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The Rendell administration is keeping the strapped Gaming Control Board afloat with another $10.4 million from other agencies, despite protests from Senate Republicans about the constitutionality of such fund swaps.


Senators may take some kind of action to challenge the practice, which they say infringes on the power of the General Assembly to appropriate funds.


Budget Secretary Michael Masch informed House and Senate leaders in a July 18 letter that the gaming board, charged with overseeing the startup of slots casinos in the state, would run out of money “within the next two days unless the administration takes action to solve the GCB’s funding problem.”


That action involves transferring $10.4 million left in Act 71, the 2004 law that authorized 61,000 slot machines in Pennsylvania, from the state police and the Revenue Department to the gaming board.


As the Sunday News reported July 9 and 16, the gaming board was low on cash, with no influx of revenue in sight until the first casinos are licensed — something the board said last week would happen on Sept. 27.


The board has been operating with $7.3 million transferred in December from the Revenue Department after running through its initial $7.5 million stake from Act 71.


A legislative advisory board concluded in June that such transfers violate the state constitution.


“It is very troubling to see the Rendell team continue to flaunt the constitution,” Stephen MacNett, general counsel to the Senate Republican Caucus, said Friday.


Slots opponents seized on the news about the gaming board’s fiscal crunch. Last week, an anti-gambling group, CasinoFreePA, kicked off a petition drive to repeal Act 71, and Friday, three GOP senators called on Gov. Ed Rendell to call a special session of the Legislature to amend the slots law.


Republican governor candidate Lynn Swann also slammed Rendell, his Democratic opponent in the fall, for giving more money to the board.


“Taxpayers have paid over $20 million to the Gaming Control Board,” Swann said in a statement, “and yet Pennsylvanians have received no relief from their skyrocketing property taxes.”


Almost busted


Masch, the budget secretary, confirmed in his letter that the gaming board was on the verge of running out of money last week.


He wrote to the majority and minority chairmen of the House and Senate Appropriations committees — including Senate Appropriations chairman Noah Wenger, R-36th District — that the transfer of $10.4 million is necessary “to ensure the solvency of the Pennsylvania Gaming Control Board during the 2006-07 fiscal year.”


While the board was given $7.5 million in Act 71, the Gaming Act, to license and oversee slots suppliers and operators, that money was nearly gone by December, when the Rendell administration transferred the first $7.3 million from the Revenue Department to the gaming board via an interagency agreement.


Act 71 appropriated $36.1 million for slots startup — $7.5 million each for the gaming board and the state police, and $21.1 million for the Revenue Department to buy a computer system.


Budget officials told the Sunday News they were treating the $36.1 million as a single pot of money.


But in a June 14 opinion requested by Wenger, the Legislative Reference Bureau, a nonpartisan panel of lawyers, wrote that such transfers, without authorization from the General Assembly, violate the state constitution.


Budget officials and representatives of Treasurer Bob Casey Jr., who had to clear the funds, said they believe the swaps are legal as long as the money is being used for the purposes originally intended — “in this case, the implementation of Act 71,” as Masch wrote to the appropriations chairmen.


Wenger had said earlier that Rendell did not include any money in his 2006-07 budget for the gaming board. The senator from northern Lancaster County raised the issue during budget hearings earlier this year and asked the Legislative Reference Bureau to study the issue.


He was not available for comment late last week.


Masch wrote Tuesday that the administration had proposed a solution in amendments to the Fiscal Code, passed earlier this summer, which would have granted authority for the transfers and reauthorized the Act 71 appropriation until June 30, 2007.


The $36.1 million technically expired on June 30. A House bill passed in May stipulated that any remaining money from Act 71 “shall lapse,” but Rendell used his line-item veto to strike that language.


Republicans, who have the majority in the General Assembly, are litigating another case involving a similar line-item veto, contending that Rendell had overstepped his authority.


Masch wrote that because the Fiscal Code did not authorize the transfers, the gaming board was on the verge of running out of money last week, and therefore “the administration has no option at present but to transfer unobligated and unneeded Act 71 appropriations from the Department of Revenue and the state police to the Gaming Control Board.”


The transfer was to be done Wednesday, he wrote.


Masch also said the gaming board has agreed “to reduce its 2006-07 budget by $500,000, to a total of $25.1 million, not including the cost of background investigations.”


He said the administration anticipates the board will need to tap $19 million this fiscal year from an expected $30 million in “operator escrow account deposits” with the gaming board for license applicants.


The board should finish the fiscal year with $1.9 million left, Masch wrote, assuming that four casinos at horse racing tracks open as projected this winter and next spring.


Thursday, the gaming board said it expects to license six horse tracks for slots casinos by Sept. 27.


When casinos open, the board will begin collecting revenue from taxes, license fees and other gambling sources to fund its own operations and, eventually, school property tax rebates for homeowners.


Fighting on


Critics of the slots law, however, haven’t given up.


“People say the casinos are a done deal. Well, they said the legislative pay raise was a done deal too,” Dianne Berlin, the Penryn woman who is coordinator of CasinoFreePA, said last week in announcing a petition drive to repeal the slots law.


Three Republican senators — Jane Orie of Allegheny County, John Rafferty of Montgomery County and Bob Regola of Westmoreland County — wrote to Rendell on Friday to ask him to call a special legislative session focused on amending Act 71.


The slots law has been much criticized for such provisions as allowing lawmakers to own 1 percent of casinos.


Senate Republicans still may act on the Legislative Reference Bureau’s opinion on the transfers, said MacNett, the caucus attorney.


He did not know Friday what form that challenge could take but said he expects to have more details this week.


“Their disdain for constitutional checks and balances becomes more apparent weekly,” MacNett said of the latest fund swaps.


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Contact Helen Colwell Adams at hcolwell@lnpnews.com.