Illinois May Be Forced To Re-Pass Video Gaming Act

Posted On: 1/31/2011

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SPRINGFIELD, IL -- The Illinois state Legislature may be forced to attempt to pass the state's Video Gaming Act for a second time -- this occasion as a standalone law -- more than 18 months after the bill was originally passed as part of a comprehensive package of bills.

The state's Appellate Court ruled on Jan. 27 that a July 2009 omnibus legislative package that included the Video Gaming Act was unconstitutional because the Illinois constitution forbids lawmakers to bundle unrelated bills together in a single vote.

The Video Gaming Act legalized operator-run video lottery terminals. The resulting VLT market, expected to launch by the second half of 2011, was projected to comprise 40,000 to 50,000 networked poker games that would generate anywhere from $375 million to $500 million a year in taxes for the state. | SEE STORY

The Illinois Coin Machine Operators Association had lobbied for VLTs since the 1980s. ICMOA and other amusement professionals regarded passage of the Video Gaming Act as an historic victory for the industry, both locally and nationally. Operators nationwide hoped to emulate ICMOA's success in their own states.

Following the Jan. 26 appeals court verdict, state Attorney General Lisa Madigan quickly filed a motion for an immediate stay of the ruling, pending an appeal to the Illinois Supreme Court. Gov. Pat Quinn, who signed the original omnibus bill, said he would file the appeal right away. Observers said a ruling on the stay motion could be issued as soon as Thursday, Feb. 3.

A spokesman for House Speaker Michael Madigan (D-Chicago) said legislative leaders expect the state Supreme Court will eventually find that the omnibus bill did not violate constitutional requirements. Everything in the bill is related to a plan to raise $31 billion to build roads, bridges and schools statewide, he said.

But if the high court rules against the omnibus bill, state Sen. Matt Murphy (R-Palatine) said VLT supporters may find it difficult to round up votes in the General Assembly to pass the Video Gaming Act as a standalone bill. That's because the law has encountered very strong resistance since its original passage, Murphy said.

About 80 cities and counties have voted to opt out of participation in the planned VLT market. The Illinois Gaming Board has strongly criticized elements of the original act and follow-up enabling legislation, saying it would be too easy for convicted criminals and organized crime to get involved in the VLT market.

The Chicago Crime Commission and former FBI agents have also charged that any legalized video poker market would inevitably be corrupted by the mob. Such claims have received widespread publicity in local Illinois newspapers, particularly those in Chicago.

In addition to the Video Gaming Act, the 2009 omnibus bill included a variety of fundraising measures. Selling off the state lottery to a private owner and raising taxes on liquor, and other commodities, are among them.

The omnibus bill was challenged in court by the well-connected owners of a large liquor distributorship that objected to this tax hike. The family of Chicago Blackhawks owner J. Rockwell "Rocky'' Wirtz, an investor in the Chicago Sun-Times Media Group, is in the liquor wholesale business. They own Wirtz Beverage Illinois LLC.

Illinois had already borrowed $4 billion on projected revenues from the omnibus bill and awarded new construction contracts, valued at $3.9 billion, on the same basis. Illinois was also planning to borrow an additional $5 billion against anticipated revenues. Those funds, plans and projects are now in jeopardy due to the Jan. 26 ruling, officials said.

The appeals court verdict has also thrown the Illinois VLT market and its planned participants into deep uncertainty. One industry analyst said Illinois VLT sales were expected to account for 40% of all U.S. slot machine sales in late 2011 and early 2012 -- sales that now may not happen.

Consequently, International Game Technology, Bally Technologies and WMS Industries, among other VLT manufacturers that plan to supply the Illinois operators, may have to change their earnings projections and guidance. And this could impact their stock value.

Some 100 Illinois amusement operators, distributors or manufacturers have already spent $5,000 each on applications for VLT licenses, state officials said. The Illinois Gaming Board is in the midst of conducting background investigations on applicants in preparation for awarding licenses.