Page 1 HOUSE OF REPRESENTATIVES COMMONWEALTH OF PENNSYLVANIA * * * * BUDGET HEARING PENNSYLVANIA GAMING CONTROL BOARD * * * * House Appropriations Committee Main Capitol Building Majority Caucus Room 140 Harrisburg, Pennsylvania Monday, March 4, 2013 - 4:00 p.m. 1300 Garrison Drive, York, PA 17404 717.764.7801 877.747.2760 Page 2 1 COMMITTEE MEMBERS PRESENT: 2 Honorable William Adolph, Jr., Majority Chairman Honorable Ryan Aument 3 Honorable Karen Boback Honorable Jim Christiana 4 Honorable Gary Day Honorable Gordon Denlinger 5 Honorable Brian Ellis Honorable Garth Everett 6 Honorable Mauree Gingrich Honorable Glen Grell 7 Honorable Seth Grove Honorable Thomas Killion 8 Honorable David Millard Honorable Mark Mustio 9 Honorable Donna Oberlander Honorable Bernie O ’Neill 10 Honorable Michael Peifer Honorable Scott Petri 11 Honorable Jeffrey Pyle Honorable Curtis Sonney 12 Honorable Joseph Markosek, Minority Chairman Honorable Matthew Bradford 13 Honorable Michelle Brownlee Honorable Michael Carroll 14 Honorable Scott Conklin Honorable Madeleine Dean 15 Honorable Deberah Kula Honorable Timothy Mahoney 16 Honorable Michael O ’Brien Honorable Cherelle Parker 17 Honorable John Sabatina Honorable Steve Santarsiero 18 Honorable Jake Wheatley, Jr. 19 REPUBLICAN NON-COMMITTEE MEMBERS PRESENT 20 Honorable Matthew Baker 21 Honorable Paul Clymer Honorable Becky Corbin 22 Honorable George Dunbar Honorable Harold English 23 Honorable Mark Gillen Honorable Susan Helm 24 Honorable Ryan Mackenzie Honorable Ronald Marsico 25 Page 3 1 REPUBLICAN NON-COMMITTEE MEMBERS PRESENT (CONT’D): 2 Honorable Tina Pickett Honorable Rick Saccone 3 Honorable Will Tallman Honorable Mike Regan 4 5 DEMOCRATIC NON-COMMITTEE MEMBERS PRESENT 6 Honorable Tim Briggs 7 Honorable Vanessa Lowery Brown Honorable Thomas Caltagirone 8 Honorable Dom Costa Honorable Pamela DeLissio 9 Honorable Steve McCarter Honorable Phyllis Mundy 10 Honorable Ed Neilson Honorable James Roebuck 11 Honorable Rosita Youngblood 12 13 STAFF MEMBERS PRESENT: 14 David Donley Republican Executive Director 15 Ritchie LaFaver 16 Republican Deputy Executive Director 17 Dan Clark, Esquire Republican Chief Legal Counsel 18 Miriam Fox 19 Democratic Executive Director 20 Beryl Kuhr, Esquire Democratic Chief Legal Counsel 21 22 23 24 25 Page 4 1 INDEX OF TESTIFIERS 2 TESTIFIERS PAGE 3 William Ryan, Jr., Chairman.............. 5 PA Gaming Control Board 4 5 Kevin O ’Toole, Executive Director....... 10 PA Gaming Control Board 6 7 8 9 10 INDEX OF REQUESTED DOCUMENTS OR INFORMATION 11 Page Line Page Line Page Line 12 57 8 - 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 5 1 CHAIRMAN ADOLPH: Thank you. I ’d like 2 to call to order the House Appropriations budget 3 hearing on the Pennsylvania Gaming Control 4 Board. With us today is Chairman Bill Ryan, as 5 well as Kevin O ’Toole, the executive director. 6 Gentlemen, thank you for being here today, and 7 the time is yours for some opening remarks. 8 MR. RYAN: Thank you, Mr. Chairman, 9 Chairman Markosek and members of the committee. 10 My remarks are brief. First of all, I ’m here 11 with Kevin O ’Toole, our executive director, and 12 also with us, seated behind us, are 13 Commissioners Keith McCall, Annmarie Kaiser and 14 John McNally. 15 The board is requesting from the 16 General Assembly a budget in the amount of 17 $38.908 million. That is an 810,000-dollar 18 increase. 2.2 percent is how it breaks down. 19 And 36,908 of that is for administration, as the 20 committee knows. Two million of it is for 21 statutorily-mandated local law enforcement 22 grants for the coming fiscal year. 23 I think the board can tell the General 24 Assembly and this committee that we have made 25 great strides in reducing our costs in the past Page 6 1 year. In calendar year 12, we were able to 2 reduce the complement of personnel in the agency 3 from 326 to 302. That was the standing 4 complement. We did that almost completely with 5 attrition; that is, when people left, retired or 6 took other positions, we were able to look at 7 the positions and decide that we didn’t need 8 those positions filled; that we could fill the 9 positions with people inside and consolidate. 10 We did, of course, have to add seven 11 people to our staff when Valley Forge Casino 12 opened in March of 2012, but the annualized 13 savings for the reduction in personnel amount to 14 about $1.1 million; just that alone. 15 In addition, we were able to get 16 better space for our operations in the City of 17 Pittsburgh. That will save us $107,000 a year 18 going forward. We also eliminated 11 vehicles, 19 saving $60,000 a year. We reduced our budget 20 for I.T. consultants by another $60,000 a year, 21 and we reduced the number of BlackBerrys and 22 cell phones by 25 percent, and that enabled us 23 to cut our costs by $24,000. 24 On the other side of the ledger, 25 obviously, we have to add seven more people. We Page 7 1 expect for the opening of Nemacolin Woodlands, 2 which we expect will open about July 10th, 2013. 3 We also have budgeted increases for pensions in 4 the amount of 45 percent; and health care costs, 5 about 11 and a half percent. We also have 6 mandated union pay raises we have to pay for. 7 So the bottom line is an increase of $810,000, 8 or 2.2 percent. 9 The board assures this committee and 10 the General Assembly and the Governor that we 11 will continue to be as efficient as we can. We 12 realize that you can only take this so far. We 13 need people. They're a valuable resource. At 14 some point, we're going to be at that right 15 number, but I think our strides just in the last 16 fiscal year and calendar year have been very, 17 very strong. 18 Mr. Chairman. 19 CHAIRMAN ADOLPH: Thank you. Thank 20 you very much. As is the custom with this 21 committee, we always invite the standing 22 chairman of the House committees. And with us 23 today is the Republican Chair of the Gaming 24 Oversight Committee, Tina Pickett, as well as 25 the Democratic Chair of the Gaming Oversight Page 8 1 Committee, Chairman Rosita Youngblood. We 2 welcome both the chairmen of that committee. 3 My question was mainly regarding some 4 of your cost controls over the years. 5 Obviously, gaming is a big industry now in 6 Pennsylvania, and I was wondering how you were 7 cutting costs as the industry increased. Okay? 8 I appreciate the brief explanation as far as 9 personnel. Any other ways that you were able to 10 decrease costs over the years as the industry 11 continued to grow? 12 MR. RYAN: Well, in the past, I think 13 we've gotten a better -- a better idea of what 14 an appropriate salary is for a particular 15 position, so -­ 16 Another thing we have done, and this 17 we started to do before I got on the board is, 18 when we hired people doing the same work to 19 replace people who had left, we took advantage 20 of surveys and studies in the past and hired 21 those people or placed those people in positions 22 at lower salaries. 23 That has also, I think, Mr. Chairman, 24 been a real benefit to the board, and it's also 25 made it more fair for all of our employees Page 9 1 across the board. W e ’re getting a salary 2 structure that fits more with the rest of the 3 state and also fits well within our own agency. 4 CHAIRMAN ADOLPH: One of — One of the 5 issues that came up during the Auditor General’s 6 budget hearing was that, they audited the Gaming 7 Board and that he felt that the Gaming Board or 8 the casinos should be paying for this audit and 9 not the taxpayers of Pennsylvania. Any insight 10 to that? 11 MR. RYAN: Well, the only thing I 12 think the board is concerned about, the industry 13 can certainly take care of themselves, although, 14 we all have an interest in keeping the industry 15 healthy and not seeing them as just a cashcow. 16 But, any expense that the General 17 Assembly and the Governor would see as necessary 18 to be taken out of the industry revenue, all we 19 would ask on the board is that it not be done at 20 the expense of the board, the Attorney General, 21 Department of Revenue and the state police. We 22 all have funding needs. 23 As I think I’ve described, we’ve tried 24 to become more efficient and keep our budget 25 low. And a move like this, which we all know Page 10 1 would not be cheap; the numbers I hear bantered 2 about are anywhere from 600,000, 700,000 up to 3 do an audit, that they be carefully placed. And 4 that everyone remember that our budget, which 5 does come a hundred percent from the industry; 6 not from the taxpayers at all, but that budget 7 is appropriated to us each year. And if we have 8 this expense all of a sudden in the middle of a 9 year, we have to give up something else, I would 10 have to assume, in order to meet that expense. 11 So, there may be funding in the 12 accounts for that.