Bar and tavern owners are squaring off with school advocates over the surge of new revenue that's expected to come from the Oregon Lottery's expansion into electronic slot machines.

At a hearing yesterday, retailers said the Lottery is proposing a raw deal for them when it comes to sharing expected slot machine revenue.

But groups advocating for children and schools say the retailers already are making excessive video lottery profits and should get less money, not more.

At Gov. Ted Kulongoski's request, the Lottery Commission is preparing to launch slot machine-style games July 1 as a way to raise $120 million to pay for state troopers.

The commission still has to decide, however, the amount of payouts the retailers should receive when the games come online.

Lottery Director Dale Penn issued a tentative proposal that he said is aimed at giving the bars and taverns some extra profits -- but not a windfall -- from the slot games.

His proposal calls for trimming the average poker commission rate from 28.8 percent of net sales to 25.6 percent for the 2,000 establishments that offer the games. Net sales means money spent to play video poker machines minus prizes paid out.

Penn said that under his plan, the average video retailer who now receives $68,000 a year would get about $76,000 by next year -- provided that the slot machines produce an expected 12 percent boost in play.

At yesterday's retailer forum, about 150 bar and tavern owners crowded into a hearing room to show their opposition to Penn's proposal.

They expressed doubts that the video slot machine games would produce as much additional revenue as lottery officials are forecasting. They said the result is that retailers could end up with less money because of the proposed reduction in commission rates.

Later in the day, however, school advocates met with Penn to make their case that it would be reasonable to cut video lottery commissions by more than half.

Jonah Edelman of the advocacy group Stand for Children said that slashing the rate to 15 percent of net sales would produce an additional $85 million for education or other programs.

The Oregon School Employees Association is suing to overturn the rates approved last March saying the payouts are excessive and voters who approved the lottery in 1984 never intended it to be a windfall for bar owners.