09:04 AM PDT on Saturday, October 25, 2003

Associated Press

Searching for ways to squeeze more money out of state-sponsored gambling, Oregon lottery commissioners have approved plans to buy updated video poker terminals.

The search for cash comes after legislators balanced the state budget with the expectation that the lottery would generate an extra $67 million.

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Two likely, and controversial, revenue options would be adding easy-to-play slot machine-type line games, or cutting the compensation rates for retailers who carry the poker terminals.

"Things could change," said Lottery Director Brenda Rocklin. "Who knows where we are on line games? That's always still out there. But in the meantime, since we haven't been given the green light to go ahead with that, we just really have to look at other ways of doing things."

Mary Ellen Glynn, a spokeswoman for Gov. Ted Kulongoski, said she expects him to get involved soon. Kulongoski has said he does not like line games but that he has not ruled out any options.

Profits from lottery games -- which exceeded $380 million last year -- are split among several state-supported programs, including economic development, parks and a rainy day fund for schools.

To get the $67 million specified by lawmakers, however, lottery officials say they must generate $108 million in extra profit.

Legislators offered the lottery commission some guidance by authorizing one extra video poker terminal for bars and taverns, and five extra for race tracks, bringing the total to six and 10, respectively. But the agency estimates the additional machines at nearly 500 sites will generate only $11 million of the $108 million in a fully operational biennium.

"It's a small number, and I think there are retailers out there who would like to think they would profit from having" an extra terminal, said Kathy Ortega, the agency's chief financial officer. "But you have to have enough traffic on those terminals constantly to generate extra play."

The five-member commission authorized the agency to buy an initial round of 1,500 video poker terminals from Illinois-based WMS Gaming. The agency is authorized to purchase 2,101 machines at a cost not to exceed about $17.8 million. Currently, 9,500 terminals are distributed among retail shops in Oregon.

Rocklin canceled an earlier agreement with WMS last month after field tests showed a number of problems, including lower-than-expected revenue yields and technical glitches.

But Rocklin said she decided to endorse the new agreement after WMS promised to fix the problems and offered some incentives, including a new game called 3-Way Action Poker as early as next summer.