2004 Online Voters' Guide: Measures

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INITIATIVE MEASURE 892
AUTHORIZING ADDITIONAL ELECTRONIC SCRATCH TICKET MACHINES

Note: The ballot title was written by the Court and the explanatory statement was written by the Attorney General as required by law. The Fiscal Impact Statement was written by the Office of Financial Management.

BALLOT TITLE

Initiative Measure No. 892 concerns authorizing additional “electronic scratch ticket machines” to reduce property taxes.

This measure would authorize licensed non-tribal gambling establishments to operate the same type and number of machines as tribal governments, with a portion of tax revenue generated used to reduce state property taxes.

Should this measure be enacted into law?

Yes [ ] No [ ]

EXPLANATORY STATEMENT

The law as it presently exists:

The Washington State Lottery Commission was created by state law in 1982. The Lottery Commission is authorized to conduct several types of lottery, including “scratch ticket” lotteries in which printed tickets are sold, each with a cover concealing information as to whether the holder of the ticket has won a prize. The ticket holder discovers whether the ticket bears a prize by scratching the cover off. The tickets are distributed in large sets, with the winning tickets randomly scattered through each set, and sold through various business establishments.

Scratch ticket lotteries can be readily adapted for electronic play, so that in lieu of purchasing a physical ticket, the player “scratches” information displayed through graphics on a computer screen. The Lottery Commission has discretion to determine the types of lottery conducted, but cannot use electronic or mechanical devices or video terminals which allow for individual play against such devices or terminals. (This description bans traditional slot machines and similar devices.) Up to the present time, the state lottery has not conducted electronic versions of its scratch ticket games.

The revenue from the state lottery is used for various state and local public purposes after payment of prizes, agent fees, and administrative expenses. The Lottery Commission has supervisory authority over agents distributing and selling lottery tickets or conducting lottery games, but does not otherwise regulate gambling activity.

The Horse Racing Commission is a state agency with authority to permit and regulate horse racing. Horse racing establishments are permitted to operate certain pari-mutuel betting activities, which are regulated by the Horse Racing Commission.

The State Gambling Commission was created by the Gambling Act in 1973. The Gambling Commission does not directly conduct any gambling, but regulates and enforces state law against private entities that conduct gambling activities. The Gambling Act authorizes several specified types of gambling, but prohibits slot machines and certain other gambling devices. The Gambling Act does not authorize any private party to conduct a “scratch ticket” lottery.

A federal law, the Indian Gaming Regulatory Act (IGRA), defines the forms of gaming (gambling) which may be conducted by federally recognized Indian tribes. For most types of gambling, a tribe may conduct an activity if the activity is permitted anywhere within the state in which the tribal land is located. Under federal law, states must negotiate concerning any form of gaming permitted within the state, and the tribes are not subject to state law restrictions on the time, place, or manner of play. The federal law encourages states and tribes to negotiate compacts (agreements) defining the extent of tribal gaming, and provides appeal procedures if the tribe and state cannot reach agreement. A number of tribes based in Washington have negotiated compacts permitting the tribes to conduct electronic versions of “scratch ticket lottery” games. Electronic scratch ticket machines can be built to visually resemble slot machines, but their internal operation is significantly different from true slot machines. Each Washington tribe operating electronic scratch ticket lottery machines has a compact with the state specifying the number of machines which may be operated and otherwise defining how, when, and where such activities may occur. Tribal gaming revenue must be used for tribal government operations, providing for the general welfare of the tribe, promoting economic development, donations to charity, or funding operations of local government agencies.

The state levies a property tax for the benefit of the common school system. The statutory rate is $3.60 per thousand dollars of assessed value upon the assessed valuation of all taxable property within the state. The Department of Revenue is responsible for adjusting this rate in each county to reflect a statewide equalization of property tax rates. Existing law limits increases in the state property tax levy to the lesser of 101% of the highest amount levied in the three previous years or the inflation rate for personal consumption expenditures as determined by the U.S. Department of Commerce.

The effect of the proposed measure, if it becomes law:

This measure would authorize non-tribal gambling establishments to operate electronic scratch ticket gambling machines of the same type as authorized in state-tribal gaming compacts. The term “non-tribal gambling establishments” would include any establishment licensed by the Gambling Commission to conduct a gambling activity, or any establishment licensed by the Horse Racing Commission. The total number of machines authorized for the non-tribal establishments would be equal to the total number of machines authorized for tribes in state-tribal compacts.

The measure would direct the Lottery Commission to operate an electronic scratch ticket lottery in which non-tribal gambling establishments could participate through the installation of electronic scratch ticket machines (player terminals) in the businesses where they are authorized to conduct other gambling activities. The largest 40 operations conducting bingo games and the largest house-banked card rooms would be authorized to use 125 player terminals per licensed location. Other establishments would be allocated smaller numbers of terminals as described in the measure. The Lottery Commission would regulate the conduct of the lottery, including the allocation of terminals to individual licensees.

The measure would require that the prizes to the holders of winning tickets or shares in the lottery be at least 75% of the gross annual revenue from electronic scratch ticket games. The remainder of the revenue would be defined as the “net win.” Of this net win, 65% would be retained by the individual licensee. The remainder would be placed in an electronic scratch ticket account. Thus, at least 75 cents of each dollar of electronic scratch ticket revenue would be paid out as winnings, 16 cents could be retained by the licensee, and the remainder (about 9 cents) would be placed in the electronic scratch ticket account.

Of the money placed in the account, the Lottery Commission would be authorized to use amounts reasonably necessary to administer the electronic scratch ticket games, the central computer used in the games, and related accounting and auditing functions. After deduction of administrative expenses, the money in the electronic scratch ticket account would be further allocated as follows. One percent (1%) would be dedicated exclusively for distribution to a contractor to pay for services associated with problem gambling. The remaining 99% would be transferred to a special account in the state treasury named the “equal treatment equals lower property taxes account.” Beginning with the state property tax levy for collection in the year 2007, the total state property tax levy would be reduced by the previous year’s gross deposits in this account.

Play of electronic scratch ticket games would be restricted to players 21 years old or more. Electronic scratch ticket licenses could not be issued to convenience stores or other locations readily accessible to minors. Sales would be limited to establishments licensed to conduct other gambling activities, and establishments losing their gambling licenses would also lose their licenses to participate in the electronic scratch ticket lottery. The Lottery Commission would be authorized to establish rules governing the conduct of the electronic scratch ticket lottery.

Washington Secretary of State
520 Union Avenue SE, PO BOX 40220, OLYMPIA WA 98504-0220
(360) 902-4151