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MERCER: Two to watch in ’14 on video lottery

PIERRE — Will this be the legislative session when the backers of video lottery overcome the opponents of expanded gambling?

The South Dakota Lottery Commission and the hundreds of businesses involved in video lottery hope so.

They held several strategy sessions in the past year, outlining their goals to increase the money they get from players.

A better bottom line for video lottery means three things.

The state treasury and the businesses will split more money. The players will lose more money.

Every dollar lost in the privately owned machines is split 50-50 with state government.

The 2014 legislative session lands in an election year. Gov. Dennis Daugaard is up for a second four-year term and all 105 legislative seats are up for their usual two-year terms.

There isn’t any question after the past three years that the Daugaard administration wants more money from video lottery.

That can best be seen from the appointments the governor made to the commission, the hiring of a new assistant director for the lottery’s central office and the regular visits that state Revenue Secretary Andy Gerlach makes to the commission meetings.

The days of easy growth ended about 10 years ago, and the sit-back approach was scrapped after the 2010 smoking ban took effect.

The commission didn’t offer legislation this session. Instead the commission is openly backing two bills that are pieces of the agenda to make more money from video lottery.

The Senate and the House of Representatives will take their first votes on those measures in the coming days.

The Senate Commerce Committee voted 5-2 Thursday to endorse legislation from Sen. Dan Lederman, R-Dakota Dunes. It would increase to 15 the maximum number of video lottery machines in an establishment.

The limit since video lottery began in the late 1980s has been 10. Lederman’s bill would require that any machine above 10 had to use new software technology.

The committee last year voted 7-0 against a similar bill from Lederman seeking 14 machines. That might have been a result of other political circumstances.

The Senate had been friendly to the idea two years ago. Senators in 2012 approved a 14-machine bill from Sen. Bob Gray, R-Pierre, on a 24-6 vote.

Then Gray’s bill died in the House State Affairs Committee, where it was set aside 7-4.

The lottery administration is struggling — and has been for many years — with the workhorse technology of the VLC 8700 terminals that players clearly favor. The 8700s run and run and run, no matter that they have been declared officially obsolete.

The commission and the administration want to get more new machines with new technology into the bars and convenience stores and mini-casinos that dot South Dakota.

But as long as the 8700s keep working, the 10-machine limit constrains the modernization push.

The hearing by the Senate committee featured commissioner Chuck Turbiville, a former legislator from Deadwood, and the lottery’s assistant director Clark Hepper on the same side as the lottery businesses.

Representing the businesses were long-time lobbyists such as Pierre attorney Bob Riter Jr., Dean Krogman of Brookings, Sioux Falls lawyer Tim Dougherty and Larry Mann of Rapid City.

The opposition came from conservative lobbyists Cindy Flakoll for Concerned Women of America and Dale Bartsher from the South Dakota Family Heritage Alliance.

The second piece moving to a vote in the House in the next few days would allow the Lottery Commission to increase the $2 bet limit to as much as $5.

The commission also would be allowed to set rules for free play, similar to Deadwood casinos and tribal casinos. It also would remove the $1,000 maximum award.

In this instance, the commission is trying to make video lottery more competitive with other gambling locations in South Dakota and neighboring states. Rep. Dick Werner, R-Huron, is prime sponsor of the bet-limit bill, HB 1246.

Werner previously served on the Lottery Commission. He was part of its new wave of members who wanted more aggressive approaches to making more money for state government from the lottery’s array of products.

The House Commerce Committee endorsed Werner’s bill 9-4 Wednesday.

Last year the Legislature gave authority for penny machines.

The Senate agreed with the South Dakota Lottery’s proposal 30-5. But it wasn’t the easiest sell in the House, where representatives approved it 39-28. They needed 36.

If the Werner bet-limit bill makes it through the House in the next few days, its lead sponsor in the Senate next will be Lederman.

And if the Lederman machine-numbers bill makes it through the Senate in the next few days, the lead sponsor in the House next will be Werner.

Dick Werner and Dan Lederman will be the legislators to watch on this issue this session.