Brief Description: Providing long-term funding for problem gambling.

Sponsors: By House Committee on Commerce & Labor (originally sponsored by Representatives Conway, Cody, Simpson, Wood, Green, McIntire, Morrell, Kenney, P. Sullivan and Darneille; by request of Governor Locke).

House Committee on Commerce & Labor
House Committee on Finance
Senate Committee on Labor, Commerce, Research & Development
Senate Committee on Ways & Means

Background:

Most types of gambling activities in Washington are limited and regulated under the authority granted to the Washington State Gambling Commission (Gambling Commission). Certain gambling activities are authorized for nonprofit and charitable activities. For-profit businesses may conduct certain games as a commercial stimulant. Horse racing is regulated under the authority of the Washington State Horse Racing Commission (Horse Racing Commission).

Washington also has a State Lottery, which sponsors various lottery games ranging from "scratch" tickets, in which players discover if they are an instant winner, to "draw" games in which players wait for the random drawing of numbers to determine if they have won. In 2002, legislation was enacted to allow Washington to join the multi-state "shared game" lottery.

Uses of Lottery Revenues

Proceeds from the sale of all State Lottery products are deposited in the State Lottery Account. Until 1996, these proceeds, after payment of prizes and expenses, were deposited in the State General Fund. Beginning in 1996, a portion of State Lottery proceeds has been dedicated to assist with paying the principal and interest on bonds used to construct various sports stadiums. When the voters approved Initiative 728 in 2000, the State Lottery proceeds were redirected from the State General Fund to various education funds. In 2004, the net revenues from lottery games allocated for education were directed to the Education Construction Fund.

Problem Gambling Studies

Various studies funded by the Washington State Lottery Commission (Lottery Commission) have identified problem gambling issues. For example, a 1999 study commissioned and funded by the Lottery Commission found that 5.1 percent of Washington adults had experienced gambling problems or compulsive gambling at some point in their lives, with 2.3 percent reporting such problems in the year immediately preceding the survey. A similar Lottery Commission study, also completed in 1999, indicated that 7.5 percent of adolescents were at risk of developing gambling problems and 0.9 percent were problem gamblers.

Funding for Problem Gambling Treatment, Problem Gambling Public Awareness, and Hotline

The legislation authorizing Washington to participate in the shared game lottery also established a program in the Department of Social and Health Services (DSHS) for the treatment of pathological gambling. The program was to serve people needing treatment but unable to afford it. Treatment under the program was limited to funds available to the DSHS.

For fiscal year 2003 only, the Legislature provided $500,000 in revenue from the shared game lottery for this pathological gambling treatment program. The program operated for eight months, from November 2002 through June 2003, subsidizing treatment for 203 problem gamblers and 23 family members of problem gamblers, and providing training on treatment of problem gambling for 25 mental health professionals. The funding for the program was not extended.

The Washington State Gambling Commission, the Lottery Commission, and the Horse Racing Commission are jointly responsible for developing informational signs and maintaining a toll-free hotline telephone number for problem and compulsive gamblers. The signs advertising the hotline telephone number are posted in establishments that conduct gambling activities. The three agencies are also authorized to contract with qualified entities to provide public awareness, training, and other services related to problem gambling. Since 1991, the Lottery Commission and the Gambling Commission have spent an estimated $3 million on problem gambling education and awareness services.

In 2002, the Gambling Commission also contributed $150,000 to the Council on Problem Gambling to fund treatment. Since that time, however, the Gambling Commission has been advised that the statute authorizes expenditures only for public awareness and the hotline telephone. For these activities, the Gambling Commission contributed $150,000 for fiscal year 2004-2005. In November 2004, the Gambling Commission adopted a rule imposing a problem gambling fee on its licensees. This new fee takes effect June 30, 2005, but expires if the Legislature appropriates funds for the problem gambling program.

The Council on Problem Gambling has also received contributions from various tribal governments, including about $60,000 in 2001 and nearly $164,000 in 2002. Private gambling interests have also contributed about $64,000 in fiscal year 2003 to the Council.

Business and Occupation Taxes

The business and occupation (B&O) tax is Washington's major business tax. The tax is imposed on the gross receipts of business activities conducted within the state. Revenues are deposited in the State General Fund. A business may have more than one B&O tax rate, depending on the types of activities conducted. Examples of some of the B&O tax rates that apply to Washington businesses include: retailing, 0.471 percent; manufacturing and wholesaling, 0.484 percent; and services, 1.5 percent. Those covered businesses not otherwise subject to a specified tax rate pay the B&O tax at the rate of 1.5 percent.

The B&O tax does not permit deductions for the costs of doing business, such as payments for raw materials and wages of employees. There are, however, exemptions for specific types of business activities, including an exemption for the business of conducting horse race meets.

Summary:

The Problem and Pathological Gambling Treatment Program

The Problem and Pathological Gambling Treatment Program (Program) within the Department of Social and Health Services (DSHS) is revised. The Program is expanded to cover:

• the prevention, as well as the treatment, of problem and pathological gambling;
• the training of professionals in identifying and treating problem and pathological gambling; and
• the treatment of family members of problem or pathological gamblers who are unable to afford treatment and are targeted by the DSHS as most amenable to treatment.

The DSHS must establish an advisory committee to assist in designing, managing, and evaluating the Program's effectiveness. Committee members must include, at least, persons knowledgeable in the field of problem and pathological gambling and persons representing tribal gambling, privately owned non-tribal gambling, and the Washington State Lottery.

The DSHS may contract for services to be provided under the Program.

Funding for the Problem and Pathological Gambling Treatment Program

Gifts and Grants

The DSHS may solicit and accept gifts of money or property, grants, or funds from other private or public sources, including tribal governments.

Washington State Lottery Transfers

Beginning in fiscal year 2006, the Lottery Commission must transfer certain amounts from the shared game lottery revenue to the Problem Gambling Account. In fiscal year 2006, the amount transferred must equal 0.1 percent of net receipts, defined as the revenue received from lottery and shared game lottery ticket sales minus the payments to winners. In subsequent fiscal years, the amount transferred must equal 0.13 percent of these net receipts.

Business and Occupation Taxes

A new B&O tax is imposed on persons engaging in the business of operating contests of chance (such as social card games, bingo, raffles, punchboard games, and pull-tabs, but not state lottery games or amusement games), or conducting horse race meets. In fiscal year 2006, the amount of the tax is 0.1 percent of a business's gross income derived from contests of chance or, in the case of a horse racing business, of the gross income derived from parimutuel wagering. In subsequent fiscal years, the amount of tax is 0.13 percent of that gross income. This new tax does not apply to businesses operating contests of chance that have gross gambling income under $50,000 per year.

While this new B&O tax is in effect, the Gambling Commission is prohibited from increasing license fees to fund a program for problem and pathological gambling. If the Gambling Commission imposes such a fee before this actl takes effect, the fee has no effect after the act's effective date. However, during any periods when the new B&O tax is not in effect, the Gambling Commission, Horse Racing Commission, and the State Lottery may contract for services to assist in providing treatment for problem and pathological gambling, and the Gambling Commission may increase license fees to fund the authorized services.

The Problem Gambling Account

The Problem Gambling Account (Account) is created in the State Treasury. Money in the Account may be spent only after appropriation and only for the purposes of the Problem and Pathological Gambling Treatment Program. Money transferred from the State Lottery Account and collected from the new B&O tax must be deposited in the Account.

Other Provisions

Pathological gambling and problem gambling are defined.

Various technical changes are made, including deletion of expired requirements relating to transfers of funds for the previous problem gambling treatment program and to reports to the Legislature.

Votes on Final Passage:

House   57   39
Senate   36   12   (Senate amended)
House   63   32   (House concurred)

Effective: July 1, 2005