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Legislation would cut Lottery appropriations

CHARLESTON, W.Va. -- Gov. Earl Ray Tomblin has introduced legislation to cut Lottery appropriations by about $39.12 million a year for the next two years, moving that money to the state General Revenue fund, as one of several steps to close a $146 million funding gap in the 2014-15 budget.

Biggest cuts would be to the state Infrastructure Fund, thoroughbred and greyhound racing purses, and payments to cities and counties with racetrack casinos.

Revenue Secretary Bob Kiss said that, at a time when many state agencies are being asked to make back-to-back 7.5 percent budget cuts, it makes sense to look at rolling back these appropriations, which are set in state code as percentages of Lottery profits.

"Some of the logic here is everyone else is being asked to tighten their belts in excess of 15 percent," Kiss said.

As drafted, the bill (SB385) would reduce an annual $40 million appropriation of Lottery funds to the state Infrastructure Fund to  $20 million for the next two years.

It also would cut a number of annual Lottery payments that are spelled out in state code by 15 percent each year, freeing up another $19.12 million.

"They've got a gap they've got to fill, and they're looking at all their resources," Lottery Director John Musgrave said of the governor's bill.

"The governor's thinking is that everyone shares a little bit of the pain as we try the balance the (fiscal) 2015 budget and the 2016 budget," said Jason Pizatella, Tomblin's chief counsel.

The Lottery Commission illustrates the statutory appropriations as 20 buckets of Lottery funds.

As drafted, the bill exempts several buckets from the 15 percent cut, including a fund to pay down old Workers' Compensation Fund liabilities, and to pay off bonds for construction of the Capitol complex parking garage and for restoration of Capitol dome, as well as a matching fund that allows racetrack casinos to upgrade gaming areas.

The largest buckets, which would take the largest funding cuts, are: thoroughbred racing purses and development funds, which would be cut by about $6 million, payments to racetrack counties and municipalities, about $4 million; state Debt Reduction fund, about $3.2 million; and greyhound racing purses and development funds, about $2.5 million.

Kiss said the funding cuts were also recommended by Wall Street bond rating agencies, which raised concerns about declining Lottery profits, since the state has a number of outstanding bond issues that are funded through Lottery revenue.

Freeing up the funds should help debt ratios for the Lottery, and avoid hurting the state's bond ratings, he said.

"The hope is this provides some additional cushion," Kiss said. "We're preserving and protecting the very positive bond rating we have."

With increased competition from casinos in Pennsylvania, Ohio and Maryland, the state Budget Office projects that overall Lottery revenues will drop 8.9 percent in the current budget year, and another 4.7 percent in the 2014-15 budget year.

Musgrave said about $473 million of state Lottery funds, which are appropriated by the Legislature, are not affected by the proposed 15 percent cuts.

That means Lottery funding for Promise scholarships, School Building Authority, Economic Development Authority, public schools, and Senior Services, among other programs, will not be cut under the governor's proposal.

The bill will go to Senate Judiciary Committee and Senate Finance Committee for further consideration.

Reach Phil Kabler at philk@wvgazette.com or 304-348-1220.


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