent below calendar year 2013. In 2014, gross 21 table games revenue continued to increase and reported a 22 gain of 2.7 percent above 2013 revenues. 23 Tax revenue in 2014 from the combined play 24 of slot machines and table games was over $1.3 billion. 25 Pennsylvania continues to bring in more tax revenue than 9 1 any other state, annually funding important items such 2 as property tax relief and the Pennsylvania Volunteer 3 Fire Company Grant Program. 4 Thank you for allowing me to provide this 5 testimony. We appreciate the Committee's consideration 6 of our budget request. Kevin and I would be happy to 7 answer any questions you have. 8 MAJORITY CHAIRMAN ADOLPH: Thank you, 9 Chairman Ryan. Chairman Markosek. 10 MINORITY CHAIRMAN MARKOSEK: Thank you, 11 Chairman Adolph. Chairman Ryan, welcome. Welcome, 12 Mr. O'Toole, the Executive Director. I want to welcome 13 you and your other board members who are here today. 14 The members of the Appropriations Committee 15 know how much in high regard I consider not only the 16 current members of the House of Representatives but 17 former members of the House of Representatives, and I'd 18 be remiss without recognizing one who's before us today, 19 a good friend of mine who got elected the same year I 20 did back in 1982 and became Speaker of the House, Keith 21 McCall, who's here as well today; and I want, certainly, 22 the current members of the House to understand how 23 important and how great it is to be a member of the 24 House of Representatives.