The electronic version of "one-arm bandits" is coming to Oregon bars and restaurants this summer.
Under prodding from Gov. Ted Kulongoski, the Oregon State Lottery Commission voted unanimously Wednesday to allow slot-machine-style games on the state's network of video-poker terminals.
That means more than 2,200 bars and restaurants across Oregon could offer electronic slots as soon as July 1. But first the state must persuade retailers to accept new contracts that reduce their share of video-poker profits as a trade-off.
Bar and restaurant customers have been clamoring for electronic slots since video poker was introduced in the early-1990s, said Mike McCallum, chief executive of the Oregon Restaurant Association, which represents the lottery retailers.
"This is just good business sense," McCallum said.
Now McCallum's group will enter negotiations with lottery officials to protect retailers' $164 million profits earned on video poker last year. It's unclear what monetary concessions the state lottery will demand of those retailers and how many of them will willingly amend six-year contracts inked last year for the chance to lure new customers via electronic slots.
The lottery commission heard extensive testimony Wednesday about how electronic slots will produce more problem gamblers, which can lead to more bankruptcies, divorces and neglected children. And two of the four lottery commissioners lamented that they were being pressured into a quick decision to earn money for the new state budget cycle, which begins in July.
But it was never really in doubt that the governor would get his way. He appoints the lottery commissioners and hired new Lottery Director Dale Penn two months ago.
Kulongoski set the stage for the expansion into electronic slots, also known as line games, in his 2005-07 budget proposal. Kulongoski hopes to raise $120 million from the new games and to dedicate the money to Oregon State Police. The number of state troopers on the highways has plummeted over the past quarter century because of budget cuts.
Kulongoski also made it clear that retailers should make contract concessions in exchange for the ability to woo new customers. Retailers now earn an average of 28.8 percent of video-poker profits with the rest going to the state. Many education advocates want the state to lower retailers' share to produce more money for schools.
Sen. Rick Metsger, D-Welches, unsuccessfully urged lottery commissioners to delay approving line games until retailers accept lower profits from video poker. That would give the lottery more negotiating clout, he said.
Jeff Marotta, who manages the state program that aids problem gamblers, said there's no question slot games will bring more gambling addicts.
In Oregon's tribal casinos, there are 18 slot machines for every video-poker terminal, Marotta said. One study in the Canadian province of Nova Scotia showed one out every 28 lottery players developed problems from gambling.
"Adding line games may produce as many at 8,000 additional problem gamblers," he said. That could translate into 1,000 more divorces, 1,000 more people committing crimes and an indirect cost to society of $47 million, he testified.
"The money made off this game is not worth somebody's life," said Ronda Hatefi, whose brother committed suicide in part because of his video-poker addiction.
A typical gambling addict has a negative impact on seven family members and others, she said. "That is 560,000 people in Oregon directly affected by gambling."
Phillip Kennedy Wong, who represents the Ecumenical Ministries of Oregon, also opposed the expansion into electronic slots. "Rejecting this proposal is the morally right thing to do," he said.
Marotta urged the commissioners to consider measures to prevent addiction to lottery games. Video machines could display the dollars players have plugged into the machines rather than credits earned from winning poker hands. Machines could be programmed for an automatic pause after 20 minutes, so a player can assess how much they've won or lost.
Lottery commissioner Lisa Noah said the state should pursue tax reform rather than depending on the lottery to solve its budget problems.
But the "Pandora's box is open" from state-sanctioned gambling, she said. "Until (tax reform) happens, we need to look at alternative sources of revenue."
No rubber stamp
Commission chairman Kerry Tymchuk said the panel isn't a "rubber stamp" for the governor, but must defer to a governor and vast majority of lawmakers who appear to support electronic slots.
"The governor has not asked for a massive expansion of legalized gambling here in Oregon," Tymchuk said. Rather, the lottery will be adding a new game onto the six video-poker terminals at bars and restaurants hosting the games.
In the coming weeks, the lottery will prepare to add the new games and will consider ways to reduce gambling addiction, Penn said.
Tymchuk urged lottery retailers and education backers to "lower their voices" in the coming fight over retailer profits. He also signaled that the lottery won't seek the aggressive reduction in retailer profits that school-funding advocates want. Tymchuk stressed that it's not proper to milk more money from retailers just because the state budget is so tight.
The lottery's relationship with retailers, he said, is a "partnership" rather than a "dictatorship."