CHARLESTON -- The House Finance Committee decided Tuesday it would rather tax video poker machines for teachers' raises than college scholarships, the second rejection this week of Gov. Bob Wise's key legislative initiative.
Committee members voted 16-9 to endorse a reworked version of the video poker bill, HB2205, that also cuts the amount of tax revenue the machines would generate.
An administration official expressed concern over the tax rate cut.
"To lower the tax rate, we can't fund the programs that we need to fund," said Alex Macia, Wise's general counsel.
The changes could win more support for the bill among House members, who are expected to consider it later this week.
"More members are interested in doing the pay raises than in doing something else with the money," said House Finance Chairman Harold Michael, D-Hardy.
The committee's bill would direct the $22 million expected revenue from the machines toward Wise's $27 million pay raise package for teachers, correctional officers and public employees. It also provides pay raises for State Police. The raises would take effect Jan. 1, 2002.
House Speaker Bob Kiss said removing PROMISE from the bill is a technical change that makes funding the program a "budgetary issue instead of a statuary issue."
"I think what's happening here is the Legislature is saying we want to retain control of what this program costs," said Kiss, D-Raleigh.
On Monday, the House Education Committee endorsed a measure that would change PROMISE from a full college scholarship to a $500 a semester grant. It also would expand program eligibility requirements.
Kiss said the actions do not mean the Legislature is rejecting Wise's goal of funding PROMISE.
"If a budget passes the House with no funding for PROMISE, then you can make that argument," he said. "I think it's entirely too early to say it's a rejection of the governor's proposal."
Wise spokesman Bill Case said that that if PROMISE is not funded, "there will be no budget." When asked if that means Wise would veto the budget if PROMISE is not funded, Case said: "Draw your own conclusions."
Although the changes may generate some tension between lawmakers and Wise, discussion and compromise should result in a better bill, Kiss said.
The committee cut the initial tax rate from Wise's proposed 42 percent to 34 percent.
Wise had proposed that 4 percent of the revenue go to the Lottery Commission. The committee's substitute provides 2 percent for the commission and 2 percent to city or county governments.
Case said Wise opposes reducing the percentage allocated to the Lottery Commission "because he thinks enforcement is important."
The revised tax rate would increase incrementally to 42 percent, depending on the amount of money generated by each machine. Wise had proposed that the tax rate increase to 52 percent in 2003.
Wise estimated his tax structure would raise about $22 million this year, $110 million in 2002 and $125 million in 2003. Lottery Commission Director John Musgrave said Tuesday he did not know how much the lowered tax rate would raise.
Finance Vice Chairman John Doyle, D-Jefferson, said the projected revenue could fall to as low as $70 million in 2002.
The administration also is concerned about changes in how the machines are allocated, Macia said.
The bill would still limit the number statewide to 9,000 and restrict their placement to areas in bars, clubs, and fraternal and veteran organizations not accessible to anyone under 21.
The machines would be restricted to no more than five at each establishment and no more than 10 at each fraternal or veterans organization.
But the distribution was changed from an open bidding system to an allocation system that gives preference to establishments "in good standing" that currently hold a Class A liquor license and own their own machines.
"The bidding process appears to retain some discretion," Macia said. "If that is so, then that is dangerous because it would open the process up to corruption."
Case said a system that had "any discretion on who gets the machines ... would be a deal breaker."
Under the reworked version, game operators and retailers would be subject to a two-year residency requirement and operators would be limited to 450 machines each instead of 900 machines.
Video poker machines are legal if used for amusement purposes. The problem, Wise and others have said, is the machines have become illegal gambling devices where players receive winnings.
Wise planned to meet with law enforcement officials Wednesday to make plans for a crackdown on the machines should the video poker bill not pass the Legislature, an administration official said.
On the Net: West Virginia Legislature: http://www.legis.state.wv.us
Alcohol Beverage Control Administration: http://www.state.wv.us/abcc