Video lottery gambling generated $105.3 million for state government in fiscal 2003 and gradually climbed to $112 million in fiscal 2008. For fiscal 2009, which ended June 30, the state’s revenue slipped to $110.4 million. The governor’s revised budget for fiscal 2010 uses the same $110.4 million figure, as does his recommended budget for fiscal 2011. The question is whether the decline is solely a reflection of the recession, or is there something deeper happening?
Video lottery officially started in October 1989. Many of the video terminals in bars and mini-casinos are the originals from 15 to 20 years ago. Players like them, but they are beat up and often don’t work the best. However, they work well enough that they still produce a low-expense stream of money for the businesses which own them. Every day one of those old VLC machines keeps working is another day that an expensive new replacement doesn’t need to be purchased.
Video lottery is one of state government’s largest sources of general revenue. Voters have repeatedly opted to keep video lottery legal in South Dakota. But with video revenue showing its first downturn, now might be the time for the Legislature to examine whether changes would be helpful. State government currently takes one-half of the money lost by players in the machines after winnings are paid. That 50 percent rate has been consistent since 1995. It would be worthwhile to learn whether old machines are becoming a deterrent to casual play because they don’t work well. If that’s the case, would it make sense to provide a new-machine credit to encourage businesses to invest in replacements?
Here’s another issue: Voters next November will decide whether the smoking ban should extend to bars, casinos and restaurants with alcohol licenses. Owners of gambling-related businesses continue to warn that South Dakota should expect a downturn in gambling revenue if the smoking ban is approved. If that happens, what should be state government’s response?
In general, this might be the time to take a fresh look at video lottery. We have 20 years of data to examine to see whether the basic structure is working. Should the limit remain at no more than 10 machines per licensed location? Should the state’s take remain at a flat 50 percent for all locations, regardless of machine numbers and play levels? Are there adjustments that should be made from the industry’s perspective and from state government’s perspective? What have been the documentable costs to society from problem gambling involving video lottery? What do players, both regulars and occasional, think and want? People are parting with about $220 million a year when they lose at video lottery. That’s big business.
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