After encouraging signs from Gov. Josh Shapiro earlier this year, there has been little progress in Harrisburg on expanded state funding for public transit. That's because politicians are attempting to create a stable dedicated funding stream by using an unstable source: taxing skill games. But tying a gaming tax to a vital public service reveals something even more worrying.
Harrisburg is out of ideas.
Across the Commonwealth, from major-metro transit agencies like SEPTA to small-county services like those that serve Greensburg and New Castle, this essential public service is struggling. Fare revenue only ever accounts for a small percentage of costs. Government funding, especially from the state, must cover the rest.
Pittsburgh Regional Transit, for instance, operates with a structural deficit and struggles to pay for maintenance and upgrades to its aging infrastructure. The loss of fare revenue from the pandemic drop-off in commuting and structural costs like pension obligations leave no way for PRT to recoup its losses under the current state funding scheme.
The agency, which had to dipped into its reserves for $78 million this year just to balance its budget, is desperate. Creating a separate funding pool is the only way to ensure that transit agencies can improve frequency and reliability of service in order to draw more customers to transit, while adequately planning for the future by funding projects like PRT's light rail vehicles replacements, which could cost nearly $1 billion.
Unfortunately, state legislators have become dead-set on hitching dedicated transit funding to the complicated and controversial issue of skill games, which is making it more difficult to solve the pressing problem of transit funding in a timely manner.
Skill games, whose terminals resemble slot machines, are often located inside other small businesses like restaurants, bars and convenience stores. These games avoid gambling tax mandates because state courts have ruled that players can affect the outcome — the "skill" element that exempts them from regulations and taxes governing gambling, leaving them in a legal gray area.
While this tax loophole deserves to be addressed, doing so involves a careful balancing the interests of skill-games manufacturers (who want to see their product regularized and will tolerate some taxation but want to avoid regulation), their operators (largely mom-and-pop bars and convenience stores who depend on them for needed income), established gambling interests (who see skill games as unwelcome competition) and the good of the people as a whole, which is arguably not served by the expansion of a gaming product that largely sucks money out of already-struggling communities. It's a challenging moral and political issue — and one whose resolution should not be necessary to fund transit fairly and fully.
Further, gaming taxes draw money from precisely the lower-income communities for whom transit is most important. This kind of circular funding may be easy for legislators to sell to their constituents, but it betrays a serious lack of leadership and creativity.
And it proves correct those who argued, way back when casino gambling was first approved in Pennsylvania, that state leaders would continue to expand and to tax gaming to fill its coffers, as a way to avoid proposing more equitable and broad-based taxation. In other words, as many predicted, Harrisburg is addicted to gambling.
Pennsylvania transit agencies, and transit users, need a dedicated source of state funding to maintain and expand a public service that enhances personal and economic mobility while reducing traffic and making our cities — and suburbs and small towns — more livable for everyone. Fixing on skill games as that source isn't getting it done.
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