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October 8th, 2008 COREY PEIN | News Stories
 

Unlucky Strike

The Oregon lottery is going into detox—and our state budget is along for the smoke-free ride.

     
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It’s 11:30 am on a Friday at Asian Garden, a strip-mall karaoke joint next to a Beaverton Safeway.

Seated at the bar is Sally Runyon, a 50-year-old divorced mother of two, who is just off her early-morning bookkeeping shift at a trucking company.

She has a second income from an alterations business in outer Southeast Portland, and she’s well dressed, with a black Nordstrom sweater and a gold bracelet she found in a Beverly Hills pawn shop.

Her third income—when she’s lucky—is the pile of Keno tickets spread out on the bar next to her glass of Bombay Sapphire.

“My family told me that as a kid, I always had a deck of cards in my hand,” she says.

Runyon fires up a Benson & Hedges and watches the LCD monitor overhead, waiting for the balls to land on her numbers on the grid. She used to wait five minutes between Keno draws. But since 2004, after the state Legislature asked the Lottery to gin up more money, the draws have come every four minutes, from dawn until last call.

Between draws, the screen also flashes Lottery advertisements. The 29-state Powerball jackpot is up to $200 million.

“That’d change your life in a minute,” says a gray-haired man at the end of the bar.

An hour and a half later, Runyon is roughly even on the $40 she laid down. On the other hand, she won $600 from video poker the night before. A good score, but nothing too unusual.

These days, she wagers about $500 a week.

Runyon is like many heavy gamblers, except for this: She’s a winner.

In fact, she appears to be the most regular winner in the Portland metro area. She’s claimed 205 Keno prizes worth about $494,000 since January of 2000, according to the Lottery. That doesn’t include her wagers on video poker.

“It put my son through college,” she says.

The Lottery has actually put a lot of people through college, but in a different way.

Last year, the Oregon Lottery turned a $636 million profit on $1.2 billion in sales. We’re talking Powerball and Scratch-It tickets, Keno picks, and the Lottery’s most successful product: video poker and slots or, as they are often called, “reverse ATMs.”

“We are supposed to make as much money as we can in a lawful way,” says Steven Ungar, who chairs the five-member Lottery Commission when not working as a white-collar criminal defense lawyer. “That money is eagerly spent. It’s been spent on education. A lot of economic development. A lot of job creation…arts and culture. Ports. Community development. Infrastructure. International trade—all sorts of things.”

Whether you’re a high roller or a prude, there is no denying that the Lottery has become one of Oregon’s most wildly successful enterprises. After personal income taxes, the Lottery is the single largest source of revenue for state government.

“When we had the 2001 recession, the Lottery was stable where other sources of revenue were not,” says Mazen Malik, an economist with the Legislative Revenue Office.

That’s about to change.

As bartenders know—but lawmakers didn’t fully consider—the most prolific gamblers tend to smoke. And on Jan. 1, thanks to an indoor smoking ban, Oregon’s most enthusiastic taxpayers will no longer be allowed to puff away while planted in front of a video-poker machine.

While it may save on health-care costs down the line, the prohibition stands to blow a $75-million-a-year hole in the Lottery’s profits, according to gambling industry experts who’ve tracked smoking bans from Australia to Illinois.

The story could be a footnote in the Book of Unintended Consequences:

Oregon banned smoking to keep restaurant workers from getting cancer. Yet, because the state budget leans more than ever on a small core of chain-smoking gamblers, the smoking ban means less money for schools, state parks and job creation.

Oops.

This little twist in the Lottery’s story only adds to the many ironies of state-sponsored gambling.

As Oregon expanded gambling, a known addictive product, state leaders ignored the pusher’s first rule: Don’t get hooked on your own stuff.

“We’re all addicted to the Lottery,” says Steve Novick, a liberal activist and longtime Lottery watchdog.

So when the smoking ban comes, we’ll all suffer the withdrawal.

Perhaps this comedown was inevitable. Oregon is about to enter a very peculiar phase, in which the vice it deplores threatens the vice it adores.

If Runyon represents the kind of winner every gambler hopes to become, her friend Tammy Armstrong represents the “problem” gambler Oregonians would rather not dwell on.

Armstrong, 47, has spiky hair and laminated pictures of her cats on her keychain.

She quit gambling cold turkey two years ago, after losing what she simply calls “lots of money.”

“It’s all a business,” says her husband, John Armstrong. John’s previous wife died of lung cancer, after gambling the house away on the machines at Joe’s Cellar in Northwest Portland. One day he came home from a road trip to find an unusually fat bank statement. The envelope was full of overdrawn checks. “If she hadn’t died I would’ve killed her,” he jokes.

He’s proud that his current wife, Tammy, has finally beaten the gambling thing. For a while after quitting, she was afraid to go into a bar. If she did, she would keep her back to the poker machines. Eventually their spell faded.

“You’ll never get ahead on these fucking things,” Tammy says.

“I call them illusion machines. They give you the false impression that the odds [of winning] are greater than they actually are,” says Roger Horbay, a Canadian gambling expert working under contract for Oregon’s health department. “The machines don’t meet the same standards for fairness and honesty that traditional casino games like blackjack and poker are required to meet. A [video] slot machine is more like a stacked deck of cards, or loaded dice.”

The Lottery would dispute that, of course. Besides, all the games are supposed to be “for entertainment purposes only.”

But if the Human Services Department is right, then about 75,000 Oregonians—about the same as Bend’s entire population—have a gambling problem. Video poker is usually their game of choice. Because the law requires that businesses place the machines in areas of “restricted visibility,” the gamblers are literally hidden away.

And most of those addicts never seek help. Last year, fewer than 2,000 people entered gambling treatment. They had gambling related-debts of $48.4 million—an average of $26,000 each in late credit card payments, delinquent rent, unpaid personal loans and drained retirement accounts.

The bartender walks by Tammy to replace the ashtray. Tammy says she learned how to spot the problem gamblers from her years working as a bartender.

“They don’t drink,” she says. “They just smoke.”

To get an idea how the ban on smoking will affect the Lottery—and, by extension, the state—consider what an institution it has become in just 24 years.

Ever wonder why your state income taxes haven’t gone up since 1987? Why you don’t pay sales tax? It’s partly because the Lottery’s contribution to the state budget has more than doubled over the past two decades, even when adjusted for inflation. Today it accounts for 7 percent of Oregon’s $15 billion biennial budget. Few states rely so much on gambling revenues.

“The Lottery has had an interesting progress—the trend has always been up!” says Malik, the state economist.

After the introduction of video poker, Malik says, “there was a phenomenal increase. We kept looking for a while, and saying, ‘It’s going to slow down, it’s going to slow down’—it just keeps going.”

Video slots, introduced in 2005, led to a similar spike. New games can attract people who never otherwise would have gambled.

“If you were to throw a net over eight adults, two of them are people who like gambling and seek it out. Two will detest gambling and wouldn’t do it even if you gave them money. The other four people are not going to be avid gamblers, but people who do it as a secondary thing,” says Bob Whelan, an economist who has consulted for the Oregon Lottery and tribal casinos.

Lottery funds have poured millions into state economic development projects. They pay for toxics monitoring in the Willamette River and provide 900 low-income college scholarships. They help pay for Portland’s streetcars and a state office that lures film and television producers to Oregon.

In 1995, a ballot measure passed that committed 18 percent of Lottery profits to public education. In 1998, voters amended the constitution to give state parks and natural resources a 15 percent cut. On this November’s ballot, there is a measure that also seeks to grab Lottery dollars. Measure 62 would amend the state constitution and require that 15 percent of the Lottery’s profits go to law enforcement, too.

And let’s not forget that the Lottery has proven to be a $240-million-a-year lifesaver for retailers, including 2,400 restaurants and bars across the state that house the video-gambling machines. That’s because the bar keeps at least 11 cents on every dollar that’s bet.

“This thing supports a hell of a lot of happy hours,” says Whelan, the economist.

The Lottery has also helped pay the salaries of a number of public employees, including the $174,000 salary of Lottery director Dale Penn, and the friendly claims staff at the beautiful Lottery headquarters near the Salem airport. The 13-year-old building, named after founding Lottery Commissioner Eugene “Debbs” Potts, is bursting at the seams. It houses not just hundreds of Lottery staffers, but a contingent of Oregon State Police assigned to conduct background investigations on employees and retailers.

This summer the Lottery Commission approved a $1.2 million architectural study to eventually expand the building “out a little bit and up a little bit,” says Chairman Ungar. “The Lottery has continued to expand its employee base, its revenue, and like other businesses, it needs more space.”

The smoking ban puts all this in some jeopardy. In the meantime, the Lottery Commission hasn’t been twiddling its thumbs.

The plan for next year, says Lottery spokesman Chuck Baumann, includes replacing old machines and rolling out new games with flashier graphics and sounds that should attract younger players. Come January, the Lottery will introduce a raffle, and it has been looking into “network gaming,” the next big thing out of Las Vegas. The Lottery also plans to crank up the volume of its pitch. Last year it nearly doubled its ad budget to over $10 million. Director Penn says another marketing push is in the works for next year to assist sales during the smoking ban.

The concern, of course, is that a weakening in the Lottery’s revenues will give oxygen to those who don’t like the idea of state-sponsored gambling—organizations like Ecumenical Ministries of Oregon, which believe it is morally unacceptable. Or good-government advocates who think paying taxes ought to be an obligation, not a consequence of pulling a jack-high in a video-poker game. Or those who bemoan the Lottery’s social costs, which are hard to quantify but no less real.

“People are desperate in a recession, so they’re going to gamble more. They look at that machine and say, ‘You’re going to make my life easier,’” says Dawn Nettles, a Texan who runs the watchdog site lottoreport.com. “They get down to their last $20. They say, ‘What’s that $20 gonna do me?’ So they lose that $20. They get mad. Then they go home and beat their wife. It’s a downward spiral all the way.”

None of those arguments can fully explain the path of Barbara Roberts, a 71-year-old Portland retiree who happens to have been Oregon’s first female governor.

Thirteen years out of office, Barbara Roberts is, in many circles, revered. Her post-gubernatorial career has been distinguished. With more energy than most 40-year-olds, she has written a book on coping with death, taught students at Harvard and Portland State universities, and mentored a new generation of women in politics. She campaigns selflessly for those people and causes she believes in—and is the standard-bearer for a Great Society sort of liberalism that many Democrats have given up on.

Back in 1991, then-Gov. Roberts allowed the Lottery to bring video poker to Oregon. She let the video-poker bill pass without her signature, which she said showed her ambivalence toward the game.

“It’s not, in my estimation, a particularly wise way for the state to raise money,” she says. When voters approved the Lottery, “they didn’t know what it was going to turn into.”

On leaving office, she did credit video poker—“not that I like it”—with saving the state from the ravages of Measure 5, which limited property-tax increases.

These days, however, Roberts regularly gives a little extra to the state treasury—through the bill acceptor in a video-poker machine at Kay’s Bar in Sellwood.

It’s a pastime she prefers to keep private. Roberts never played video poker until “long after” she left government, and now only “on a rare occasion.” She says she keeps close track of her spending.

“It’s just biding a little time. It gets me away from my computer, my speechwriting, my piled-up mail,” she says. “It’s fun.”

“I win and lose. Anybody who plays wins and loses,” says Roberts. “It’s the nature of the beast.”

 
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