The Oregon Lottery director on Tuesday issued a new proposal to cut compensation to video poker retailers, but did so in a way that would have a milder impact on high-volume taverns and delis than she previously had called for.
Director Brenda Rocklin's proposal, which goes to the Oregon Lottery Commission today, would generate about $80.4 million more for the state over four years - just less than the $81.5 million that would have been raised in the first four years of her previous proposal.
But in her latest recommendation, Rocklin's rate changes would let the biggest money-making retailers - those whose annual sales exceed about $500,000 - keep more profits than they would have under her earlier plan, issued a month ago. Those bars, taverns, delis and lounges would see their compensation drop by about 10 percent, instead of the 22 percent reduction they would have faced. It will be the midlevel retailers who will face a bigger reduction rate, of 12 to 14 percent under the latest plan.
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Of the state's 2,200 video poker retailers, only about 230 fall in this high-volume sales category, with compensation levels of between $395,000 and $153,000. More than half the state's video poker retailers had sales last year of $200,000 and compensation of $70,000 or less.
On average, retailers would keep about 28.4 percent of video lottery sales as compensation, down from the current 32 percent average.
Rocklin said she was confident her new proposal struck the fairest possible balance between the lottery's dual mandate under Oregon law.
"In my view, this new compensation system strikes the right balance between maximizing net revenues to the state and providing a reasonable rate of return to Lottery retailers," Rocklin wrote to the five commissioners in a draft memo explaining her recommend- ation.
Rocklin said she fully expected both sides of the contentious debate over video poker compensation rates to oppose her proposal. Bars, taverns and delis specializing in video poker have voiced opposition to any cut in compensation, while advocates for public services have said only deep cuts in the compensation rates will eliminate what amounts to a subsidy for businesses at the expense of education, job-creation and natural-resources programs that are supposed to receive the proceeds from state lottery games.
"Based on past experience, I'm going to predict that no one will be happy with this proposal," Rocklin said.
Leading advocates on both sides appeared to confirm her prediction.
Steve Novick, a former U.S. Justice Department lawyer and aide to several Democratic office holders in Oregon, said Rocklin's proposal seemed to invite a lawsuit based on what he saw as a failure to maximize revenue to the state.
Novick said it was particularly irksome to see Rocklin propose a shift of $80 million over four years after initially - but incorrectly, it turned out - projecting a four-year revenue increase of $153 million over the first four years of a six-year contract proposal.
"She's essentially cut the amount of money she promised to education and other programs in half," Novick said.
Bill Perry, lobbyist for the Oregon Restaurant Association, also expressed concerns. He said that Rocklin appeared to take into account his trade group's arguments that cutting compensation too deeply would backfire, prompting shorter hours of operation and ultimately costing the state more in lost revenue than it would collect through the new rates.
However, he said the rate cuts were still too deep. Perry also criticized the proposal's four-year contract period, saying it would add uncertainty for businesses that need to know how much they'll likely get from video poker receipts as they chart their future plans.
"We're opposed to this," Perry said.
Source: David Steves, The Register Guard
