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SALEM -- With lawmakers facing a $2.7 billion budget shortfall, few things, it seems, are untouchable. Public pensions, long protected by powerful unions, are being reduced. Minority commissions, once a symbol of Oregon's progressiveness, are on the chopping block.

Next up may be the restaurants, bars and taverns that got nearly one-third of the net proceeds from video poker machines last year. The retailers' take, called commissions, was $153 million. "There are no sacred cows this time around," said Senate Democratic Leader Kate Brown of Portland.

The Senate Rules Committee held a hearing Thursday on a bill that would slash commissions to 15 percent, from about 32 percent. That would mean an extra $75 million for schools, parks and other state programs financed with Oregon State Lottery profits, supporters say.

"I'm not saying that we should squeeze every nickel out of these commissions, but I do think that while the rest of government is being asked to sacrifice . . . we need to look at the fact that these particular amounts are too high," said Sen. Tony Corcoran, D-Cottage Grove, a labor consultant who sponsored Senate Bill 279.

But Bill Perry, an Oregon Restaurant Association lobbyist, said fewer dollars for retailers -- who averaged $75,000 a year ago -- would mean layoffs and reduced employee benefits in a state with one of the nation's highest unemployment rates.

"I don't know where people get this philosophy that this is a slush fund. . . . This is everyday operation money," Perry said. "It goes to employment; it goes to capital improvement. Any money you cut is going to cut something." The lottery generated more than $350 million in profits last year, 80 percent from video poker.

Retailers get their cut of the poker money in exchange for carrying the machines. One in four retailers took in more than $100,000 in 2002. The powerful restaurant lobby has squashed attempts to cut commissions in past sessions. But some say Oregon's fiscal crisis could spur action in a year in which another formidable group, labor unions, has taken hits as lawmakers grapple with an $11.2 billion two-year budget that's $2.7 billion short of what's needed to maintain current services.

Democratic Gov. Ted Kulongoski has said he wants to look into cutting the rates of the highest commissions. But his spokeswoman said Thursday that he hasn't taken a position on the bill. "We'll watch it and see what happens," Mary Ellen Glynn said. "Obviously, you don't want to lose jobs and hurt small businesses during a downturn in the economy."

Two similar bills have gone nowhere in the Republican-controlled House. Rep. Diane Rosenbaum, D-Portland, who sponsored one of them, said legislators should act now because lottery retailer contracts expire in June 2004. "This has to be considered; people expect us to look under every rock for money," she said. "We simply can't afford to be this generous with public funds."

Corcoran and others say they're not wedded to across-the-board reductions. Lottery commissioners plan to study the rates before they sign off on new contracts next year.

10 percent rate's effects

A 1994 study by the secretary of state's office showed that cutting commissions to 10 percent would still result in retailer profits of 16 percent to 53 percent. "Nobody wants to kill geese that lay golden eggs, but the evidence here is these geese are obese, and they would lay more golden eggs if you simply put them on a diet," said Steve Novick, an Oregon Education Department legislative coordinator who has tried to put the issue before voters.

Retailers argued that it costs money to hire security and workers to handle customers at video poker terminals. They said they might cut back on the number of terminals or lay off workers to deal with the smaller commissions.

Connie Hunt, who owns Portland's East Bank Saloon, said she spends more than 70 percent of her yearly commission on employee health insurance, holiday bonuses and salaries. The money also has paid for new wait stations, new carpets and other improvements bought from local businesses. "Those lottery dollars are invested back into our community," Hunt said. "Video poker is economic development for the little guy like me."

At least one legislator seemed unconvinced that a change is needed. Sen. Jason Atkinson, R-Jacksonville, said he's afraid of what a reduction would do to small businesses. "If you were to make it more difficult on the people who chose to do this, you'll take somebody out, and you'll probably end up with the same amount of money in the end," he said.

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