Brief ⁽¹⁾

SB 156 would enact the "Kansas Gaming Revenue Recovery Act" and authorize the Kansas Lottery to conduct games on "electronic gaming machines" at qualified parimutuel racetracks. The bill would earmark all revenue from those games and establish an oversight framework involving both the State Lottery and the Racing and Gaming Commission. Major provisions of the bill include the following.

• The bill would require the executive director of the Lottery to enter into contracts with qualified parimutuel licensees for the operation and management of electronic gaming machines at racetracks.
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  • The contracts could not limit the days or hours of operation or the number of the gaming machines.
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  • The contracts would be for the term of the existence of the Lottery and would renew automatically with each extension of the Lottery.
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  • The gaming machines could not include any casino table games.
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  • Progressive games would be permitted.
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• Voters in the county in which the racetracks are located would have to approve the question of allowing electronic gaming machines.
• • The question could be placed on the ballot by the County Commission or as a result of a petition signed by at least 10 percent of the voters who voted for Secretary of State at the last election for that office.
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• Oversight and regulation of the electronic gaming operations would be provided by both the State Lottery and the Racing and Gaming Commission.
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  • The Lottery and Racing and Gaming Commission would be authorized to examine the books, papers, and other documents, and inspect machines and facilities to determine compliance with the act.
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  • Any person providing electronic gaming equipment or services would have to be licensed by the Racing and Gaming Commission.
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  • The Racing and Gaming Commission would have to require an annual audit of each operator contracting with the Kansas Lottery. The audit would have to be conducted by a licensed accounting firm approved by the Commission at the expense of the operator.
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  • Three years after electronic gaming machines begin operating at each track, the Racing Commission would be required to prepare an economic impact report for the Legislature. That report would have to:
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The cost of the report would be financed from the Electronic Gaming Machine Operation and Regulatory Fund.

• The Lottery would hold the license for all software programs utilized for the games. The track owner/manager would be the sublicensee.
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• The Lottery would approve the type of gaming machines used. The Racing and Gaming Commission would be required to issue a certificate of authority for each machine before it could be used.

• Electronic gaming machines would have to pay out an average of at least 87 percent of the amount wagered, be linked to a central communication system, and be on-line and in constant communication with a computer located in an office at the racetrack.
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• Tracks where gaming machines are located would have to meet statutory requirements for live racing.
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• Net machine income (wagers minus winnings) would be distributed as follows:
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  • 1 percent for the Lottery and Racing Commission's regulatory expenses;
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  • ¼ percent to the State Gaming Revenues Fund (the fund to which Lottery and Parimutuel revenues are currently credited);
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  • 3½ percent, or a minimum of $1.6 million per year, for live horse racing purse supplements allocated to quarter horse and thoroughbred accounts (amounts allocated to each of the accounts would be based on the average of the preceding three years' live race starters in the state);
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  • 3½ percent for purse supplements for live dog racing;
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  • 30 percent to the State General Fund; and
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  • the balance to the track owner/managers.
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• Electronic gaming machine games would be exempt from sales tax.
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• No taxes, fees, charges, transfers, or distributions could be made or levied against net machine income, except as provided by the act.
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• County home rule power would be limited regarding electronic gaming devices.
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Background

The bill was requested for introduction by Senator Steineger. Major proponents of the bill are the licensed parimutuel track owner/managers with facilities in Kansas City, Wichita, and Frontenac. At the hearing before the Senate Committee on Federal and State Affairs, testimony in favor of the bill was presented by Senator Barone and representatives of: Kansas Greyhound Association; Kansas Thoroughbred Association; Kansas Quarter Horse Racing Association; the Unified Government of Wyandotte County/Kansas City; the Kansas Chamber of Commerce and Industry; the Kansas City Kansas Area Chamber of Commerce; the Kansas AFL-CIO; and several students at Regents universities and Washburn University.

Opposition to the bill was presented at the Senate Committee hearing by representatives of: the American Legion, Stand Up for Kansas; Kansas Clubs and Associates; Kansas Bowling Proprietors Association; several citizens.

The Senate Committee amended the bill to:

• Delete all references to the "State Technologically Literate Work Force Development Fund;
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• Increase the state's share of revenues from 20 percent to 30 percent and provide that this funding would go to the State General Fund;
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• Delete the provision regarding extension of the Kansas Lottery;
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• Make technical corrections; and
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• Make the act effective upon publication in the Kansas Register.

The Division of the Budget's fiscal note for the introduced version of the bill states that the Kansas Lottery estimates that approximately $210.6 million in revenue would go to the Electronic Gaming Machine Fund each year. There is no fiscal note on the amended version of the bill.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/bill_search.html