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During desperate times, those in charge need to be creative in coming up with solutions to difficult problems.  In Pennsylvania, Governor Rendell faces such a difficult problem.  His state is staring at a $2.3 billion budget deficit.  There’s little doubt that over the coming weeks and months he and his fellow administrators will argue and fight over which state supported programs will receive reduced funding or be cut altogether.  Gov. Rendell wants to see to it that funding for higher education not only receives full funding, but additional funding in the years to come.

He recently announced his “emergency tuition relief” plan which, in essence, calls for the legalization and taxation of thousands of new video poker machines in bars, pubs, and private clubs throughout the state.  The state estimates that there are already thousands of these machines operating illegally within its borders.  The Governor’s plan would require club owners to apply for a license, which would be issued and regulated by the Department of Revenue.  Applicant’s would be required to undergo a background check and all of the machines would be tied into a main system, which would have control over things such as odds and payouts.

The 50% tax on proceeds from the machines would go toward a fund used to aid citizens in paying for tuition at one of Pennsylvania’s state-run colleges or universities.  It is estimated to bring in as much as $550 million per year and help as many as 170,000 students.

Pennsylvania’s public colleges and universities rank as the 6th most expensive in the country.  Combine that fact with the downturn the economy is in and it becomes quite obvious to the state’s leaders that something needs to be done.  However, not everyone agrees that this is the best way to pay for the “emergency tuition relief” fund.  Some of the state’s Representatives, mostly Republicans, reacted, or possibly over-reacted, quite negatively.  Rep. Douglas Reichley, R-Lehigh, said that he understands that some establishments within the state already operate these machines illegally.  However, he added, “Prostitution is illegal too, so what next?  Legalize prostitution?”

State Revenue Secretary Stephen H. Stetler said, “This is not an expansion of gaming – it is the recognition that video poker is already a thriving industry.”  However, Rep. Mike Vereb, R-Montgomery, disagreed, saying it was “barbaric to legalize gaming in neighborhoods.  This is a major expansion of gambling, no matter how they spin it.”

Many bar and tavern owners are hopeful about the possibility of a new revenue stream, too.  They are often competing with the many legal casinos in PA and  just like other businesses in the current environment, many are struggling just to stay afloat.  The director of the Pennsylvania Tavern Association, Amy Christie, said, “With the economy, the smoking ban, and the .08% blood alcohol limit, we need this to exist.”

Regardless of whether or not video poker becomes legal in Pennsylvania, it is a positive sign to see state leaders looking to non-traditional methods of raising revenue.  Just today, Barney Frank, the Chairman of the House Committee on Financial Services, told the Financial Times that in the coming weeks he would re-introduce a bill that would establish the licensing and regulation framework of online gaming companies.

Frank believes his bill, which has been discussed but never voted on by Congress, has a much better chance of moving forward now.  There has been quite a public outcry by poker players for their right to play online.  Also, Frank believes that the new Congress and new Obama administration will be much more friendly and open to the possibilities that regulating online poker creates.