1998 HB678 Fiscal Note St Lottery Commission Video Lottery Terminals

HB 678

Department of Legislative Services

Maryland General Assembly

FISCAL NOTE

House Bill 678

(Delegate Rawlings, et al.)

Ways and Means

State Lottery Commission - Video Lottery Terminals - Revenues and Funding

This bill proposes a constitutional amendment which authorizes video lottery terminals (VLTs) at up to 10 locations in the State, provides for the distribution of revenue from video lottery terminals, creates the Education Trust Fund and other special funds, and prohibits the General Assembly from adopting any laws authorizing any additional forms or expansion of commercial gaming.

Fiscal Summary

State Effect: Special fund revenues would increase by an estimated $54.6 million in FY 1999, increasing to $428.1 million in FY 2001, the first full year of operation for all authorized VLTs. Income and other tax revenues could increase an indeterminate amount through economic activity generated by VLT operations. Expenditures could increase for education, horse racing purses, and tourism development to the extent included in future years= proposed budgets and appropriated by the General Assembly. Fee revenues will offset administrative costs of the State Lottery Commission.

(in millions)	FY 1999	FY 2000	FY 2001	FY 2002	FY 2003
SF Revenues	$54.6	$354.6	$428.1	$427.9	$427.6
SF Expenditures	--	--	--	--	--
Net Effect	$54.6	$354.6	$428.1	$427.9	$427.6

Note: ( ) - decrease; GF - general funds; FF - federal funds; SF - special funds

Local Effect: Revenues for localities with VLTs would increase by an estimated $11.7 million in FY 1999, and $29.1 million in FY 2000. In the out-years, this amount would increase by 2% annually. Expenditures would not be affected.

Small Business Effect: Meaningful.

Analysis

Bill Summary: This bill permits video lottery operations at Laurel, Pimlico, and Rosecroft racetracks, all five existing off-track betting facilities (OTBs) (in Cecil, Dorchester, and Frederick counties, and two in Charles County), and at tourist destination locations in Western Maryland and on the Eastern Shore. Licenses may only be issued at OTBs and tourist destination locations if this constitutional amendment receives a majority of the votes cast in each respective county. Video lottery licensees at OTBs may have 250 VLTs; all others may have 2,000 VLTs for a total of 11,250 authorized VLTs. The bill also establishes the Education Trust Fund (ETF), and details the programs on which expenditures from the fund may be made.

Regulation

The State Lottery Commission is the regulatory body for video lotteries. The commission shall own or lease and control each VLT, associated equipment, and the central computer. Among other duties, the commission must establish application and license fees to cover administrative costs; establish the rules, odds, and method of operation of VLTs; prescribe the grounds and procedures for reprimands and revocation or suspension of licenses; oversee the manufacture, distribution, and servicing of VLTs; require periodic financial reports from licensees; prohibit licensees from allowing minors to play VLTs; and establish the payout percentage, which must not be less than 83% on an annual basis. The commission shall also license video lottery operators, video lottery employees, service technicians, and manufacturers. The commission has the authority to inspect and examine all premises in which video lottery operations are conducted and any VLTs and associated equipment, and to seize any VLTs and associated equipment. The commission may also inspect, examine, audit and seize books, records and documents relating to a licensees VLT operations.

At least $100 million must be invested by each licensee on construction and related costs, except for OTB licensees, who must invest at least $10 million each. License holders at race tracks must provide 500 additional full-time jobs; those at tourist destination facilities must provide 800 full-time jobs; those at OTBs must provide at least 200 additional full-time jobs. If licenses are issued to tourist destination facilities, the State Racing Commission is to issue OTB permits to the license holders. All video lottery licensees must endeavor to spend 14% of the total dollars spent on construction and procurement on services and goods provided by minority businesses.

Distribution of Revenue

The first allocation of revenue is for the costs of leasing, purchasing, repair, and maintenance of VLTs and associated equipment, as well as impact aid for counties where VLT facilities are located. If, at the end of the fiscal year, the proceeds from all VLTs average $250 per day per machine or less:

! up to 47% of the remaining proceeds (after the above costs) are distributed to the video lottery facility licensee;

! 9% is distributed to the purse dedication account;

! 1% is distributed to the Maryland Tourism Development Board;

! 0.5% is distributed to holders of track licenses except those who have video lottery facilities;

! the remainder (at least 42.5%) is distributed to the Education Trust Fund.

If proceeds from all VLTs exceed $250 per day per machine, the above distribution is followed for the first $250. Of the excess, no more than half, as determined by the commission, is distributed to the VLT licensees, and the remainder (at least half) is distributed to the ETF.

Education Trust Fund

A nine-member Education Trust Fund Board, chaired by the State Superintendent of Schools, is created to oversee the allocation of expenditures from the ETF. The State Superintendent of Schools is the chairman of the board. The board is required to report to the Governor and General Assembly by November 1 each year on the beginning balance and projected revenues of the fund, multi-year commitments for operating or capital purposes, and the proposed overall budget and allocation of funds for the upcoming fiscal year. The Governor may adjust the board=s proposed allocation of funds within the overall ETF budget and purposes for which the funds are designated.

Expenditures on the following programs are authorized from the fund:

! the extended elementary education program, which is an existing program providing pre-kindergarten programs to four-year olds from low-income families;

! full-day kindergarten with before and after school care for Aat risk@ children eligible for free and reduced price meals (a new program);

! technology in education, to fully fund the Maryland Plan for Technology in Education, which calls for all schools to be wired for technology and for the provision of hardware, software, and teacher training;

! the State Library Resource Center and regional resource centers, for improved library services and technology enhancements;

! the Opportunities Scholarship Fund, for scholarships of up to the full cost of University of Maryland, College Park tuition for Maryland high school graduates and college students with B averages or higher and family incomes of not more than $85,000 (a new program);

! the State=s student financial assistance programs, to reduce waiting lists for financial assistance;

and for Maryland=s public senior higher educational institutions, expenditures from the ETF may be made for:

! the Eminent Scholar Fund, to create endowed chairs;

! raising faculty salaries to the 90th percentile of their peer institutions;

! providing and maintaining information technology infrastructure.

Expenditures may also be made from the fund for the public school construction program or any other education related purpose approved by the board. The Governor is to include in each year=s proposed budget for these programs an amount not less than the amount appropriated in the prior fiscal year.

Other Revenue Uses

The Purse Dedication Account is created to enhance purses at the racetracks. Expenditures may only be made through an appropriation in the State budget or by budget amendment, and only by the following allocation: 62.3% to mile thoroughbred purses; 7.7% to the Maryland-Bred Race Fund; 26.67% to standardbred purses; and 3.33% to the standardbred race fund.

Funds distributed to the Maryland Tourism Development Board shall be expended for statewide tourism promotion, including heritage and other tourism areas. A Compulsive Gambling Fund is established, and funded by a $350 annual fee for each VLT. The fund is to be used by the Department of Health and Mental Hygiene for a 24-hour hotline for compulsive gamblers, and to provide counseling and other support services.

State Revenues: The table below shows the estimated proceeds of VLTs and their distribution for fiscal 1999, the first year of operation, through fiscal 2001, the first year in which the full allotment of VLTs would be in operation for the entire year (numbers may not add due to rounding).

Distribution of Estimated VLT Revenues Fiscal 1999 through Fiscal 2001
	FY 1999	FY 2000	FY 2001
Vendor Costs	$10,758,000	$65,443,000	$78,750,000
Impact Aid	11,742,000	29,143,000	29,725,000
VLT Licensees	48,910,000	317,408,000	383,253,000
Purse Dedication Account	9,366,000	60,780,000	73,389,000
Tourism Promotion	1,041,000	6,753,000	8,154,000
Non‑VLT Tracks	520,000	3,377,000	4,077,000
Education Trust Fund	44,227,000	287,018,000	346,558,000
Gross Proceeds	$126,563,000	$769,922,000	$923,906,000

These estimates are based on average proceeds per VLT per day of $225, and assume one-third of the VLTs are operational in February, 1999, one-third in July 1999, and the final third in January 2000. It is assumed that vendor costs would total approximately 8.5% of gross proceeds. The estimates show the maximum distribution to VLT licensees; the commission could distribute a lesser amount. If so, the difference would be credited to the ETF.

If the average proceeds per VLT per day were $300, the distribution to the ETF would be an estimated $481.8 million in fiscal 2001, and the distribution to VLT licensees would be an estimated $522.0 million.

Revenues would also increase an indeterminate amount through application, license, and other fees. The commission is to set these fees to cover the costs incurred in the regulation of VLTs. This revenue increase cannot be reliably determined at this time; the commission would set the fees by regulation.

19981216 President Clinton explains Iraq strike

Transcript: President Clinton explains Iraq strike - December 16, 1998

MORE STORIES:. Wednesday, December 16, 1998. • Republicans skeptical of Iraq attack on eve of impeachment vote • Clinton: Iraq has abused its final chance…

Clinton Iraq 1998

http://www.cnn.com/ALLPOLITICS/stories/1998/12/16/transcripts/clinton.html

Transcript: President Clinton explains Iraq strike

CLINTON: Good evening.

Earlier today, I ordered America's armed forces to strike military and security targets in Iraq. They are joined by British forces. Their mission is to attack Iraq's nuclear, chemical and biological weapons programs and its military capacity to threaten its neighbors.

Their purpose is to protect the national interest of the United States, and indeed the interests of people throughout the Middle East and around the world.

Saddam Hussein must not be allowed to threaten his neighbors or the world with nuclear arms, poison gas or biological weapons.

I want to explain why I have decided, with the unanimous recommendation of my national security team, to use force in Iraq; why we have acted now; and what we aim to accomplish.

Six weeks ago, Saddam Hussein announced that he would no longer cooperate with the United Nations weapons inspectors called UNSCOM. They are highly professional experts from dozens of countries. Their job is to oversee the elimination of Iraq's capability to retain, create and use weapons of mass destruction, and to verify that Iraq does not attempt to rebuild that capability.

The inspectors undertook this mission first 7.5 years ago at the end of the Gulf War when Iraq agreed to declare and destroy its arsenal as a condition of the ceasefire.

The international community had good reason to set this requirement. Other countries possess weapons of mass destruction and ballistic missiles. With Saddam, there is one big difference: He has used them. Not once, but repeatedly. Unleashing chemical weapons against Iranian troops during a decade-long war. Not only against soldiers, but against civilians, firing Scud missiles at the citizens of Israel, Saudi Arabia, Bahrain and Iran. And not only against a foreign enemy, but even against his own people, gassing Kurdish civilians in Northern Iraq.

The international community had little doubt then, and I have no doubt today, that left unchecked, Saddam Hussein will use these terrible weapons again.

The United States has patiently worked to preserve UNSCOM as Iraq has sought to avoid its obligation to cooperate with the inspectors. On occasion, we've had to threaten military force, and Saddam has backed down.

Faced with Saddam's latest act of defiance in late October, we built intensive diplomatic pressure on Iraq backed by overwhelming military force in the region. The UN Security Council voted 15 to zero to condemn Saddam's actions and to demand that he immediately come into compliance.

Eight Arab nations -- Egypt, Syria, Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates and Oman -- warned that Iraq alone would bear responsibility for the consequences of defying the UN.

When Saddam still failed to comply, we prepared to act militarily. It was only then at the last possible moment that Iraq backed down. It pledged to the UN that it had made, and I quote, a clear and unconditional decision to resume cooperation with the weapons inspectors.

I decided then to call off the attack with our airplanes already in the air because Saddam had given in to our demands. I concluded then that the right thing to do was to use restraint and give Saddam one last chance to prove his willingness to cooperate.

I made it very clear at that time what unconditional cooperation meant, based on existing UN resolutions and Iraq's own commitments. And along with Prime Minister Blair of Great Britain, I made it equally clear that if Saddam failed to cooperate fully, we would be prepared to act without delay, diplomacy or warning.

Now over the past three weeks, the UN weapons inspectors have carried out their plan for testing Iraq's cooperation. The testing period ended this weekend, and last night, UNSCOM's chairman, Richard Butler, reported the results to UN Secretary-General Annan.

The conclusions are stark, sobering and profoundly disturbing.

In four out of the five categories set forth, Iraq has failed to cooperate. Indeed, it actually has placed new restrictions on the inspectors. Here are some of the particulars.

Iraq repeatedly blocked UNSCOM from inspecting suspect sites. For example, it shut off access to the headquarters of its ruling party and said it will deny access to the party's other offices, even though UN resolutions make no exception for them and UNSCOM has inspected them in the past.

Iraq repeatedly restricted UNSCOM's ability to obtain necessary evidence. For example, Iraq obstructed UNSCOM's effort to photograph bombs related to its chemical weapons program.

It tried to stop an UNSCOM biological weapons team from videotaping a site and photocopying documents and prevented Iraqi personnel from answering UNSCOM's questions.

Prior to the inspection of another site, Iraq actually emptied out the building, removing not just documents but even the furniture and the equipment.

Iraq has failed to turn over virtually all the documents requested by the inspectors. Indeed, we know that Iraq ordered the destruction of weapons-related documents in anticipation of an UNSCOM inspection.

So Iraq has abused its final chance.

As the UNSCOM reports concludes, and again I quote, "Iraq's conduct ensured that no progress was able to be made in the fields of disarmament.

"In light of this experience, and in the absence of full cooperation by Iraq, it must regrettably be recorded again that the commission is not able to conduct the work mandated to it by the Security Council with respect to Iraq's prohibited weapons program."

In short, the inspectors are saying that even if they could stay in Iraq, their work would be a sham.

Saddam's deception has defeated their effectiveness. Instead of the inspectors disarming Saddam, Saddam has disarmed the inspectors.

This situation presents a clear and present danger to the stability of the Persian Gulf and the safety of people everywhere. The international community gave Saddam one last chance to resume cooperation with the weapons inspectors. Saddam has failed to seize the chance.

And so we had to act and act now.

Let me explain why.

First, without a strong inspection system, Iraq would be free to retain and begin to rebuild its chemical, biological and nuclear weapons programs in months, not years.

Second, if Saddam can crippled the weapons inspection system and get away with it, he would conclude that the international community -- led by the United States -- has simply lost its will. He will surmise that he has free rein to rebuild his arsenal of destruction, and someday -- make no mistake -- he will use it again as he has in the past.

Third, in halting our air strikes in November, I gave Saddam a chance, not a license. If we turn our backs on his defiance, the credibility of U.S. power as a check against Saddam will be destroyed. We will not only have allowed Saddam to shatter the inspection system that controls his weapons of mass destruction program; we also will have fatally undercut the fear of force that stops Saddam from acting to gain domination in the region.

That is why, on the unanimous recommendation of my national security team -- including the vice president, the secretary of defense, the chairman of the joint chiefs of staff, the secretary of state and the national security adviser -- I have ordered a strong, sustained series of air strikes against Iraq.

They are designed to degrade Saddam's capacity to develop and deliver weapons of mass destruction, and to degrade his ability to threaten his neighbors.

At the same time, we are delivering a powerful message to Saddam. If you act recklessly, you will pay a heavy price. We acted today because, in the judgment of my military advisers, a swift response would provide the most surprise and the least opportunity for Saddam to prepare.

If we had delayed for even a matter of days from Chairman Butler's report, we would have given Saddam more time to disperse his forces and protect his weapons.

Also, the Muslim holy month of Ramadan begins this weekend. For us to initiate military action during Ramadan would be profoundly offensive to the Muslim world and, therefore, would damage our relations with Arab countries and the progress we have made in the Middle East.

That is something we wanted very much to avoid without giving Iraq's a month's head start to prepare for potential action against it.

Finally, our allies, including Prime Minister Tony Blair of Great Britain, concurred that now is the time to strike. I hope Saddam will come into cooperation with the inspection system now and comply with the relevant UN Security Council resolutions. But we have to be prepared that he will not, and we must deal with the very real danger he poses.

So we will pursue a long-term strategy to contain Iraq and its weapons of mass destruction and work toward the day when Iraq has a government worthy of its people.

First, we must be prepared to use force again if Saddam takes threatening actions, such as trying to reconstitute his weapons of mass destruction or their delivery systems, threatening his neighbors, challenging allied aircraft over Iraq or moving against his own Kurdish citizens.

The credible threat to use force, and when necessary, the actual use of force, is the surest way to contain Saddam's weapons of mass destruction program, curtail his aggression and prevent another Gulf War.

Second, so long as Iraq remains out of compliance, we will work with the international community to maintain and enforce economic sanctions. Sanctions have cost Saddam more than $120 billion -- resources that would have been used to rebuild his military. The sanctions system allows Iraq to sell oil for food, for medicine, for other humanitarian supplies for the Iraqi people.

We have no quarrel with them. But without the sanctions, we would see the oil-for-food program become oil-for-tanks, resulting in a greater threat to Iraq's neighbors and less food for its people.

The hard fact is that so long as Saddam remains in power, he threatens the well-being of his people, the peace of his region, the security of the world.

The best way to end that threat once and for all is with a new Iraqi government -- a government ready to live in peace with its neighbors, a government that respects the rights of its people. Bringing change in Baghdad will take time and effort. We will strengthen our engagement with the full range of Iraqi opposition forces and work with them effectively and prudently.

The decision to use force is never cost-free. Whenever American forces are placed in harm's way, we risk the loss of life. And while our strikes are focused on Iraq's military capabilities, there will be unintended Iraqi casualties.

Indeed, in the past, Saddam has intentionally placed Iraqi civilians in harm's way in a cynical bid to sway international opinion.

We must be prepared for these realities. At the same time, Saddam should have absolutely no doubt if he lashes out at his neighbors, we will respond forcefully.

Heavy as they are, the costs of action must be weighed against the price of inaction. If Saddam defies the world and we fail to respond, we will face a far greater threat in the future. Saddam will strike again at his neighbors. He will make war on his own people.

And mark my words, he will develop weapons of mass destruction. He will deploy them, and he will use them.

Because we're acting today, it is less likely that we will face these dangers in the future.

Let me close by addressing one other issue. Saddam Hussein and the other enemies of peace may have thought that the serious debate currently before the House of Representatives would distract Americans or weaken our resolve to face him down.

But once more, the United States has proven that although we are never eager to use force, when we must act in America's vital interests, we will do so.

In the century we're leaving, America has often made the difference between chaos and community, fear and hope. Now, in the new century, we'll have a remarkable opportunity to shape a future more peaceful than the past, but only if we stand strong against the enemies of peace.

Tonight, the United States is doing just that. May God bless and protect the brave men and women who are carrying out this vital mission and their families. And may God bless America.

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