Thursday, January 30, 2020

Important Revenue Gaming Bills Fail

January 30, 2020

When Governor Northam presented his budget, he “baked in” some money, meaning he assumed some new revenue bills would pass and so used those anticipated revenues for funding. Today one of his budget assumptions failed and K-12 education may pay the price.

You may have noticed all these game machines popping up in gas stations and convenience stores. These “games of skill” are called “gray machines.” That’s not because they’re gray; it’s because they operate in the gray area of the law, currently unregulated and untaxed. There are no rules, no requirements, and no one really watching. The governor believed the General Assembly would regulate and tax these machines. He also assumed that such machines would be under the authority of the Virginia Lottery. If so, any proceeds would go to K-12. The governor’s budget team estimated those proceeds to be $125 million a year.

Last night the governor’s bill in the House, carried by Delegate Lamont Bagby, died on a vote of 8-0 in the gaming subcommittee. The Senate version of the bill didn’t die but was rolled into a bill that bans the machines in Virginia. That legislative action blew a $125 million hole in the governor’s budget, which had planned for those millions to be used to backfill the per pupil allotment. The per pupil allotment is the only state funding that goes to the local school divisions with no strings attached, and is based on how many students you have enrolled. Divisions can use it for recurring and non-recurring costs. The money that was allocated for the per pupil allotment was actually redirected to increase the At-Risk add on. Now that backfill money is gone and there are no new revenues slated to go to K-12, which puts schools in a very tight spot. The VEA supports all the funding the Governor included in his introduced budget, but we have asked for significant additional funding. Killing this revenue stream will force the General Assembly to make some very difficult decisions. It will certainly sink some of the budget amendments offered by some legislators. This is a self-inflicted wound. We will have to see how they solve the problem.