Kentucky Scholarships Generate Talk of Gaming

An Aug. 26 presentation on the status of the Kentucky lottery and a scholarship fund that derives money from it led to a call for more funding, even if it means legislators would have to approve expanded gambling to generate the revenue.

Dr. Joe McCormick, executive director of the Kentucky Higher Education Assistance Authority, told the General Assembly's Interim Joint Subcommittee on Licensing and Occupations the organization has more applications for scholarships than it does revenue to pay for them. He predicted that without more revenue, scholarship money might have to come from other sources.

"If the lottery revenue remains as it is, I cannot assure you that in 2007-08, you will not have a deficit in (Kentucky Educational Excellence Scholarship) funding," McCormick told members of the subcommittee.

McCormick said that of 100 ninth-grade students, only 38 would end up in college after high school. He told lawmakers that's "unacceptable" and contradicts the goals and objectives of the state, and that if revenue from expanded gambling through the lottery could put more students in college, "I urge you to vote for it."

"The more important thing is to turn that statistic around," McCormick said, "and if (expanded gambling) is the only way to get the money, I'm all for it."

Arch Gleason, president of the Kentucky lottery, reviewed figures that showed counties near the Tennessee border took a hit when that state implemented its own lottery. A slight increase in sales in other parts of the state partially offset the difference, he said.

Gleason said Kentucky faces competition from other states with other forms of gambling. He said that of lottery growth in the United States, "the states that have been more aggressive" achieved about 100% growth, while revenue in states with traditional lottery programs grew at a 19% rate.

Gleason said there is "compelling evidence" that in states in which the lottery manages video gaming programs or slot machines, the impact on traditional lottery games is "in the single digits" percentage-wise. He said it's imperative the state maintain funding for scholarship programs.

"If an expansion is done in Kentucky and through the lottery, we'd have a much better chance to minimize the impact on scholarship programs," Gleason said.

The issue of expanded gambling could be addressed at the 2006 General Assembly session in Kentucky, though officials remain noncommittal on its chances of passage. One legislator privately said he believes casino gambling has very little shot of passing next year, while others seem more willing to broach the topic.

Republican Sen. Tom Buford of Central Kentucky said it's his personal opinion that the constitutional amendment that authorized the lottery allows for an expansion of gambling--such as video lottery terminals--under the auspices of the lottery. He then asked Gleason for the lottery's opinion.

"Our opinion has been an expansion could occur by a vote of the General Assembly as far as the operation of VLTs or slot machines is concerned," Gleason said. "We never went as far as to look at the operation of casinos. That's a matter of public policy that needs to be addressed by the General Assembly."

No racetrack officials were present at the subcommittee meeting. Turfway Park president Bob Elliston, when asked where the racetracks stand on involvement of the lottery in racetrack gaming, said: "I think the racetracks are probably ambivalent on the lottery. If it became a slots-only program, clearly the lottery could serve a major function."

Elliston also said things like scholarships are major reasons for the push for expanded gambling.

The horse racing industry is formulating a strategy for the 2006 legislative session, and may have details hammered out by this fall. In 2004, the last year gaming legislation was introduced, the tracks sought full-scale casinos, but the bill was altered to add non-track locations.

The official position of the industry probably will come from the Kentucky Equine Education Project, which was formed last year to educate the public and legislators on the importance of the horse industry to Kentucky's economy. KEEP officials have indicated expanded gambling would be dealt with in 2006.