FISCAL NOTE

Date Requested: February 19, 2020
Time Requested: 01:42 PM

3194	Introduced	HB4892
Agency:	Lottery Commission, WV
CBD Number:	Version:	Bill Number:	Resolution Number:
CBD Subject:	Taxation

FUND(S):

State Lottery Fund; Excess Lottery Revenue Fund

Sources of Revenue:

Special Fund

Legislation creates:

Creates New Fund: Personal Income Tax Reduction Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

Summarize in a clear and concise manner what impact this measure will have on costs and revenues of state government. HB 4892 diverts funds from both the State Lottery Fund and the State Excess Lottery Revenue Fund that may in the future have an adverse impact on bond ratios and the levels of revenue available for appropriation to important programs. Lottery anticipates that additional revenue, if any, from the sources listed in this proposed legislation would offset declines in other sources thereby allowing bond ratios and current levels of appropriation to be maintained. In other words, HB 4892 does not take into account that revenue levels fluctuate year-to-year such that dedication of revenue to a statutorily created fund would have an adverse effect on funds available to maintain bond ratios and programs for seniors, education etc. Lottery cannot reasonably foresee the amount of revenue at issue as some of the revenue is not a new stream of income and other anticipated revenue is not codified.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2020 Increase/Decrease (use"-")	2021 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	0	0
Personal Services	0	0	0
Current Expenses	0	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	0	0
2. Estimated Total Revenues	0	0	0

Explanation of above estimates (including long-range effect):

Please explain increases and decreases in personal services, current expenses, repairs and alterations, assets, other costs and revenues, including assumptions and data sources and delineation between start-up and ongoing costs. Please also include a long-range schedule of costs and revenues if fiscal impact is expected to vary in future years. KENO: HB 4892 creates a personal income tax reduction fund in a new section of the code and diverts revenue from a number of Lottery revenue streams to that fund. New subdivision §11B-2-33(b)(2) diverts the net amount of the state’s share of gross revenue from the play on “Travel” or “Keno” (Keno) in non-ABCA licensed establishments authorized by the Legislature in SB 27, passed in the 2019 Regular Session. Currently, Lottery has 240 ABCA licensed establishments offering Keno with sales representing 1.9% of all traditional lottery sales. Pursuant to SB 27, Keno Go will be available at all traditional lottery establishments (totaling 1457 as of December 2019) beginning in May of this year. Please note that all Keno revenue is deposited in the State Lottery Fund which provides priority funding for Economic Development Authority Bonds, School Building Authority Bonds, and Community and Technical College Bonds as well as funding for the Department of Education and the Arts, the Division of Natural Resources, the Division of Culture and History, the Division of Tourism, the Library Commission, the Higher Education Policy Commission, the Department of Education, the Bureau of Senior Services, and Veterans. In effect, HB 2892 would divert all Keno revenue from these additional 1247 retailers that will come online in May to the personal income tax reduction fund, thereby reducing revenue available for allocation in the State Lottery Fund. LVL OPERATOR AS RETAILER: In new subdivision §11B-2-33(b)(3), HB 4892 would divert revenue received from LVL operators who are now permitted by statute to become licensed LVL retailers in up to 10 locations pursuant to HB 2191 passed in the 2019 Regular Session. Currently, Lottery licenses 34 LVL operators and 1,235 LVL retailers. Note that all LVL revenue goes into the State Excess Lottery Revenue Fund, which supports priority funding for the senior citizen property tax, Higher Education Improvement Bonds, School Building Authority Bonds, Economic Development Fund Bonds, the Water Development Authority, Cacapon Bonds, and Park Bonds. The Excess Lottery Revenue Fund also supports, among many other funds, Promise Scholarships, the Infrastructure Council, the WV Division of Human Services, the State Debt Reduction Fund, and Capitol and Cultural facilities improvement funds. Under current law, only a certain number of permits are available, and most operators have all of their permits active at current retail locations. As of the filing of this fiscal note, Lottery has 8008 outstanding permits, with 7,552 active machines at retail locations. Since the passage of HB 2191, most operators opening retail locations have been through buyouts of existing retail locations. In other words, operators are becoming retailers through the purchase of already approved and active locations such that the revenue from these purchases is not new income from the opening of new locations. As such, the effect of HB 4892 would be to divert existing revenue from current LVL retailers that now goes into the Excess Lottery Revenue Fund for bond payments and appropriations for Promise Scholarships and other programs, to a statutorily created fund. This would possibly cause a reduction in revenue to the Excess Lottery Revenue Fund from hundreds of locations. SATELLITE LOCATIONS: New subdivisions §11B-2-33(b)(4)(5) & (6) would divert revenue from racetrack video lottery, racetrack table games, and sports wagering, respectively, that is generated by “a secondary location” of a licensed racetrack, also known as a “satellite casino.” At present, West Virginia Code does not authorize secondary locations for the four racetracks operating in the state, and no legislation to authorize these locations is under consideration. Therefore, Lottery cannot provide specific projections for this hypothetical revenue stream. Legislation proposed in the 2019 Regular Session, HB 2901, would have authorized one secondary location in the same county where the racetrack licensee is located. In effect, passage of that bill would not have generated new revenue. Rather, it would have maintained, at best, revenue at the one racetrack interested in a secondary location because of major road construction taking place over a number of years projected to interfere with the number of patrons visiting its primary location. INTERACTIVE GAMING: New subdivision §11B-2-33(b)(7) would divert the net amount of the state’s share of gross revenue from interactive gaming (I-Gaming) at both primary and secondary locations. While the Legislature authorized I-Gaming through the passage of HB 2934 in the 2019 Regular Session, I-Gaming will not be offered until sometime later this year at the earliest. West Virginia Code authorizes the Lottery to file an Emergency Rule before June 30 of this year. HB 4892 would divert all revenue derived from I-Gaming from the West Virginia Lottery Interactive Wagering Fund. Lottery anticipates that the 15% privilege tax authorized in W.Va. Code 29-22E-16, which allocates .25% to the pension plan for the employees of the licensed racing associations in the state and the balance to the State Lottery Fund, would have a stabilizing effect on the State Lottery Fund to help maintain revenue already allotted for bonds and special programs for seniors, veterans, and education.

Memorandum

Please identify any areas of vagueness, technical defects, reasons a bill would not have a fiscal impact, and/or any special issues not captured elsewhere on this form.

Person submitting Fiscal Note: Tracy L. Webb, General Counsel
Email Address: twebb@wvlottery.com