North Carolina gaming expansion may not end with online sports betting this legislative session which would mean the loss of sports betting tax revenue for the state..
Matt Kredell at PlayUSA reported that talks are underway to include video lottery terminals (VLTs) and commercial casinos in the state’s budget appropriations bill, House Bill 259.
Rep. Jason Saine, the principal sponsor for the bill that legalized online sports betting in North Carolina, told PlayUSA, “I do believe VLTs and casinos could be included in the budget. Supporters and lobbyists are continuing to meet with members.”
Some lawmakers angled to include commercial casinos into House Bill 347, Saine’s sports betting bill, but they were ultimately held out to ensure online sports betting’s best chance of passage. What may have seemed destined for the next legislative session might now be alive and kicking if the state can agree on budget appropriations for commercial casinos and VLTs.
Offsetting income tax deductions through gaming revenue
A conference committee chaired by Saine on HB 259, the Appropriations Act, is considering how much gambling expansion might counterbalance some state deductions to income taxes over the next seven years.
As PlayUSA reported, “the Senate proposed decreasing individual income tax from 4.99% to 4.5% by 2024 and 2.49% by 2030.” While the state currently has a $3.25 billion budget surplus, halving incoming tax rates over the next seven years would create a need for revenue.
One of the direct benefits of expanding gambling would be offsetting that revenue loss.
Spectrum Gaming Group conducted a study in March 2023 to analyze the influence of gaming expansion on the state. The executive summary of the study set the purpose by stating, “Greater Carolina engaged Spectrum Gaming Group to independently estimate the total revenue potential of gaming expansion throughout the state–and to estimate the revenue potential under gaming expansion parameters being considered by the North Carolina legislature.”
The study delineated and analyzed contributions from VLTs and commercial casinos under a range of tax rates to determine gross gaming revenue (GGR) and tax revenue estimates for the state.
Spectrum found that with the introduction of 30,000 VLTs distributed to lottery retailers throughout the state, North Carolina could generate $1.89 billion in GGR per year. Spectrum assessed tax revenue for tax rates ranging from 20% to 35% and calculated that the state could bring in between $379 million-$664 million annually.
When considering commercial casinos, Spectrum figured commercial resort casinos in Anson, Nash and Rockingham counties (per the recommendations of Greater Carolina). Those casinos, Spectrum figured, would capture $1.57 billion in GGR, or 71% of the total casino market for North Carolinians. The remaining market share would go to the three in-state tribal casinos and some “leakage” to out-of-state casinos in nearby Virginia.
Commercial casinos, like VLTs, were considered at the same range of tax rates (20%-35%), and Spectrum concluded that three commercial casinos could generate $336 million-$589 million in tax revenue annually.
Spectrum data suggested the state could be looking at over $1 billion per year in added tax revenue from the legalization of VLTs and commercial casinos.
House committee heard but did not move on VLT bill
In May, the House Commerce Committee heard testimony on House Bill 512, which would legalize VLTs across the state. It did not take a vote on the bill.
Rep. Harry Warren, R-Rowan, the bill’s chief sponsor, set the purpose for the bill by referencing the many “fish game” parlors operating in metro areas throughout the state.
Warren cited between 60,000-100,000 illegal gaming machines operating in the state.
“By restricting, regulating and reducing the supply,” Warren contended, “we can eliminate sweepstakes parlors and the seedy aspects of unregulated gambling, replacing it with a limited supply of gaming entertainment that fulfills the public demand in a safer, controlled environment and safer conditions.”
At maturity, Warren’s bill would split the revenue from VLTs 60/40, where 60% would go to the VLT operators and 40% to the North Carolina Lottery for student loan forgiveness and funding of in-state HBCUs.
There is no indication that the language of HB 512 will inform the VLT additions proposed in the state’s appropriations bill. As Saine told PlayUSA, those additions are being written by the Senate.
However, Warren sees the potential for overlap.
“I’m anticipating that the Senate version of a VLT bill will be included in the upcoming conference report, which will become our budget,” Warren told PlayUSA. “Sports betting advanced on its own, but we’re thinking some other aspects of gaming might just come up in the budget.”
Casino “leakage” a concern for NC lawmakers
The Eastern Band of Cherokee Indians (EBCI), which operate two of the three North Carolina tribal casinos, along with Caesars, recently opened a temporary casino across the border in Danville, Virginia. The permanent $650 million Caesars casino is set to open in late 2024.
In the early going, informal polling of visitors and observing of license plates in the casino parking lots indicate that North Carolinians make up half or more of the visitors to Danville Casino.
Spectrum indicated that North Carolinians will, in the absence of a commercial casino market in the state, spend upwards of $250 million annually at Virginia casinos.
With the completion of the permanent Caesars and EBCI casino in 2024, that leak will only get bigger.
Lawmakers making a late-session push to legalize commercial casinos hope that some legislative plumbing will stop this leak and re-route that money back into the state.
The floodgates may be opening
Saine explained the goal of finalizing the budget through conference committee by July 1, in time for the start of the fiscal year. However, as PlayUSA has noted, Senate leader Phil Berger sees budget discussions carrying on into July.
How central gambling expansion is to those discussions is unclear. However, should budget debates swiftly usher in commercial casino and VLT expansion, that would be a major development after the months-long process to pass online sports betting.
Should the Legislature find a way forward, the gambling floodgates would suddenly be wide open. Online sports betting, parimutuel horse-race wagering, online horse-race betting, VLTs and commercial casinos would all be handed over to the North Carolina Lottery and, possibly, other regulatory bodies within weeks. It would be up to those regulators to create the necessary safeguards for North Carolinians to safely and confidently jump into the fast-moving stream of legal gambling.
So far, there has been no momentum to add mobile gaming apps such as BetMGM online casino to the state.