Lottery surpasses $1 billion in sales.

Byline: David Steves The Register-Guard

SALEM - New electronic slot-machine games in bars and taverns drove Oregon Lottery sales past the $1 billion mark for the first time in its 21-year history, the state agency reported Tuesday.

Spokesman Chuck Baumann said several factors contributed, including big Powerball and Sports Action sales. But he said the addition of slots, known as "line games" within the industry, was critical.

"I'd say the majority of it would be line games," he said. "The retailers wanted it for a long time, and they wanted it for a reason. It's a very popular game."

Since 1992, when the lottery began offering video gambling in bars, taverns and adults-only establishments, video poker was the only game available.

The overall video-lottery revenues shared by the state and the retailers jumped from $576.7 million last year to $728.8 million for fiscal-year 2006, which ended June 30. That was a 26.4 percent increase - the biggest since the start of lottery-run video gambling, Baumann said.

The lottery's sales last fiscal year reached $1.09 billion, surpassing the record of $937 million from 2005.

The boom meant more revenue to the programs that benefit from the lottery, including education, economic development and natural resources. Their share of lottery proceeds reached $483.6 million, up from $415.8 million the previous year.

The bars, taverns, gambling parlors and other retailers shared in the lottery's good fortune. In 2005, they collected commissions totaling $163.2 million after prizes were paid. In the past fiscal year, those commissions had increased to $185 million.

The increased profits for retailers came despite the Oregon Lottery Commission's decision last year to reduce their commissions, or rate of return, from 28.8 percent to, on average, 24.8 percent.

At the time, the Oregon Restaurant Association, which lobbies on behalf of those retailers, fought reductions in the commission rate. It argued that while bars had for years asked for slots, they couldn't afford the risk of rates that dropped too low.

Initially, many of the top retailers, including the Portland-area Dotty's Deli chain of gambling parlors, refused to add line games because of the lower rates. But nearly all of the biggest lottery outlets since have added slots, Baumann said.

The Oregon Restaurant Association's chief lobbyist, Bill Perry, said he was encouraged that the bottom-line returns were healthy for those businesses. However, he said, since the most profitable businesses already saw their video-gambling terminals in constant use, it was possible that they didn't reap as much of the revenue increase as did midrange retail- ers.

Perry said his association would need to study the numbers to determine among retailers that added line games, coupled with a new scheme of weighted commissions based on sales totals, if that led to the mix of winners and losers he and others warned of before slots came online.

"I think they did a pretty good job of holding people harmless," Perry said. "We just haven't seen the breakdown yet to be able to say how many."

The average retailer kept $86,813 in the past fiscal year from video lottery sales, up from $79,950 a year ago. The top retailer in 2006 was Dotty's No. 24 in Portland, with a commission of $354,600. Lane County's top retailer was Ashley's Deli in Springfield with $281,799.

The lottery commission also agreed last year to a cap meant to prevent retailers from reaping an unanticipated profit windfall, should slots prove more lucrative than projected. That cap, which will further reduce retailers' compensation rates, kicks in if video-lottery sales grow by $805 million by the second year of the arrangement, Baumann said.

With the increase reaching $729 million in just its first year with slots, he said it seemed highly likely that cap would kick in. It will reduce retailers' compensation by up to 8 percent for the high-volume outlets.

Jonah Edelman, the executive director of the advocacy group Stand for Children, pushed for lower compensation rates and the windfall-triggered cap. He said he was pleased that the safeguard would probably kick in next year. But he said the booming sales made it clear that the Oregon Lottery Commission should have gone further than it did to shift lottery profits away from bars and taverns and into public services.

"The results show we still have excessive profits being made at the expense of school children and other beneficiaries of public services," Edelman said. "So I think the debate needs to continue."