Justin D. Anderson
Charleston Daily Mail

www.dailymail.com

Amid the hubbub over the moral issues surrounding table games in West Virginia, voters might be missing the fact that a big chunk of the state's take of the revenue generated at the racetracks can't be spent on anything other than debt reduction.
"When you look at the actual law that (the Legislature) passed, they held the tracks' economic feet to the fire; I mean they spelled it out," said Kanawha County Commission President Kent Carper.
"It is an excellent example of fiscal responsibility," he said.
By the state Lottery Commission's estimate -- assuming Kanawha County voters approve a table games referendum on Aug. 11 -- lawmakers initially will have about $5.8 million to spend on various debts that have haunted the state for years, like huge shortfalls in some public pensions.
That amount would be for the latter half of the fiscal year after gaming gets under way. Millions more would be dedicated to debt reduction in the years after that.
Even more money is dedicated specifically to paying down shortfalls on promised benefits to local police and fire pensions, paying regional jail expenses and local infrastructure.
To devote table games money to financially responsible ends wasn't some eleventh-hour compromise between the Legislature and the racetracks.
"It was in the bill that the Legislature drafted," said Jim Toney, financial manager for the state Lottery. "I think the intent was always to have a component of this revenue go to debt reduction."
According to state law, racetracks that offer table games will owe the state Lottery a 35 percent privilege tax. The tax is levied on money earned off table games minus winnings paid out to customers.
The money is deposited into the West Virginia Lottery Racetrack Table Games Fund.
According to state Lottery estimates, for the latter half of 2008 and if Tri-State Racetrack in Nitro gets to offer table games, $11 million will be deposited into the fund.
Right off the top, the state Lottery can take up to three percent of this money for administrative costs.
Another 2.5 percent goes to racetrack purse funds; 2 percent to horse and dog breeding funds; and one percent is allocated to the commissions in counties where racetracks are located.
The money to the county commissions is based on how much the racetrack there made. If table games had passed in Jefferson County, which is considered a growth area, the county allocation would have been dedicated to school improvements, the law says.
Two percent goes to cities within racetrack counties. Half goes to cities, like Wheeling and part of Nitro, that have the racetracks within city limits. The other half is divided among the other cities within the racetrack counties based on population.
About 26 percent of the state's take remains after these initial distributions.
Of that, 76 percent goes right into the State Debt Reduction Fund. For 2008, this is estimated at $5.8 million.
Under the law, the Legislature has the discretion as to where this money will go. And the funds can be spent "solely for the purpose of accelerating the reduction of existing unfunded liabilities and existing bond indebtedness" the state has.
Being mindful of the state's debts has been a hallmark of Gov. Joe Manchin's administration. Just recently, Manchin sold the rights to future payments on the state's share of a massive settlement with major tobacco companies.
The money from the sale, estimated at more than $800 million, was deposited into the troubled Teachers Retirement System, a plan that promises benefits to education professionals based on salary and years of service.
That plan got into some financial trouble in part because lawmakers weren't making required annual payments into the plan, state officials have said.
Two years ago, Manchin tried to get state voters to approve the sale of up to $5 billion in bonds to address the shortfall in the plan. Voters turned him down.
Debt reduction has been a topic in each of the governor's three State of the State addresses.
The pensions of racetrack employees also will be secured with 4 percent of the remaining table games money placed in a fund managed by the state Racing Commission.
Gambling lobbyist and state Racing Association President John Cavacini said the tracks pushed for this in the bill.
"It was a part of the racetrack video lottery act and we continued that in the follow up to the table games act," Cavacini said.
Ten percent of the remaining table games fund money goes to the other counties without racetracks. Lawmakers mandated counties to use the money only to pay regional jail fees and improve infrastructure. The money is divided up equally among the counties.
The rest of the money - another 10 percent -- goes to cities in non-racetrack counties. The cities can only spend the money on police and fire pensions and infrastructure.
Cavacini said racetrack officials deemed the 35 percent tax rate as somewhat high, so lawmakers compromised by exempting table games operations from city business and occupation taxes, sales taxes and amusement taxes.
Separate from the privilege tax, all table games license fees -- $1.5 million for the initial license; $2.5 million for each annual renewal - go to the state Bureau of Senior Services for in-home health care. If racetracks don't build a 150-room hotel on the premises within three years of offering table games, a $2.5 million surcharge is added onto the license fee.
Contact writer Justin D. Anderson at justin@dailymail.com or 348-4843.