Legislators look at gaming tax

Published 11:12 pm Tuesday, December 16, 2008

The chairmen of the Legislature’s education budget committees said next year’s budget will likely be lower than this year’s newly prorated budget, but levying gambling taxes could improve the forecast.

Sen. Hank Sanders, D-Selma, and Rep. Richard Lindsey, D-Centre, said the Legislature should look at gambling taxes when it convenes Feb. 3, especially taxes on the growing number of gambling halls featuring electronic bingo.

“It’s a serious problem that we don’t get any state revenue from bingo,” Sanders said.

They have the backing of one of the state’s most influential lobbying groups, the Alabama Education Association. At AEA’s delegate assembly in Montgomery Dec. 4-6, members passed a resolution urging the Legislature to tax bingo and other electronic gambling games to help public education.

On Monday, Republican Gov. Bob Riley said lower-than-expected tax collections were forcing him to impose proration — or across the board cuts — of 12.5 percent on the state education budget. Riley said he would pull money from a state “rainy day” fund to erase part of the shortfall, but the effective rate of cuts would be 9 percent.

The cut in the budget for fiscal 2009 is largest in the state since 1961 and is the second largest since the Great Depression.

Alabama legislators will begin holding hearings Jan. 12 to prepare the education budget for fiscal 2010, which begins on Oct. 1, 2009.

Sanders, chairman of the Senate Finance and Taxation-Education Committee, said he expects economic conditions to worsen before they get better, and fiscal 2010 budget could be $600 million to $800 million below the $6.3 billion what was appropriated this year. The result would be that Alabama would be spending the same amount it was four years earlier.

“The situation is just overwhelming,” he said.

Lindsey, chairman of the House Education Appropriations Committee, also forecast a smaller budget.

“We could see the loss of a number of jobs, which means larger classes and fewer electives offered,” he said.

Paul Hubbert, executive director of the Alabama Education Association, agreed with Lindsey’s assessment.

“I think the worst is yet to come,” he said.

Hubbert said he personally opposes gambling, but electronic bingo is a growing business in the state and ought to be taxed. He said a gambling tax might be the only tax that has a chance of passing during a recession.

“It obviously can’t be consumer taxes,” he said.

Hubbert and the two budget chairmen said there is no consensus on how to tax gambling. But AEA’s delegates recommended a tax rate of 20 percent of the gross revenue after paying winnings.

State Superintendent of Education Joe Morton said he will have to see what’s proposed before taking a position on gambling taxes.

But he said, “There will be — in my prediction — pretty hard looks at that in the legislative process,” he said.

Last year, Rep. Marcel Black, D-Tuscumbia, tried to get the House to pass a bill allowing the dog tracks in Birmingham and Mobile to add electronic bingo in return for paying a tax on the machines at those two sites. The tax would have generated an estimated $55 million annually. The bill died because it fell one vote short of the number needed to bring it up for debate. Gov. Bob Riley opposed it.

Electronic bingo games already operate at the dog tracks in Greene County and Macon County. Electronic bingo halls tied to charities are located in Lowndes and Walker counties, and major installations are planned for Houston and Etowah counties.

In addition, the Poarch Band of Creek Indians operates electronic bingo on tribal lands in Montgomery, Wetumpka and Atmore, but those operations are outside the state government’s taxing ability. Alabama could get revenue by negotiating a compact to let the Indians expand the types of gambling they offer in return for a portion of their proceeds, but no Alabama governor has ever advocated that.

Alabama does levy a tax on pari-mutuel wagering at dog tracks, but that has been declining due to gamblers’ changing tastes. In fiscal 2008, the tax generated $2.7 million, down 10 percent from the previous year, according to the state Revenue Department.