Gretchen Whitmer dislikes the Michigan online poker bill for the same reason Rick Snyder did: it takes money out of the School Aid Fund.
Michigan Governor Gretchen Whitmer said Rep. Brandt Iden’s online gambling bill needs some work. Brandt Iden chairs the House Ways and Means Committee, which discussed a package of 8 separate bills at a House hearing on Thursday. HB 4926, Iden’s longstanding online gambling bill, was one of the eight bills discussed.
According to several Whitmer administration aides who testified, the governor would veto HB 4926 if it reached her desk at the moment. Given the testimony, the legal Michigan online poker and casinos sites are further from passage than they were last year at this time.
That’s discouraging, because Brandt Iden passed HB 4926 in the House by a wide margin in December 2018. The bill passed in the Michigan Senate, only to be vetoed on December 28 by departing Gov. Rick Snyder. Snyder said online casinos and poker sites could undermine lottery sales, so he vetoed the package.
Now it appears HB 4926 faces even tougher headwinds than in 2018. Brandt Iden, a Republican from Kalamazoo, needed to get his bill passed a GOP governor. Now he faces a governor from the other party.
Bethany Wicksall’s Testimony
The new administration’s arguments sound like the Snyder’s complaints. Bethany Wicksall, who works for the State Budget Office, said Gov. Whitmer fears the state’s gaming tax revenues will decline if the bill passes.
Wicksall said, “Our main concern, obviously, is the potential reduction in state revenue. As the bill is written — given the tax rate, the distribution of the additional new online gaming revenue to the state, as well as the potential impact to the state lottery — even under an optimistic scenario, Treasury estimates that there would be a potential reduction in overall state revenue.”
Michigan School Aid Fund a Concern
Chief Deputy Treasurer Jeff Guilfoyle said the School Aid Fund (SAF) is the main concern. Michigan is one of six states that have online lottery ticket sales. Guilfoyle believes online casinos and card rooms naturally compete against online lottery ticket sales. If the state legalizes online casinos, then online lotto sales could decline.
Guilfoyle stated, “It is iLottery that we think would be in most direct competition with iGaming. That substitution between iLottery and iGaming, even at a very small level, has a fairly significant impact on state revenue.”
Not Enough Tax Revenues for SAF
Michigan collected $70 million from the lottery for SAF funds last year. The state would collect 10% of online casinos revenues, but only 5% would go to the SAF. The chief deputy treasurer said that’s the problem. Guilfoyle added, “Because the tax rate is so much lower, the state actually comes out behind.”
Given the opposition, Brandt Iden must find a way to channel more gaming tax revenues to the School Aid Fund. The problem is, if the funds don’t exist in online gambling to fund SAF, then no amount of tinkering will work.
Guilfoyle noted that the taxation levels stack the deck against online casinos and poker sites. According to the budget official, if it wants to replace the SAF revenues, the state would have to generate $174 in online casino/poker funds for every $1 generated by the state lottery. That won’t happen, so a new system must be found.
House Bill 4926
Those who support HB 4926 argue that online casinos and poker sites will not cannibalize the online lottery sales. They note that lotto players don’t overlap with online casino players — and certainly don’t overlap with card players.
That might be the case, but it doesn’t matter if it’s the talking points of the Whitmer administration. Because Rick Snyder also used the same argument, Whitmer’s officials can cite the same statistics.
What’s worse, the fact both administration use the same talking points show they are the consensus. Backers of the lottery have convinced political appointees that iGaming sales undermine lottery sales. To meet the challenge, Brandt Iden must find a way to raise more SAF funds from online gambling.
