Finance panel adopts VLT amendment with floor-space protections and directs new lottery revenue to schools

The Finance Division II on Monday adopted an amendment to House Bill 2 addressing the conversion of historic horse-racing machines to video lottery terminals and the disposition of resulting lottery revenue.

The amendment passed on a 4-3 voice/hand vote after members insisted on two substantive changes: keeping a 70% maximum allocation of gaming floor space for machines (rather than a proposed 90%) and directing new lottery revenue toward public school adequacy grants rather than leaving it in the broader Education Trust Fund. The motion passed 4 in favor and 3 opposed.

The measure was presented by Charlie McIntyre, Lottery Director. McIntyre told the committee he had received the most recent amendment “Saturday” and said the timing made revenue estimates difficult. “I received this information, the latest version of the amendment. I think it was Saturday,” McIntyre said, explaining staff had limited time to convert operator plans into reliable net-revenue estimates.

McIntyre and Cooley Arroyo, the lottery division’s chief compliance officer, said two features of the proposal require new or updated forecasts: the timeline for operators to convert historic horse racing (HHR) rooms to VLTs and a proposed change in the allowable share of floor space for machines. McIntyre warned the committee that changing the floor-space ratio could reduce revenue to charities that run some gaming venues: during the earlier HHR rulemaking the state negotiated a 70/30 split to protect charities’ table-game income and revenue flows to charities. McIntyre estimated—based on preliminary conversations with operators—that charities could see substantial net losses if the percentage of machines in existing rooms increased quickly.

Committee members expressed competing priorities. Several members said a lower operator take would encourage faster conversion to VLTs — increasing overall revenue — while others pressed to preserve negotiated floor-space protections for charities and to ensure lottery proceeds flow directly to district school adequacy grants as required by the State Constitution.

Representative Robson (motion maker) proposed the two edits the committee ultimately approved: replace references in the amendment to a 90% machine floor-space cap with 70%, and add language directing lottery revenues to state adequacy grants for public district schools. Representative Murray and others argued for limiting operator shares to encourage more state revenue; other members said operator economics and regional comparators informed profit splits.

The committee’s action does not itself change the statutory tax or licensing framework; it amends the version of HB 2 under deliberation. McIntyre said staff will return with revised revenue estimates reflecting the committee’s changes. The committee also asked staff to align any lottery-revenue disposition language in this amendment with related budget language being considered elsewhere in HB 2.

Members signaled the committee intends additional technical drafting before the amendment is inserted into the final bill text; staff were asked to prepare updated revenue estimates and to reconcile the amendment’s language with other House budget language.

Votes at a glance: the committee voted to adopt the amendment with the two edits (70% floor-space cap; direct appropriation to state adequacy grants). The recorded hand-count vote was 4 in favor, 3 opposed.

For now, the committee left other details — including the precise operator share (discussion ranged from 30% to 45% in practice) and timing of conversions — to staff revenue work and future meetings.