The Kentucky House passed a bill to create a Problem Gambling Assistance Fund using money from the PokerStars settlement.
But the fund won’t get the full $225 million as originally intended. A house floor amendment lowered the total to $50 million.
That’s still a hefty amount to provide much-needed funding to assist problem gamblers in the Bluegrass State.
Rep. Adam Koenig, who sponsored the bill, accepted the amendment.
“Fifty may not be as good as 225 but it’s better than zero, which is what we do now,” Koenig said. “The important thing is we need to do something, and I’m happy to move passage.”
The Kentucky House also approved a bill to modernize pari-mutuel wagering on Monday. The bills advance to the Senate.
Details of problem gambling fund bill
Koenig explained to colleagues that Kentucky currently offers pari-mutuel wagering, charitable gaming and lottery. Yet, with all that gambling going on in the state, it doesn’t require any industries to support problem gambling programs.
The House also passed a bill last week legalizing sports wagering, online poker and daily fantasy sports. It’s expected to gain approval from the Senate and governor, expanding gambling in the Commonwealth further.
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Last September, Kentucky received $225 million of an agreed-upon $300 million for a settlement with Flutter Entertainment, parent company of PokerStars. The settlement was for the site offering online poker in the state when it wasn’t legal to do so.
Michael Stone, executive director of the Kentucky Council on Problem Gambling, suggested to Koenig that this money go to creating a sustainable trust for the Kentucky Problem Gambling Assistance Fund.
House Bill 609 creates a Kentucky Problem Gambling Assitance Board to administer, organize, invest and distribute the funds. The Board would consist of five members:
- House-nominated appointee.
- Senate-nominated appointee.
- One at-large member appointed by the governor.
- Appointee from the Kentucky Council on Problem Gambling.
- An academic with an extensive background on the psychological aspects of problem gambling nominated by presidents of the University of Kentucky and University of Louisville.
Creating a sustainable problem gambling fund
Rep. James Tipton offered the amendment to give the problem gambling fund $50 million, saving $175 million for other state needs. He specifically mentioned the pension fund, which is where sports wagering proceeds go in Koenig’s bill.
Koenig admitted that $50 million would still go a long way. He noted that projections show the problem gambling fund expending $1.5 million in year one and $3.7 million annually in the future.
“So we’re looking at 15, maybe if we get good returns 20 years out of this $50 million,” Koenig said. “I don’t anticipate being here in 20 years. Hopefully I’ll be out on a golf course somewhere.”
Koenig meant the fund to assist the problem gambling issues in Kentucky for “centuries, if not in perpetuity.”
Spencer suggested this could still happen. If the legislature looks to supplement the problem gambling fund in the future with money from the gambling industry.
Koenig countered that is difficult because lottery fund money goes toward scholarships, and the state doesn’t make anything from charitable gaming other than licensing fees.
After House members approved the amendment, the bill passed by a 81-14 vote.
Pari-Mutuel bill also advances
A pari-mutuel modernization bill passed by the House will bring more money to the state. However, some lawmakers didn’t think it asked enough of gambling companies operating in the state.
Most important to Kentuckians, the bill eliminates breakage. Horse bet payouts will now go down to the penny.
The rest of the bill adjusts pari-mutuel tax rates and caps money going to equine funds to increase money going to the state. Koenig said this was in response to concerns from colleagues last session when passing a historical horse racing bill that the tax rate wasn’t high enough.
Analysis projects the bill could raise an additional $15 million for Kentucky’s general fund.
Rep. Lisa Willner said that gaming corporations promised good-faith conversations about raising the historical horse racing tax rate to get that vote. Instead, the bill taxes all pari-mutuel wagers at 1.5% of gross revenue. That’s the same rate already paid in HHR. It’s an increase on the live wagering and advanced deposit wagering rates.
“Now we have agreed to expand gambling considerably without raising anywhere near the revenue that’s needed and that our state deserves,” Willner said.
She contended that the effective tax rate on Kentucky HHR was only 7-8%.
She said that in a task force she chaired, the Kentucky Policy Center said the effective rate was between 16-18%. While tracks said their effective rate was 32.8%.
Rep. Josh Calloway offered an amendment increasing the rate from 1.5% to 6%. Koenig argued that the amendment would put an end to historical horse racing in Kentucky. Yet, it nearly passed, failing 32-39.
The pari-mutuel bill then passed 66 to 29.
