West Virginia lottery funds: Time for a reset - Beckley, Bluefield & Lewisburg News, Weather, Sports

West Virginia lottery funds: Time for a reset

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Sen. Brooks McCabe, D-Kanawha, is managing member and broker of West Virginia Commercial LLC. He has been involved in commercial and investment real estate for more than 30 years, and he also is general partner of McCabe Land Co. LP. He has served in the West Virginia Senate since 1998, and is a special project consultant to The State Journal.

In a time when the gaming industry is fraught with change and competition increasing in the contiguous states, West Virginia ought to take a careful look at lottery revenues and reset its funding priorities. 

Gov. Earl Ray Tomblin has introduced legislation (SB385) that reduces funding for two years for certain accounts funded by lottery proceeds. This $39 million reduction is justified by the need to balance the budget and to address concerns expressed by Wall Street that the four-to-one coverage for bond payments could be in jeopardy in future years. 

This is a good bill and should pass in some form. The problem is that it does not go far enough. Given that there will be considerable discussion by the stakeholders of each program being cut, the Legislature should meet the challenge now and do it in such a manner that the subject does not have to be revisited in two years. If the Legislature needs to expend political capital to accomplish a task, it should make sure the debate is worth the effort. Since this legislation will be hotly debated by all parties involved, the Legislature should take the opportunity to firmly settle the issue going forward. This will allow the Legislature to move on to other areas that need attention.  

  • First, the reductions in funding need to be permanent. If the state budget and lottery revenues recover in the future, the Legislature should look at the current priorities rather than default to priorities set many years ago. 
  • Second, the Legislature should have an interim study to determine if all lottery accounts should continue to be funded. Some of the obligations were put in place to help the initial legislation expanding the lottery pass. One set of accounts that may be worth reviewing is the funding for greyhound racing purses and breeders funds. The point being, with a multiyear budget crisis facing the state, a prioritization of how the lottery funds are allocated should be considered and the appropriate changes should be made.
  • The Legislature should use this prioritization in a very real and practical manner by informing the lower priority recipients of lottery funds that they may lose their funding if, for any reason, the revenues unexpectedly drop due to the vagaries of the economy or regional competition. This will assure the four-to-one ratio for bonding purposes stays in place. It also assures that high priority funding is protected.
  • A fourth consideration should be the establishment of a reserve or buffer fund to help manage the volatility of lottery and general fund proceeds. The Budget Office estimates that lottery revenues will drop approximately 9 percent in the current year and 5 percent in Fiscal Year 2015. It is unsure when lottery receipts will start growing again. If and when excess funds are generated by the lottery, the funds should be held in reserve and used to smooth cash flow for key programs, especially one-time capital needs. 

This could be one of the first lines of defense for the state in times of need. Many legislators are focusing only on the Rainy Day Funds as the key backstop. These funds should be viewed as the last resort. Current thinking seems to be finding all kinds of creative ways to use the Rainy Day Funds. One of the backstops should be the lottery. We need to find a way to cause this to be put in place.

As West Virginia develops its "Map to Prosperity," better management of the budget needs to be part of the plan. We must not miss such opportunities as SB385 provides. A chance to re-address funding priorities for lottery proceeds is an important part of the equation. 

Let's raise the bar and seize this opportunity to put part of the "Map to Prosperity" in place for future years.