03:35 PM PST on Tuesday, February 15, 2005

By CHARLES E. BEGGS, Associated Press Writer

SALEM -- Lottery Director Dale Penn on Tuesday recommended that commission payments for new slot-machine style video games be about one-half the rates now paid to bars and taverns with video poker.

File photo

Slot machine line games.

Lottery retailers get an average of 28.8 percent of net revenue from video poker machines. Penn proposed a 15 percent rate for revenue from slot-type games when they are added in a few months.

Net revenue is money played on the video terminals minus prizes paid out.

A final rate decision is up to the state Lottery Commission. Penn said he expects the panel may take that action in April, following a hearing on his recommendation that is set for March 25 in Salem.

Gov Ted Kulongoski directed the commission to add so-called line games to video machines to raise an additional $60 million a year to finance the state police.

Penn said the lower commission for the slot-style games is justified because adding the games "will not significantly increase costs to retailers" and will boosts sales from increased play.

"Our goal ultimately is to increase sales, and when we look at what has occurred in other markets and what games are most popular, line games are that popular choice," he said.

There are 10,300 video poker machines in 2,000 establishments around the state. Video poker produces more than 80 percent of the almost $400 million a year in lottery profits that the state uses for education, economic development and other programs.

Penn said installing the new games will be a matter mostly of putting into the poker machines new software and computer chips.

In some cases new machines will have to be purchased, he said, because about one in five existing terminals won't accommodate line games.

Penn earlier had proposed trimming commissions for all video games to an average of 25.6 percent, because the lottery's existing electronic systems can't separate commission rates by games.

But he said by shifting money within the lottery budget, changes can be expedited to the system so it can calculate separate commissions for each game.

Plans are to have new games operating by July.

Penn said his proposal was influenced by studies conclude establishments could make a profit if commissions on all games were trimmed to 15 percent.

But Penn said slashing all commissions to 15 percent "would not be viable" because he believes a significant number of bars and taverns then would drop the games.

The commission rates for poker were reduced by about 10 percent in new retailer contracts agreed to last year.

"This looks like a very thoughtful and reasonable proposal that brings the lottery more in line with its legal mandate to maximize revenue for public benefits," said Jonah Edelman of Portland, executive director of Stand for Children.