Like New Jersey before it, Iowa’s plans for creating an online gambling regulatory framework seem to be dead for the time being. In New Jersey, it was due to a conditional veto by Governor Chris Christie. In Iowa, it is due to lawmakers being unable to agree on an online poker bill.

Though the legislation survived the funnel deadline last week, lawmakers in the Senate were unable to decide on a bill. Facing questions about how minors and problem gamblers would be protected, the legislation was amended to request a report from the Iowa Racing and Gaming Commission. Requesting a report, of course, is a considerable step backward from legalizing online poker and creating regulation for it.

The legislation in its original form would have required players to make cash deposits in brick and mortar casinos. They then would be given a password to an online poker site, where they could gamble with the money they deposited. However, nothing would prevent that password being given to other people, such as minors.

Senator Jack Hatch, a Democrat who opposed the poker bill, said that “the lack of absolute security that an underage person couldn’t obtain the code of the parent and so forth is probably my biggest objection.” Lobbyists for the bill, of course, argued that online poker is already taking place in Iowa, so some regulation is better than none. Others argued that bad regulation isn’t necessarily better than none.

“Just because it’s not regulated now doesn’t mean we should regulate it,” said Senator Roby Smith, a Republican who opposed the bill.

Senator Bill Dotzler, a Democrat who supported the bill, said that attempts to legalize online poker aren’t done. It will just take more time. “I’ve been around long enough to know that bills of this significance sometimes take two or three years to garner support,” he said.

As soon as Iowa Governor Terry Branstad (R) proposed drastically increasing the tax rate for the state’s casinos, the industry has been livid. The casinos and anyone who has a basic understanding of economics concluded that it would hurt business and result in reduced profits and reduced employment. Now there is a study to back that up.

Governor Branstad’s proposal would tax casinos at a 36% rate, which is a large hike from the current level of 22% or 24%, depending on the casino. Today a study conducted by Harvey Siegelman of the Strategic Economics Group was released, showing just how bad the tax hike would be for the state.

In the report, Siegelman says that the massive tax increase would result in four of the 17 casinos going out of business. Another four casinos would be put in dire financial situations, which could lead to massive layoffs and in the end, perhaps they would have to close as well. That’s quite a difference from Branstad’s position that the casinos make plenty of money and can afford to pay higher taxes.

In addition to four casinos closing shop and another four being put in a severe financial situation, the tax increase would also result in the layoff of 2,600 workers. Because the casinos are required to make charitable contributions but are allowed to modify the amount contributed in the event of a tax increase, the report also states that charitable giving would decline by $17 million.

It will be interested to see how the ever-defiant Branstad reacts to the report. He may simply say it’s biased and can’t be trusted. Though the Strategic Economics Group is considered a trusted an impartial group, the study was commissioned by the Iowa Gaming Association.

A portion of the revenue from the Iowa Lottery and Iowa casinos goes to “nonprofit” organizations tasked with treating problem gambling. A recent state audit, however, found that one such center wasn’t using those funds as directed and criminal prosecution may be in the future.

State auditors found more than $114,000 in alleged misspending by the Eastern Iowa Center for Problem Gambling located in Davenport. The Davenport location closed in June 2008. The problem may have been much bigger than that. Auditors were missing a lot of information due to records that were either shredded or lost (both are violations).

On Monday, State Auditor David Vaudt said that his staff had begun investigating the treatment center after receiving a tip in March of 2008, only three months before the center closed, alleging a misuse of funds. Vaudt then tried to get information from the center and the center was not compliant.

“The director and her attorney definitely fought giving us access to their records. We did what we could,” Vaudt said. You can imagine why the director, Janet Meisenbach, didn’t want the records turned over to state auditors. She is alleged to have been overpaid by $38,693 in addition to taking an improper vacation payout of $4,872, making improper credit card purchases equaling $14,254, making credit card purchases that are being called “unsupported” to the total of $27,032 and taking an improper travel payout of $4,872.

Another issue is that the board of directors rarely met with Meisenbach and did not play an active role in the organization. Usually in nonprofit organizations, the director reports to the board of directors. In this case, though, Meisenbach appointed the board and rarely consulted them, possibly because they would say something like “hey, why don’t we use some of this money to treat problem gambling rather than to give you a nice vacation?”

The center operated thanks to a $672,000 yearly contract with the Iowa Department of Public Health. It had offices in Davenport, Washington, Clinton and Cedar Rapids, but only the Davenport location was implicated in any wrongdoing. Copies of the audit were sent to state and county prosecutors.

Add Iowa to the list of states that have a chance to be the first to regulate intrastate online gambling. Though New Jersey certainly has a head start, if the bill is vetoed or conditionally vetoed before the end of tomorrow, another state could still beat them. Yesterday a subcommittee in the Iowa state Senate approved a bill that would legalize and regulate online poker at an intrastate level.

The next step for the bill is for it to pass the Senate State Government Committee, which is expected to vote on it today. The bill must clear that committee by the end of the day on Friday in order for it to remain eligible in the current legislative session.

If the bill becomes law, it would establish a regulatory framework that would allow Iowa residents to play online poker at home. However, in order to play they would have to set up special accounts at land-based casinos in the state. The brick and mortar casinos already located in the state would set up online poker rooms where registered players who live in Iowa and are at least 21 can play. In order to access the online poker websites, players would have to go to a brick and mortar casino in Iowa, set up a special account, deposit cash, agree to maximum bet limits and limits on the length of play, and then would be given a password for the website. The players can then go home and play online poker at the website at their convenience.

Of course, it’s not terribly convenient when you need to go to a land casino to make a deposit. One of the reasons for that requirement is to deal with problem gambling. If you have to make deposits in cash, you can’t gamble on debt.

Senator Jeff Danielson, Chairman of the Senate State Government Committee, expects the measure to pass today. Danielson says that the bill is about “consumer protection,” since an estimated 150,000 Iowans are already playing poker online. He says that “technology has gotten ahead of our policy on gaming laws. We think it’s time to modernize Iowa’s laws relative to this aspect of gaming.”

With most U.S. states in debt, the country is looking for ways to close budget gaps. Whenever that happens, the issue of gambling is likely to come up. After all, gambling and casinos are major sources of revenue. A lot of money changes hands and a lot of money is to be made. Iowa is now looking at gambling as a way to increase revenue, but not in a way that’s beneficial to residents.

Some states, such as Pennsylvania and New Jersey, have looked to gambling expansion as a way to generate more revenue. They have decided to allow more casinos to be built, with the new casinos having to pay all kinds of fees in addition to being taxed once they are in operation. Other states, such as New Jersey and California, are looking to online gambling. For Iowa, the perceived fix isn’t nearly as generous. They want to raise taxes.

Iowa Governor Terry Branstad wants to increase the tax rate on the state’s casinos from 22% to 36%. According to Governor Branstad, the massive tax hike will result in an additional $200 million for the state. While that money is needed, there is no question that a tax increase of that magnitude would adversely impact the casinos. Bob Thursby, General Manager of Terrible’s Casino, said that the tax hike “would have a devastating effect on us.”

Some people may not care about the casinos’ bottom line, but that affects more than just the bank account of the casino executives. For one thing, reduced profits by the casinos could result in fewer deals for the guests. Players could lose some of their comp benefits, some of the good promotions and more.

Another problem is the casino grants. The gaming associations of Iowa routinely give out grants to local businesses and municipalities. For example, when the Denver Fire Department needed new equipment, instead of asking for taxes to be raised on Iowa residents to pay for it, they asked for and received a grant from the Black Hawk County Gaming Association.

Governor Branstad doesn’t believe that taking money from the casinos will reduce the charitable donations, though. Those contributions are required to have a gambling license in Iowa, so Branstad said that “if they stop their charitable contributions, they lose their gambling license.”

The gaming associations have agreements with certain groups to donate a pre-determined percentage of revenue. A double-digit increase of their taxes would either take all of the gaming associations’ money or cause them to prorate their contributing amount, according to Don Hoth, president of the Black Hawk County Gaming Association. “We wouldn’t be able to honor those commitments to the extent that they were made,” Hoth said.

As the recession that Ben Bernanke and Timothy Geithner won’t admit exists shows no sign of getting better, states are looking at ways to make more money. Right now, most states are hemorrhaging cash and every little bit of revenue is needed. For that reason, Iowa and Kansas are the latest to look at their current gambling laws and discuss whether they need to be changed.

Right now lawmakers in Iowa are considering expanding their legal gambling by expanding the areas where it can occur. Currently casinos can only offer gambling on the gambling floors. The new legislation would allow gambling to occur in other rooms in the casino. The advantage would be that casinos could open poker rooms and start hosting major poker tournaments, which in theory could be a big source of revenue for the state. So it seems that in 2010, the politicians in Iowa finally realized that poker is big and involves a lot of money. In related news, the state legislature has said that they believe that the Internet is starting to catch on. If only there was a way of making money off of the Internet…

Meanwhile, Kansas lawmakers are basically asking for a do-over. In 2007, the Democratic-led Congress passed a law to bring in four state-owned casinos. As early as 2008, they realized that they wrote a terrible law that gave no incentive for anyone to actually buy property, build a casino on it, and open the business. Basically, the state charges way too much upfront for everyone involved and in a bad economy, no one is willing to risk paying that money. This is why Democrats should never try to have anything to do with business or economics. They simply have no understanding of either.

As a result of the bad bill, though the casinos are legal in the state, none exist. Last year, the lawmakers realized that they badly needed the casino revenue due to the recession, but were unwilling to take the time to discuss changing the law because they were too busy dealing with the recession and trying to find ways to help the economy (no, I’m not making this up). So now that, according to the federal government, the recession is over, they want a do-over.

Some Republicans are against amending the law. Republican House Speaker Mike O’Neal said that “they got the deal they wanted. They can live with the deal they got.” The Democratic response was something along the lines of, “Look, we’re Democrats. We always write terrible bills. That’s what we do! (It’s also why we don’t bother reading them). Don’t hold that against us. Let us try again and I assure you we’ll come up with a good one this time!”

The proposed changes in the law are aimed at making it more affordable for companies to come in and start up a casino. Among other things, there would be a drop in the investment that is required of developers from $225 million to $100 million. There is also a fee that must be paid up front to the state for the privilege of allowing the state to run your casino. That fee would drop from $25 million to $11 million. Another change would be to give the developers a larger cut of the profits from the casinos.

It will be interesting to see if the Kansas lawmakers do end up rewriting the gambling bill and if so, whether it will bring any casinos to the state. If not, they can always try again. If at first you don’t succeed…