Jerry Kopel

New bill would rob State Historical Society of promised gambling revenues

Feb. 15, 2009


BY Jerry Kopel

HB 1272 is an anti-State Historical Society and pro-Community College measure, as was its parent, Amendment 50 on the November, 2008 ballot. Chief bill sponsors are Rep. Tom Massey (R) Poncho Springs and Sen. Abel Tapia (D) Pueblo.

The issue: How to divide up tax revenues obtained under two constitutional amendments. The first is the casino Limited Gaming Act of 1990 with a maximum bet of $5. The second is the Limited Gaming Act revision of 2008. The revisions allow 24 hours gambling, adds craps and roulette, and maximum bets of $100.

Both versions use "78 percent" in describing where the major funding goes. From the 1990 version, the general revenue fund gets 50 percent, and the Historical Society gets 28 percent. From the 2008 version, community colleges get 78 percent.

If this is (presently) a "compromise" bill, the Historical Society board ought to resign en masse. The board took "no position" in support or opposition on the 2008 amendment even though to anyone with a fifth grade education it clearly cut the Historical Society funding.

But legislators ought to be concerned about a larger loss to the general revenue fund protected by the original 1990 casino language.

The tax money received is presently set at 20 percent of the casino gaming profit.

Contention revolves around interpreting a new subsection (7) where the 24 hour day, craps and roulette and $100 maximum bets take effect July 1, 2009. The language includes the following:

"(c) from gaming tax revenues attributable to the operation of this subsection (7), the treasurer shall pay:

(ii) Annual adjustments in connection with distribution to limited funding recipients in subsection (5) (b) (II) of this section [Kopel: That's the 1990 version which includes 50 percent to general revenue] to reflect the lesser of six percent of, or the actual percentage of annual growth in gaming tax revenue attributable to this subsection (7)..."

That seems to say as to money that comes in as additional tax revenue due to increased hours, maximum bets and new games, six percent is the most the 1990 group gets. In other words, (7) eats up all the money, from the first penny, and not just from $5.01 upwards.

Assume during the 2009-10 fiscal year, that there is a quarter billion dollars in gross profits attributable to more hours, games and maximum limits. That would produce $50 million in gaming taxes based on the 20 percent tax presently in place

HB 1272, as written, would give six percent of the $50 million to beneficiaries of the language passed in 1990, or $3 million. Fifty percent of that ($1.5 million) would go to general revenue, and $840,000 (28 percent) would go to the Historical Society.

Those sums would be placed on top of the money received by 1990 beneficiaries from the gaming tax revenue in the 2008-09 fiscal year, and that would then be the new total to use as a base for the fiscal year 2010-11.

The Historical Society should claim against all the first $5 being bet from both 1990 and 2008 versions, plus a maximum of six percent on the rest of the new funds (over $5) coming in from the 2008 revision.

At least, that's how I interpret a Denver Post comment by Colorado Preservation Inc. president Dan Love. "We expect to receive revenue as if Amendment 50 hadn't been passed."

In my opinion, the same drafter of the 2008 amendment, has also drafted language in HB 1272 that expands what the citizens voted on. It states:

"Annual growth in extended limited gaming tax revenue means the simple year-to-year change in the amount of revenue from extended limited gaming between each current fiscal year and the immediately preceding fiscal year.

The annual adjustment shall be applied only to the annual growth in extended limited gaming tax revenue and shall not be subject to compounding or accumulation."

The wording "not subject to compounding or accumulation" is not in the constitutional amendment. It appears only in HB 1272. It means the first growth in tax revenue for fiscal year 2009-10 (which I estimated at $50 million) is NOT available in future year calculations.

Suppose during fiscal year 2010-11 there is another increase of $10 million in tax revenue beyond the $50 million growth that happened in 2009-10. General revenue and Historical Society won't get a six percent shot at $60 million (50 plus 10). They would be limited to six percent of the $10 million, meaning $300,000 for general revenue and $168,000 for Historical Society.

The first fiscal year involved is the one ending June 30, 2009, which is the fiscal year when casino revenues subject to taxation has dropped considerably.

So the "ratchet effect" criticized in the (Doug Bruce) TABOR constitutional language would be adopted by HB 1272 for the benefit of casino operators

How do the new funds from casino profit affect general revenue funds for community colleges?

The legislature must provide sufficient funds for appropriations for the fiscal year. The 2008 casino amendment did not provide a "floor" on top of which other funds can accumulate. Example: education under Article 9, Section 17: "the statewide base...for public education funding...shall grow annually at a rate set by the general assembly..."

To get around the lack of a floor, HB 1272, under subsection (e) ties any percentage reduction for community colleges to no more than the same percentage reduction in funding for any other state-funded higher education institution during the same fiscal year.

Even if that language remains in the bill, a statute cannot override the legislative duty to fully fund the fiscal year appropriation. The legislature can ignore the statute and reduce the community college general revenue funding by the amount the colleges will be receiving from casino tax funds.

Two members of the Joint Budget Committee are on HB 1272, Sen. Tapia as chief Senate sponsor and Rep. Jack Pommer (D) Boulder, vice chairman of the JBC as a co-sponsor.

Will the University of Colorado bring pressure on Rep. Pommer to transfer to CU general revenue funds scheduled for community colleges, when the end result would still leave community colleges who receive casino tax funds, at the same level as presently budgeted?

Regulations assisting the general revenue and Historical Society funding:

The Gaming Commission should consider setting up separate licensing for games that are $5 or less to play, and games that are more than $5 to play, with smaller licensing costs for the $5 or less games.

If you happen to be a "small" player, do you want to be sitting at a slot machine next to someone who is shoveling in $100 tokens or chips? Or sitting at a blackjack table or craps table next to someone betting $100? I don't think so.

Casinos may have to make decisions based on middle income "social" gamblers vs. hard-core obsessive gamblers or "high rollers vs. low rollers". This may actually lead to a competitive industry, similar to what you have by dining in middle-class or high-class restaurants.

Taxing at a rate higher than 20 percent and up to 40 percent:

Such a decision by the Gaming Commission can then be introduced as a bill to be referred to statewide voters and passed by a majority of legislators in the House and Senate.

There is no need to amend the constitution. The tax measure can be voted on in November of 2009. Since it is referred to the people, it does not go to the governor for approval.

Information about publicly owned casinos, their profits, and who gets them, compensation for various executives, can be made public in an American world that is madder than all-hell at greed at the top. For the first five years under the 2008 amendment, additional casino profit is expected to be about $1.5 billion, with a tax paid of $300 million.

Campaign fund costs for persuading voters to approve a tax hike could be obtained from wealthy donors to the Historical Society.

Another alternative: Strike the safety clause in the bill and allow three months to obtain signatures to place the issue on the November ballot:

The failure to pass HB 1272 before July 1, 2009 would not infringe on the Gaming Commission duty to pass rules under CRS 12-47.1-302 to allow the 2008 amendment to proceed smoothly. In fact, the commission would likely be more impartial than HB 1272 supporters s would like.

There would be an opportunity for Historical Society supporters to petition to place HB 1272 on the November ballot and vote it down.

(Jerry Kopel served 22 years in the Colorado House.)

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