HomeOhio Sports Betting NewsOhio Revises Its Allocation of Sports Betting Tax Revenue

Ohio Revises Its Allocation of Sports Betting Tax Revenue

As dozens of states across the U.S. have legalized sports betting in the last five years in the wake of a landmark U.S. Supreme Court ruling in May 2018, one of the challenges for each legislature has been "Where does the newfound tax revenue go?"

Image: IMAGO / ZUMA Wire

Many states have simply added the tax money to the state’s general fund, while several others devote the funds to broad sectors such as education or assistance for senior citizens.

Colorado, a state well-known for being particularly environmentally conscious, places more than 90% of its sports betting tax dollars into the Colorado Water Plan, which is designed to ensure that its open space is protected regardless of whatever changes in the climate may come.

Ohio lawmakers, however, in 2019 elected to split sports betting tax revenue equally between general education funding and extracurricular school programs – the latter being both sports-related and non-sports-related (minus 2% of the revenue that goes toward funding for programs designed to aid compulsive gamblers).

But when the state finalized a new annual budget this summer, a state Senate version prevailed – eliminating the specific funding for youth sports and other programs and instead directing 98% of funds into “general support of public and non-public education for students in grades K-12.”

“I don’t think anything in government surprises me anymore,” Scott Kaufman, athletic director at Lakota West High School, told wcpo.com.

“Here’s the one thing we do know that is a statistical fact: Kids that are involved in student activities, whether it’s athletics or music or drama, are going to be more successful in the classroom.”

Bill Seitz, a member of the state House of Representatives, had a similar reaction.

“To my dismay, the Senate has chosen to eviscerate the original sports gaming bill in this regard by appropriating not a farthing for sports and extracurricular activities – but rather, putting it all into [general] school funding,” Seitz said.

Adaptive Sports Ohio currently receives $250,000 in annual state funding to help school districts that seek to establish wheelchair basketball teams for disabled students.

Executive director Lisa Followay said she had hoped the House version of revisions to sports betting tax funding would prevail, but expressed hope that the program still will be able to expand even under the Senate version that was signed into law by Gov. Mike DeWine.

The Alternatives That Lost Out – and How Much is at Stake

The Senate version of funding directives for sports betting taxes beat out a pair of other versions. DeWine’s proposal was to prioritize the elimination of fees to parents that enable their children to participate in youth sports.

The House version would have maintained the funding for youth sports and other extracurricular programs, but also placed a $15 million cap on such funds.

The latter is particularly relevant because DeWine signed into law a controversial measure that doubled the state’s sports betting tax rate from 10% to 20%. Business leaders, in general express dissatisfaction with such a move for a variety of reasons.

One is that some sportsbooks in Ohio undoubtedly launched because of what initially was a tax rate less onerous than most states. That led to robust interest in setting up shop in the state – yet six months after the first bets were placed, the Governor flipped a switch to raise the tax rate to above the nationwide average. Ohio currently has 18 sportsbooks.

That said, the new tax rate – while it may lead some sportsbooks to disband operations – will produce higher returns than initially had been anticipated.

Early estimates that sports betting in Ohio might generate about $25 million in tax revenue per year were wildly pessimistic. Instead, the first half of 2023 alone produced $54 million in taxes – and, thanks to the new tax rate and the arrival of football season, the second half of the calendar year should yield more than another $100 million toward education.

A mostly silent winner in the upheaval is the problem gambling lobby, which has had its percentage of tax revenue survive the changes. So instead of roughly $500,000 in funding based on original estimates, advocates can now expect to see at least $3 million headed their way in 2024.

That should help ease the concerns of some lawmakers about neighboring Kentucky’s pending launch of sports betting on Sept. 28.

Kentucky law is unusual in that the state – a hotbed of thoroughbred horse racing, where the legal betting age is just 18 in most states – has designed its sports betting law to mirror that age limitation.

There is some logic to the decision, as it avoids curious scenarios such as in New Jersey, where visitors over 18 and under 21 can wager as much as they like on the horse races at the Meadowlands Racetrack or on other races across the U.S. shown on simulcasting screens – but they can’t bet on a ballgame at the FanDuel Sportsbook located within the track’s grandstand.

Kentucky’s choice means that thousands of students at the University of Cincinnati and nearby Xavier University who are ages 18-20 will be barred from legal sports betting in Ohio but can take a very short trip into Kentucky and make wagers online there. Some of the unanticipated extra funding could go toward gambling education programs on campus at both schools.

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