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Tax Law

State Net Capitol Journal – August 6, 2012

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Budget & Taxes

CA STATE PARK DONORS CRY FOUL: Last month California officials revealed that the state Department of Parks and Recreation had stashed away $54 million it had not reported to the state Department of Finance. The news came as quite a surprise, especially to the groups that had generously donated to keep state parks open that the department said had to be closed to save $22 million.

"They sort of came to us under false pretenses," said Reed Holderman, executive director of the Sempervirens Fund, a nonprofit conservation group. "They cried wolf, and we responded."

Holderman's group pledged $250,000 to keep Castle Rock State Park open, and he said the parks department should at least refund the money nonprofits donated.

"An elegant solution would be for them to refund the nonprofits, and put whatever is left into parks."

But donors that aren't in the nonprofit category are also demanding restitution.

U.S. Rep. Linda Sanchez (D) sent a letter to the parks department demanding it refund $30,000 the city of Whittier donated to keep open Pio Pico State Park.

"I am extremely proud our community stepped up to keep this treasured state historic park open," she wrote. "However, based upon the recently discovered budget surplus, it is clear that there was no need for the city to use their general funds for this purpose."

There is no evidence any money was embezzled or stolen at the parks department, but critics are calling the threatened park closures a political gimmick to try to convince voters to support Gov. Jerry Brown's (D) tax increase measure in November.

State Parks Director Ruth Coleman has since resigned, and her top deputy has been fired. And the California Natural Resources Agency, which oversees the parks department, said it will recommend the extra money be spent on the parks. But it said that decision will ultimately be up to state lawmakers.

Legislative leaders were noncommittal on the issue.

"There's no determination at this point," said Mark Hedlund, a spokesman for Senate President Pro Tem Darrell Steinberg (D). "The priority is to get to the bottom of the situation and figure out what happened. And then we go from there." (SAN JOSE MERCURY NEWS)

STATES ONE-UP EACH OTHER FOR SHARE OF GAMBLING POT:There was a time when a few states held virtual monopolies on gambling. One of them was New Jersey, which opened its first casino - the first outside Nevada - in 1978. Another was Delaware, which legalized slot-like machines at its racetracks nearly two decades ago.

But the rapid expansion of gambling in recent years, as the recession has pressured states to come up with new sources of revenue, has transformed the industry. Last year, under pressure from new casinos in Maryland and Pennsylvania, Delaware's three racetrack casinos shed 15.9 percent of their jobs. And over the past year, Pennsylvania, which didn't open its first casino until 2007, took in more slot machine revenue than New Jersey, according to analysis by Spectrum Gaming Group.

The more established players have battled back. Delaware, which derives more than 7 percent of its general fund budget from gambling - making it the state's fourth largest revenue source - first legalized a form of sports betting and then permitted table games like blackjack and roulette. And when those measures failed to stop the decline of the state's gambling revenues, Gov. Jack Markell (D) signed a law (DE H 333, Chapter 285) that could make it the first to offer online gambling, capitalizing on the recent Justice Department ruling reversing the federal government's longstanding opposition to many forms of Internet gaming.

"If we had not approved gaming along these lines this year and put ourselves at the forefront, other states would have moved ahead of us and we would have been back in a year or two playing catch-up," said Delaware Secretary of Finance Tom Cook.


But Delaware and other states with operating casinos are already facing even newer competition. Ohio opened its first casino in May in Cleveland, less than two hours away from a gambling facility in Erie, Pennsylvania.

"The driving factor here is location," said William R. Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno. "Other things being equal, people will choose the most accessible or convenient casino outlets. People who used to travel some distance no longer do."

Massachusetts is also planning to open several casinos. And Maryland is holding a special session this month to consider expanding gambling.

The endless one-upmanship has some analysts wondering when the market will reach saturation. Casinos have already begun touting their other assets to try to lure gamblers. Some Atlantic City casinos, for instance, have run ads reminding people they're located at the beach. Some fiscal officials also wonder about the long-term impact of expanded gambling on state finances.

"Gambling legalization and expansion during tough times produces significant short-term revenue increases in some jurisdictions," the Rockefeller Institute of Government reported last year. "But if experience is a guide, such growth will not continue over time." (NEW YORK TIMES)

BUDGETS IN BRIEF: San Bernardino, CALIFORNIA, officially filed for Chapter 9 bankruptcy last week after disclosing a $46 million shortfall in its budget. The city is the third in the Golden State to seek court protection from creditors in recent weeks, after Stockton, a community of 292,000 near San Francisco, on June 28, and Mammoth Lakes, a resort community of 8,200, on July 3 (BLOOMBERG). • During the recession, when jobless rates soared, FLORIDA overpaid unemployment recipients by $486 million, according to the U.S. Department of Labor. Between 2008 and 2011, the state's error rate - which includes underpayments as well as overpayments - rose from 4.5 percent to 8.4 percent (ORLANDO SENTINEL). • Voters in 12 districts across the state of GEORGIA rejected a penny sales tax referendum last month that would have funded transportation projects in nine of those districts, including metro Atlanta. Voters in that city rejected the tax by a margin of 63 percent to 37 percent (ASSOCIATED PRESS). • On July 31 - the last day of MASSACHUSETTS' regular session - the House and Senate overwhelmingly approved legislation (SB 2400) aimed at controlling the growth of health care spending in the state. Gov. Deval Patrick (D) is expected to sign the measure, which would restrict the growth rate of health spending to the growth rate of the state's economy as a whole through 2017 and to half a percentage point below the growth rate of the state's economy for the five years after that (BOSTON GLOBE, STATE NET). • The NEVADA Governor's Office of Economic Development has approved $89 million in sales and property tax abatements over 10 years for Apple Inc. In exchange, the company will locate a data center in the Reno area (LAS VEGAS SUN). • U.S. House Republican leaders have dropped plans to extend the current farm program for one year and will press for immediate drought-relief instead. The GOP has been stymied by internal divisions over how to proceed on the issues of farm subsidies and the food stamp program (USA TODAY).

- Compiled by KOREY CLARK

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