NO.cantrellreopen.051320.12.jpg

Harrah's Casino remains closed amid the coronavirus pandemic in New Orleans, Tuesday, May 12, 2020. Mayor LaToya Cantrell announced New Orleans will be able to proceed to phase 1 of reopening the city starting Saturday at 6am. Casinos will not be able to open in Orleans parish in phase 1.

The Louisiana Senate Revenue & Fiscal Affairs committee Friday rejected an effort to cut taxes on “free play” promotions that the gambling industry says are necessary to bring customers back to casinos that have closed eight weeks because of COVID-19.

The promotions are aimed at attracting customers and keeping them coming by giving them, essentially, house money with which to gamble. The industry says the promotions have proven successful in the past, but is hampered by a tax that Louisiana imposes that few other states do.

Senators didn’t disagree, but removing money from the state treasury at a time when Louisiana is facing deep financial problems was a concern for a majority on the panel.

“So, if we vote for this resolution, we’re taking $29.3 million out” of the state treasury, said state Sen. Eddie Lambert, R-Prairieville, “on the hope that it generates more money than we give away?”

Budget architects will begin Monday coming up with ways to make up an estimated $867 million shortfall in revenues. Lawmakers are looking at deep cuts in funding in popular services and programs.

Meanwhile, representatives in the House have been advancing bills that would subtract from what funds are available to supplement law enforcement salaries, pay for health care for one-fourth of the state’s residents, provide TOPS grants that cover tuition for college students meeting modest academic standards, along with a myriad of other services. One bill pending before the full House would suspend the severance tax on oil and natural gas production, which would require $212 million more in cuts, another would reduce the severance tax rates, which would remove $112.6 million from the treasury over five years, while a third measure would decrease state revenue by $378 million.  

But the casinos are suffering from being closed since mid-March.

Richard Neal, manager of Golden Nugget Lake Charles, said casinos are expecting lower demand than usual for the next three months – at least. Casinos are allowed, in the Phase 1 reopening, to open half their games – craps tables, slot machines, and the like – but limit the number of customers to 25% of facility’s allotted capacity.

Casinos and video poker accounted for $731.6 million in state revenues in 2019. Legislative and administration economists project that amount will drop about $268 million because the casinos were totally shut down for so long.

“It is our biggest marketing tool, without a doubt,” Neal said of “free play” promotions. The industry in Louisiana brings in about $2.5 billion annually and spends about 10% of that amount in promotional marketing.

“We’ll use promotional credits to try to stimulate demand and get people back,” Neal said.

Unlike most states, Louisiana does not allow the casinos to credit the gambling that use the promotion. If a customer uses a “free play” promotion of, say, $20 at a blackjack table, then spends $80 of his own money, Louisiana taxes the full $100 spent. Mississippi, for instance, would tax only the $80.

Sen. Barrow Peacock, who sponsored Senate Concurrent Resolution 64, said he was skeptical at first. But he came to believe gambling officials were correct that removing the tax on promotions, as all but three states have done, would help attract more customers to spend more and that’s how state government collect taxes.

“We are in partnerships with these casinos,” said the Bossier City Republican. “We’ve got to help these casinos, our partners, get back open.”

Wade Duty, head of the casinos’ trade group, pointed that Louisiana takes 21.5% off the top of the amount gambled in the riverboat, land-based and racetrack casinos. But for the coronavirus shutdown, gambling has created hundreds of millions of revenues for the state year in and year.

“The industry is a consistent producer,” Duty said, adding that gambling hasn’t had “roller coaster rides” of other industries, which when downturns occur the drop in state revenues has thrown the budget into crisis.

Voting for eliminating taxes on "free play" promotions (3): Sens Mike Reese, R-Leesville; Gary Smith, D-Norco; and Rick Ward III, R-Port Allen.

Voting against SCR64 (4): Vice Chairman Jay Luneau, D-Alexandria; Sens Eddie Lambert, R-Gonzales; Patrick McMath, R-Covington; and Rogers Pope, R-Denham Springs.

Email Mark Ballard at mballard@theadvocate.com.