07:02 AM PST on Friday, February 25, 2005

BY NIKI SULLIVAN, Associated Press Writer

SALEM -- Lawmakers entered the debate over how big a payout bar and tavern owners should get from slot-machine style games after they're added to the lottery's video poker terminals.

(AP File Photo)

Commissions to the 2,000 retailers with video poker would be nearly cut in half -- to 15 percent -- for the new slot-style games under a bill considered Thursday by a Senate committee.

The bill is being weighed while the Lottery Commission, which typically decides commissions after negotiations with retailers, is in the midst of a process to determine the commission for the new games.

Plans are to add the slot-style games in July. Gov. Ted Kulongoksi directed the Lottery Commission to add the games to raise $120 million to fund state police.

Retailers now get an average of almost 29 percent of net revenue -- the money played minus prizes paid -- from video poker. Lottery Commissioner Dale Penn, is recommending a 15 percent commission for the new games, prompting an outcry from lottery retailers.

Sen. Charlie Ringo, D-Beaverton, said he introduced the bill to cap commissions on new lottery contracts to 15 percent because the issue has become a "political football" and state programs that are supposed to benefit from the lottery are getting shortchanged in the face of hefty commissions.

"That some of these taverns are taking 35 percent off of these state machines while our schools and law enforcement personnel are stretched so thin is unconscionable," Ringo said in a news release.

Ringo said he based the 15 percent commission rate on a 1994 study by the secretary of state's office that concluded that bars and taverns could earn a profit with commissions of 12 to 15 percent.

School advocates agreed with Ringo, saying the lottery wasn't created to subsidize bars and taverns. They said that's the effect of the current average commissions of $68,000 annually per retailer.

Penn said that video lottery games started in 1992 with a 35 percent retailer commission but now that vendors are established, rates can be lower for new games.

Restaurant owners disagreed in testimony to the Senate General Government Committee.

Portland sandwich shop owner Steve Moore said he's concerned about school funding for his three children, but he's also concerned that drastically lowering the commission he receives might make his relationship with the lottery unprofitable.

He said the state would lose in the end if businesses ended their contracts with the lottery because they couldn't make a profit.

Ringo said in tight budget years, everyone has to cut back, including bars and restaurants.

Cutting the lottery commissions "is not a radical new idea," said Sen. Frank Shields, D-Portland, the committee chairman. But he wanted to discuss the issue because of the state's chronic budget problems.