COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES APPROPRIATIONS COMMITTEE BUDGET HEARING GAMING CONTROL BOARD STATE CAPITOL HARRISBURG, PENNSYLVANIA ROOM 140, MAJORITY CAUCUS ROOM WEDNESDAY, FEBRUARY 27, 2019 10:00 A.M. BEFORE: HONORABLE STANLEY SAYLOR, MAJORITY CHAIRMAN HONORABLE MATT BRADFORD, MINORITY CHAIRMAN MAJORITY MEMBERS PRESENT: HONORABLE ROSEMARY BROWN HONORABLE LYNDA SCHLEGEL-CULVER HONORABLE SHERYL DELOZIER HONORABLE GEORGE DUNBAR HONORABLE JONATHAN FRITZ HONORABLE MATT GABLER HONORABLE KEITH GREINER HONORABLE SETH GROVE HONORABLE MARCIA HAHN HONORABLE DOYLE HEFFLEY HONORABLE LEE JAMES HONORABLE FRED KELLER HONORABLE JOHN LAWRENCE HONORABLE JASON ORTITAY HONORABLE CLINT OWLETT HONORABLE CHRIS QUINN HONORABLE JAMES STRUZZI HONORABLE JESSE TOPPER HONORABLE RYAN WARNER HONORABLE MARTINA WHITE Pennsylvania House of Representatives Commonwealth of Pennsylvania 2 1 MINORITY MEMBERS PRESENT: 2 HONORABLE DONNA BULLOCK HONORABLE MORGAN CEPHAS 3 HONORABLE CAROLYN COMITTA HONORABLE AUSTIN DAVIS 4 HONORABLE MARIA DONATUCCI HONORABLE ELIZABETH FIEDLER 5 HONORABLE MARTY FLYNN HONORABLE EDWARD GAINEY 6 HONORABLE PATTY KIM HONORABLE STEPHEN KINSEY 7 HONORABLE LEANNE KRUEGER HONORABLE STEPHEN MCCARTER 8 HONORABLE BENJAMIN SANCHEZ HONORABLE PETER SCHWEYER 9 10 NON-COMMITTEE MAJORITY MEMBERS PRESENT: 11 HONORABLE DAVE MILLARD HONORABLE SUE HELM 12 HONORABLE MARK KELLER HONORABLE DAN MOUL 13 HONORABLE TIM O'NEAL HONORABLE MATT DOWLING 14 HONORABLE FRANK RYAN HONORABLE CRAIG STAATS 15 HONORABLE BARRY JOZWIAK HONORABLE JEFF PYLE 16 NON-COMMITTEE MINORITY MEMBERS PRESENT: 17 HONORABLE SCOTT CONKLIN 18 HONORABLE TOM CALTAGIRONE HONORABLE MALCOLM KENYATTA 19 HONORABLE BRIAN SIMS HONORABLE DAN FRANKEL 20 HONORABLE DAN DEASY HONORABLE MARY ISAACSON 21 22 23 24 25 3 1 COMMITTEE STAFF PRESENT: 2 DAVID DONLEY REPUBLICAN EXECUTIVE DIRECTOR 3 RITCHIE LAFAVER REPUBLICAN DEPUTY EXECUTIVE DIRECTOR 4 MIRIAM FOX 5 DEMOCRATIC EXECUTIVE DIRECTOR TARA TREES 6 DEMOCRATIC CHIEF COUNSEL 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4 1 I N D E X 2 TESTIFIERS 3 * * * 4 NAME PAGE 5 KEVIN O'TOOLE 6 EXECUTIVE DIRECTOR, GAMING CONTROL BOARD.......................6 7 R. DOUGLAS SHERMAN 8 CHIEF COUNSEL, GAMING CONTROL BOARD.......................7 9 DANTE SANTONI 10 COMMISSIONER, GAMING CONTROL BOARD........................ 11 DAVID M. BARASCH 12 CHAIRMAN, GAMING CONTROL BOARD........................ 13 14 15 SUBMITTED WRITTEN TESTIMONY 16 * * * 17 (See submitted written testimony and handouts 18 online.) 19 20 21 22 23 24 25 5 1 P R O C E E D I N G S 2 * * * 3 MAJORITY CHAIRMAN SAYLOR: We'll call the 4 Appropriations Committee to order. And we've 5 been joined this morning by: the Chairman of the 6 Gaming Control Board, David Barasch, Commissioner 7 Santoni, and also Commissioner Manderino, who is 8 over there -- she's not sitting at the table -- 9 Kevin O'Toole, who is the Executive Director of 10 the Gaming Control Board, and Douglas Sherman, 11 who is Chief Counsel of the Gaming Control Board. 12 If those that are going to provide 13 testimony would rise and raise their right hands. 14 * * * 15 (Testifiers sworn en masse.) 16 * * * 17 MAJORITY CHAIRMAN SAYLOR: Thank you. 18 We'll start off with our first questioner 19 of the day, and that's Representative Dunbar. 20 REPRESENTATIVE DUNBAR: Thank you, 21 Mr. Chairman. Good morning, everyone. 22 I am standing in for our new Chairman of 23 the Gaming Oversight Committee, Chairman 24 Marshall, who was unable to come in today, but he 25 did want me to ask a few questions in regards to 6 1 the Department of Justice's recent ruling in 2 regards to the Wire Act. 3 Have you -- based upon that ruling, have 4 you had any feedback from Pennsylvania's casinos 5 about whether that can potentially impede online 6 gambling in any way? 7 EXECUTIVE DIRECTOR O'TOOLE: Yes, 8 Representative. As soon as that reinterpretation 9 of the Wire Act occurred, with the help of our 10 Office of Chief Counsel, we prepared a letter and 11 we sent it to all of the general managers and 12 their counsel. And what we wanted to accomplish 13 in that letter was to make sure that the casinos 14 thoroughly read that reinterpretation and looked 15 very closely at their plan for implementing 16 interactive gaming in Pennsylvania. 17 There had been an expectation that those 18 iGaming operators who were partnering with our 19 casinos in Pennsylvania, if they already had 20 infrastructure in another jurisdiction, that they 21 could leverage that to reduce the cost of 22 implementing iGaming. But with that 23 reinterpretation, it became quite obvious that 24 everything had to be on an interstate basis, and 25 that would probably be the biggest challenge -- 7 1 not so much of a challenge, but a modest delay -- 2 to establish an adequate server location within 3 the Commonwealth of Pennsylvania. 4 We did ask each casino to respond and 5 provide us with a plan for how they would comply 6 with Federal law, which is their obligation. We 7 have begun to receive replies, and we're 8 analyzing them at the present time. 9 REPRESENTATIVE DUNBAR: And I know the 10 original issues with the UIGEA Act and everything 11 like that dealt with wire transfers of money. 12 Is there any concern about banks not 13 handling transactions for online gaming? 14 EXECUTIVE DIRECTOR O'TOOLE: Well, there 15 is and our Chief Counsel has really studied the 16 issue closely. 17 CHIEF COUNSEL SHERMAN: We don't know, at 18 present, how the banks will respond, or the 19 payment processors, the Mastercards, the Visas, 20 as far as whether or not they will process those 21 transactions for online gaming concerns. I know 22 all of the operators are aware of that issue. 23 Prior to the 2011 interpretation of the Wire Act, 24 which said it only applied to sports, there was 25 difficulty in getting payments made. 8 1 We will really have to wait and see how 2 they respond, you know, I -- 3 REPRESENTATIVE DUNBAR: Has there been 4 any guidance from the DOJ on this at all? 5 CHIEF COUNSEL SHERMAN: Not yet. A day 6 or two after the reclarification came out from 7 the DOJ, they did issue, basically, a 90-day 8 moratorium letter for the U.S. Attorneys to 9 prevent them -- or asking them to refrain from 10 instituting any criminal proceedings. I think 11 it's during that time period -- again, the rumor 12 mill is that there will be some clarifications or 13 some guidance coming. We have not received it 14 yet. 15 REPRESENTATIVE DUNBAR: Any concerns 16 about the ability for that, as far as budgeting 17 concerns, at least as far as we are concerned, 18 that any casinos may want to pull back out, those 19 that have already paid for licensing fees? 20 CHIEF COUNSEL SHERMAN: We have not heard 21 that any will be pulling out, no. 22 REPRESENTATIVE DUNBAR: That's good. 23 CHIEF COUNSEL SHERMAN: I think they're 24 all examining their own operation to make sure 25 that it's an interstate operation and that they 9 1 can fulfill the goal of opening an online gaming 2 operation. 3 REPRESENTATIVE DUNBAR: And since I 4 segued into budgeting with that, in the 5 Governor's budget, he has projected revenues of 6 173 -- 173, close to 174 million dollars into our 7 General Fund from Gaming. 8 Do you have any idea of what the 9 breakdown of that is, or is that just from the 10 Governor's -- 11 CHIEF COUNSEL SHERMAN: I don't have that 12 with me today, but I could look into that. 13 REPRESENTATIVE DUNBAR: And I'm solely 14 speaking of General Fund dollars, which 15 eliminates slots because that's going into 16 property tax, but the dollars from table games 17 alone has been 130 million dollars, I think this 18 year is what is projected, and we're on pace for 19 that. And what I'm really getting to is what 20 we're expecting from sports wagering. 21 EXECUTIVE DIRECTOR O'TOOLE: Certainly. 22 Well, I could give you a little summary on that. 23 So far in this fiscal year, we have received 24 seven petitions for sports wagering certificates. 25 All seven have been approved. Five have 10 1 implemented sports wagering. It began in the 2 middle of November. 3 The authorization fee to obtain a 4 certificate is 10 million dollars. We have 5 received 60 million, and it's been deposited into 6 the Commonwealth's General Fund. One additional 7 10 million dollar payment is due shortly. I 8 don't know the exact due date. 9 REPRESENTATIVE DUNBAR: And I'm out of 10 time, so I don't want to belabor the fact, but I 11 would really appreciate if you could get to the 12 Chairman a general idea of what the expectations 13 are revenue-wise on the tax itself, seeing that 14 New Jersey is, I think the last I read, two and a 15 half million dollars they generated in tax in 16 November, and their tax rate is significantly 17 lower than ours. 18 And just extrapolating that, we can 19 almost assume if things go well here that we 20 could be up to five million dollars a month or 21 greater than that in tax revenue. Over the 22 course of a year, that will make our budget a 23 little bit easier to attain. So any information 24 you can give the Chairman on that will be greatly 25 appreciated.