Daily Independent (Ashland, KY)

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June 27, 2013

Lawmakers concerned about Keno game

FRANKFORT — Some key lawmakers have strong reservations about a plan by the Kentucky Lottery Corporation to introduce a Keno game this November even as the state continues to face tight revenues.

Lottery officials told the Interim Joint Committee on Appropriations and Revenue Thursday that the new game could produce as much as $30 million for state coffers in five years. That news came just ahead of news from the State Budget Director, Jane Driskell, that it’s likely the state will face “a tight growth rate” in the coming budget deliberations.

State Treasurer Todd Hollenbach, who sits on the Lottery Corporation Board, said he initiated the idea of offering a Keno game as lawmakers last spring looked for ways to fund the state’s employee pension funds because it would “generate significant revenues.”

But A&R Co-Chair Sen. Bob Leeper, I-Paducah, said he is “terribly concerned” that Keno will “dramatically increase the number of (gambling) addicts. It is just going to happen.”

Keno offers frequent payouts, every five minutes or so, and lottery officials expect to place Keno terminals in venues which offer social settings such as bowling allies and restaurants which typically don’t offer the current lottery games.

But Leeper said the availability of alcohol at many of those venues will only make it more likely addictive gamblers will be hooked by the fast-paced game.

Kentucky already has a lottery but lawmakers have generally resisted Keno games. But the Democratic House floated the idea of Keno and Internet lottery sales this spring while looking for a way to produce more money to fund the underfunded pension systems. Ultimately, the General Assembly chose to make some tax changes to fund the pension system payments.

But shortly after the session ended, the lottery board voted to introduce Keno, which according to the board’s general counsel, Mary Harville, it already has legal authority to do.

Leeper wasn’t alone in questioning the game’s temptation for gambling addicts. Rep. Jim Wayne, D-Louisville, also expressed concern but lottery officials said they’d found no existing studies showing a higher rate of addiction because of Keno which some other state lotteries offer.

Margaret “Marty” Gibbs, executive vice president of the Lottery, said the board is also exploring offering lottery sales through the Internet, a system called I-Lottery. She said two states, Illinois and Georgia, already sell lottery tickets online and Kentucky Lottery officials are watching those states closely as they evaluate whether to offer it in Kentucky.

Gibbs estimates internet games could produce $49 million for the state by Fiscal Year 23.

Sen. Sara Beth Gregory, R-Monticello, questioned why Keno is being implemented “quickly and abruptly” and said she thinks it may face legal challenges.

“It’s an entirely different game than what was contemplated in 1988 when the lottery was approved,” Gregory said.

Driskell, the budget director, told the committee she thinks the state will probably meet its revenue estimates for the current fiscal year which ends June 30.

After less than projected tax receipts in March and April, May showed improvement and June is typically a strong month.

“We are encouraged by the growth in May but we continue to emphasize we face a tight growth rate,” she told lawmakers.

On top of that, the state faces some new expenses it didn’t budget for and after five years of budget cuts the state needs to address education funding, the newly enacted requirement for full payments to the pension system and to restore the Rainy Day Fund.

Part of the problem, according to Greg Harkenrider, deputy executive director for financial analysis, is slow growth in a “narrow” sales tax base. Kentucky offers many exemptions to its sales tax for specific products and also doesn’t tax services as many states do.

Harkenrider said Kentucky’s sales tax revenues are not growing as fast as other states as the economy very slowly recovers.

That prompted Wayne to ask Driskell what Gov. Steve Beshear is doing to promote the need for tax reform, an issue he highlighted last spring in his budget address.

Last year Beshear appointed a commission to recommend changes to the tax code but he’s made no formal proposal to the legislature. One of the commission’s recommendations was to extend the sales tax to selected services used primary by higher income groups, a proposal Wayne supports.

“Tax reform is still on the governor’s priority list,” Driskell said.

RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.

 

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