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Oregon Lottery: Retailer boost may be good idea

The director of the Oregon Lottery says it may be a good bet for the state to allow bars, taverns and restaurants to take a little bigger cut from lottery video games if it results in more lottery proceeds overall.

“They are our business partners, our service delivery system,” Jack Roberts says, without whom the Oregon Lottery would generate only a fraction of what it does.

But some lawmakers think retailers already get too big a cut, and said so during a legislative meeting Tuesday.

“It’s somewhat galling to see millions and millions go into retailers’ commissions,” says Rep. Carolyn Tomei, D-Milwaukie, who leads the House Human Services and Housing Committee.

“They like having those machines in there, so why would we have them get more money?”

According to the Oregon Lottery’s financial statement for the 2012-13 business year — the latest available — retailer commissions for all games accounted for $204.9 million, an expense second only to prizes at $206.8 million. Net proceeds transferred to the state for various purposes, including education, were $546.9 million for that year.

Roberts is a former state labor commissioner who has been Oregon Lottery director for the past year.

He says lottery revenues are growing again, after they took a downturn with Oregon’s economy in 2009 and 2010, but they are growing only at 1 to 2 percent annually — far less than tribal casinos.

The number of retailers is also down from the 2010 peak of 2,371. Roberts says while few of them actually requested the Oregon Lottery to remove machines, several went out of business during the downturn, and lottery sales of most were affected when Oregon’s indoor-smoking ban was extended to bars and taverns in 2009.

He says retailers are "demoralized" and that a boost for some of them might also help the state at the same time.

About 70 percent of Oregon Lottery money comes from the video terminals, which started with poker in 1992 and expanded to other games in 2005.

The Oregon Lottery is in the middle of replacing its 12,000 terminals over a four-year period that will end in 2016-17. Of the $225 million total, the Oregon Lottery will pay for a third directly, and the rest will be drawn from lottery earnings before the state gets its net proceeds.

Roberts says the new machines and communications network will allow the Oregon Lottery to add new games and deal with problem gamblers, although he says the commission has yet to discuss specifics of the latter.

Decision pending

The exchange during the legislative meeting came as the Oregon Lottery is about to settle on new rates for retailers’ multiyear contracts, which end June 30.

Rates began in 1992 at 35 percent, which Roberts says was probably too high. Retailers now can choose between two plans, which net them a commission average of 23.6 percent.

Those plans were devised several years ago. The Oregon Lottery Commission left them unchanged the most recent time they were up for renewal, during the economic downturn.

One of the plans under consideration — but which Roberts says he has made no recommendation on — would give a cut of 27.5 percent to retailers amassing less than $175,000, 23 percent to those between $175,000 and $475,000, and 20 percent to those above $475,000.

Roberts says one of the options would cost an extra $5.6 million, but that amount could be covered by the Oregon Lottery’s contingency fund, which now is at $93 million.

During the last major debate a decade ago, education and social services groups advocated a flat rate of 15 percent.

The decision is up to the commission, whose five members are appointed by the governor and confirmed by the Senate, but whose budget is independent of the Legislature.

Roberts says he hopes the commission will decide the matter at its Jan. 30 meeting, which would allow time for the Oregon Lottery to prepare contracts with retailers.

Under the 1984 measure approved by voters, the Oregon Lottery transfers net proceeds after half of the money goes to prizes and a maximum of 16 percent to advertising and administrative costs, although the actual percentage used is far less.

The proceeds originally went to economic development, but voters since have extended them to education, parks and watersheds.

Budget woes

During the House committee meeting Tuesday, lawmakers voiced familiar complaints about Oregon’s dependence on lottery proceeds.

The $18.6 billion budget that Gov. John Kitzhaber proposes for the tax-supported general fund and lottery proceeds for the next two years projects $870 million from the lottery.

“We are addicted to the lottery, and we must break that addiction,” says Rep. Mitch Greenlick, D-Portland.

Roberts says that when he was appointed director, Kitzhaber first asked whether he had supported the Oregon Lottery’s creation in 1984. Neither did.

“Thirty years later, we are both still waiting for that better way (of financing government) to come,” Roberts says.

“But in the meantime, the only replacement revenue we have provided for schools since Measure 5 (property tax limit) passed is the video lottery.

“Unlike Measure 5, pass replacement revenue first. Don’t get rid of the lottery revenue and then say we’ll find a way to make this up. I am not encouraged by what I have seen over the past few decades.”

pwong@PamplinMedia.com

(503) 385-4899

twitter.com/capitolwong

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