07:28 AM PST on Friday, December 19, 2003

By BRAD CAIN, Associated Press Writer

SALEM, Ore. -- The Oregon Lottery will try again to determine whether to reduce state payments to video poker retailers.

Some critics say the payouts to bars and taverns are excessive, but a restaurant industry group is vowing an all-out fight to block any cuts.

With the Lottery's current contract with 1,900 bars and taverns set to expire in June, the Lottery Commission has asked Secretary of State Bill Bradbury to conduct a study of the fairness of the current pay rates.

(Oregon Lottery web site)

On Friday the commission is to schedule retailer forums and public hearings, looking ahead to the Lottery drawing up a new contract by early April.

"This is a good opportunity for all of us to take a fresh look to see if the current rate is fair," said Kerry Tymchuk, the newly appointed chairman of the Lottery Commission.

Retailers have a lot riding on the results.

The Lottery paid $153 million in commissions averaging about $75,000 each to the 1,900 bars and taverns with video poker in the most recent fiscal year.

One retailer in four made $100,000 or more in commissions. The payments average 32 percent of net poker machine revenue, meaning money played minus prizes paid out.

Critics of the current setup say the payments are excessive when tight money is putting a squeeze on school funding and other services.

Plus, they said, Oregon voters who supported creation of the lottery in 1984 never intended for it to become a windfall for bar owners.

"The Lottery isn't supposed to be about keeping failing taverns in business, or fulfilling the expectation of tavern owners who have been on the lottery gravy train," said political activist Steve Novick.

But the powerful Oregon Restaurant Association said the state shouldn't financially punish those who have helped produce a major source of revenue for state programs.

The Lottery has gone from a simple scratch-off ticket operation in 1985 to a business that now makes about $350 million a year for the state, most of it from video poker.

"The current commission rate is working very well for the state," said association spokesman Mike McCallum. "When something is working, why would you want to change it?"

During the 2003 Legislature, lawmakers considered a bill that would have cut poker commissions by more than 50 percent, producing an additional $75 million a year for education or other programs.

The bill didn't pass, but the movement by some to slash the payouts to retailers continues.

Gov. Ted Kulongoski said he's hoping the secretary of state study, which will include a look at how much other states pay their lottery retailers, will help settle the issue.

"I don't think anybody ever thought when we got into this that it was a means for the retailers to get rich. This wasn't supposed to be `Joe Millionaire"' for the retailers, the governor said.

"Let's end the debate. Let's find out what is fair compensation for the retailers and fair for the citizens of Oregon," he said.