Ecumenical Ministries v. Oregon State Lottery Commission

FADELEY, J.,

concurring in part and specially concurring in part.

I concur with the decision announced in the lead opinion but write separately because I do not think this case, which is decided on the sufficiency of plaintiffs’ pleadings alone, provides a platform for announcing an intricate scheme of rules for interpreting initiated constitutional amendments.

This case involves only the meaning of a few of the words newly enacted in 1984 in an initiated constitutional amendment, namely, the words “casino,” “costs of administration,” and “creation of jobs and economic development.” The parties make no issue or contest for us to resolve concerning methodology for use in interpreting initiated constitutional amendments. Announcing an interpretational scheme when there is no controversy results in abstract judicial legislating.

The Oregon Constitution, Article XV, section 4, originally provided in part:

“[Ljotteries, and the sale of lottery tickets, for any purpose whatever, are prohibited, and the Legislative Assembly shall prevent the same by penal laws.”

*570In 1984, the people by initiative measure amended that prohibitory article to permit the state to operate a State Lottery through a Lottery Commission.1

After that amendment, the constitution continued to prohibit and limit state participation in gambling except as provided in the 1984 amendment. The first subsection of that amendment states:

“Except as provided in subsections (2), (3), (4), (5), and (6) of this section, lotteries and the sale of lottery tickets, for any purpose whatever, are prohibited, and the Legislative Assembly shall prevent the same by penal laws.”

The listed exceptions to the general prohibition are as follows:

Subsection (2) permits charitable bingo;

Subsection (3) creates a State Lottery Commission and State Lottery and places limits on the expenditure of “[a] 11 proceeds from the State Lottery”;

Subsection (4) authorizes, in paragraph (d), a State Lottery and lottery games using terminals, but limits the kinds of game procedures that “[t]he State Lottery may operate” to those authorized by the “Commission,” specially removes some kinds of gambling from the Commission’s jurisdiction, and also, in paragraph (e), limits the use of total revenues “from the sale of all lottery tickets or shares”;

Subsection (5) provides for start-up funding of “the Commission and the State Lottery”;

*571Subsection (6) provides that “[ojnly one state lottery operation shall be permitted in the State.”

One constitutional restriction, Oregon Constitution, Article XV, section 4(7), provides:

“The Legislative Assembly has no power to authorize, and shall prohibit, casinos from operation in the State of Oregon.”

A second restriction prohibits the Lottery from engaging in certain kinds of gambling.

Yet another set of restrictions in the 1984 constitutional amendment circumscribes the uses of all money received from the State Lottery. All funds not needed for prizes paid and administration and operation of the Lottery Commission and the retailing of the lottery games through the Commission are dedicated to “creating jobs and furthering economic development” within the state. The constitution limits use of proceeds received by the Commission to “costs of administration,” also referred to alternatively as “expenses” of the State Lottery. Or Const, Art XV, § 4(3) and (4)(e).2

The 1991 legislature enacted statutes authorizing the Lottery Commission to initiate video poker and other interactive video gambling machines, but only if the machines are located in places that are licensed to sell intoxicants and only if limited to five machines for each such licensed premises. ORS 461.215 and 416.217. The legislature also directed distribution of some of the proceeds from the *572“video lottery games” to counties in which the machines producing the revenues were located. The legislature designated these funds to pay “law enforcement” and “mental health” costs for gaming or gambling. ORS 461.546(1).

Plaintiffs assert that the foregoing portions of the 1991 enactments contravene either the constitutional prohibition against casinos (ORS 461.215 and 461.217), the constitutional dedication of all of the proceeds of any state lottery (ORS 461.546(1)), or both. On the motion of defendants and intervenors, the trial court entered judgment on the pleadings against plaintiffs on their amended complaint without a factual hearing or trial. I turn to an examination of each of the two theories.

I

CASINO

Plaintiffs’ complaint alleged: “When implemented pursuant to * * * ORS 461.215 as amended, state-sponsored video poker will have the effect [when operated ‘on such premises in conjunction with other gambling games sponsored by Defendants’] of creating casino gambling in the State of Oregon, in violation” of the constitution. I understand “casino” to be used in the pleading in its normal meaning, which includes a building or room “/or gambling,” i.e., dedicated to substantial gambling activity. Webster’s Third New International Dictionary 347 (Unabridged 1976) (emphasis added). No litigant suggests any other meaning, although some suggest, in addition, that you cannot have a casino where only interactive machines are used to gamble. Plaintiffs seek a hearing under those allegations to prove that the “video lottery games located in a liquor licensee’s premises would constitute that establishment as a casino.”

According to the legislation under constitutional attack in this case, the subject of this litigation is described as “a game or games using video devices,” “video lottery games,” “game terminals and equipment,” and “video lottery terminals,” ORS 461.215; and is further described in ORS 461.217 as a “video lottery game terminal that offers a video lottery game” and “video lottery machines.” Those two statutes require that the “video lottery machines” be limited *573to no more than five such machines on premises described in the statute.3

The statutes also limit locations where the machines may be placed to “only on the premises of an establishment that has a contract with the state lottery as a video lottery game retailer” and also “only on the premises of an establishment licensed by the Oregon Liquor Control Commission” and having certain kinds of liquor licenses. ORS 461.215 and 461.217.

Because of the five-machine limitation on any one premises licensed by the Oregon Liquor Control Commission, it is not apparent that the legislation establishes, or may establish, a casino. Plaintiffs allege no facts specific to video poker or other “video lottery games” as to how implementation of those games, even in conjunction with each other, “will have the effect of creating casino gambling.” Plaintiffs’ allegation that that effect will be created is by itself but a conclusion, not an allegation of fact, and as such is insufficient in this constitutional context to create an issue for hearing. See Coalition for Equit. School Fund. v. State of Oregon, 311 Or 300, 322, 811 P2d 116 (1991) (Fadeley, J., concurring) (making similar point). Plaintiffs here have not sought to file a further or second amended complaint alleging facts that, if proved, would establish that creation or operation of a casino or casinos has been legislatively authorized in contravention of the constitution. On the basis discussed in this opinion, I would reverse the Court of Appeals’ remand and affirm the judgment of the circuit court on the “casino,” or pleading, phase of the case.

*574II

ECONOMIC DEVELOPMENT

Plaintiffs also seek a hearing to elicit facts to prove the amended complaint’s allegations that the transfer of some of the lottery proceeds to counties — to pay local law enforcement expenses or for hiring mental health workers to deal with gambling addicts — is not within the limited purposes for which lottery proceeds may be spent under the strictures stated in the Oregon Constitution.

The Attorney General, whose duty it is to uphold statutes passed by the legislature where that is even a remote possibility, and intervenors, who are businesses that may be licensed as video lottery game retailers under ORS 461.215, contend that the legislative transfer of lottery proceeds to the county should be counted as an expense of administration of the State Lottery Commission and that, as an expense of the Commission, the transfer is constitutional.4

The state constitutional provisions, quoted above, show a clear intention of the people to restrict the uses of lottery funds to the administrative expenses of the Commission (and the State Lottery agency) and to prizes and economic development, including job creation. Net proceeds are to be turned over to “a fund * * * for the benefit of the public purpose of creating jobs and furthering economic development” in Oregon. Those net proceeds are to be what is left over after “ [t]he State Lottery shall pay all prizes and all of its expenses out of the revenues it receives.” Or Const, Art XV, § 4(4)(e).5 Expenses are also limited by the requirement to *575return 84 percent of “total annual revenues * * * to the public.” Id 6

III

CONSTITUTIONAL INTERPRETATION

The intent of the voters who adopted the constitutional amendment must control our interpretation and application of it. It is the touchstone for any interpretation of an initiated measure. The best evidence of that intent, in an initiated amendment, is found in the material that all voters had before them when they voted, namely, the caption and question portions of the ballot title, which are printed directly on all ballots used by all absentee and regular voters to cast their votes. In determining the voters’ intent, I cannot join the lead opinion in relegating to a secondary status the one thing that all voters are most likely to read before voting to amend the constitution. I think the scheme chosen by the lead opinion, which fails to give primary status to the ballot title along with the text of the amendment to which it relates, fails to reflect our common knowledge about the phenomenon of voting on an initiative measure. I would, instead, in deciding the case, review the plain language of the ballot title and the amendment text as adopted.

Because the caption and question are printed on the ballot used by every person who voted to adopt the initiative amendment, it is the single most reliable source of the actual *576intention of the voters.7 It is the only common source of information about the amendment that is certainly available to every voter. It is true that an official Voters’ Pamphlet is mailed to every Oregon household where one or more registered voter resides, but even the Voters’ Pamphlet section for any initiated measure begins with the ballot title caption and question, only thereafter printing the words of the measure. Many voters, including absentee voters, may not have the opportunity to read the text of the measure, but all must see the caption and question printed on the ballot that they cast. I believe that, in determining voter intent, the caption and question are of at least equal value with a measure’s text that many voters do not in fact read.8

The ballot title Caption for the 1984 amendment provided:

“Constitutional Amendment Establishes State Lottery Commission; Profits For Economic Development”

The ballot title Question provided:

“Shall a state lottery operated by commission be established, profits to be used to create jobs and further economic development?”

In both, the emphasis on using State Lottery gambling profits for economic development is clear. Had the intention of the voters been to treat lottery profits as merely another revenue source — available to pay any and all expenses related to state governmental activity — they would not have voted to approve the measure presented by that caption and question *577and containing the restriction on use of proceeds, contained in subsections 4(3) and (4) of the measure, which the ballot title so strongly emphasizes.

It follows from the foregoing that the diversion of State Lottery proceeds to pay local government salary expenses enacted by ORS 461.546 is not constitutionally permissible. That statute section is therefore a nullity, as plaintiffs have alleged and contended. The further hearing ordered by the Court of Appeals’ decision, and to be held in circuit court, is one related to that statute and, therefore, has no function. Accordingly, that decision appropriately should be reversed on the ORS 461.546 phase of the case. I would join the lead opinion, for the reasons stated here, and reverse both the judgment of the circuit court and the Court of Appeals’ remand, and enter declaratory judgment in favor of plaintiffs, as prevailing party, declaring ORS 461.546(1) unconstitutional and void, and in favor of defendants, as to ORS 461.215 and 461.217, declaring those statutes constitutional and valid.

That amendment, in part now Oregon Constitution, Article XV, section 4(3), provides:

“There is hereby created the State Lottery Commission which shall establish and operate a State Lottery. * * * ”

Section 4(4)(d) in part provides:

“The Director shall implement and operate a State Lottery pursuant to the rules, and under the guidance, of the Commission.”

Creation of the State Lottery, and a constitutionally empowered commission to operate it, were not the first relaxation since statehood of laws against state involvement in gambling. State-regulated racetrack betting was enacted in 1933. Or Laws 1933, ch 397. And, in 1976, a public vote authorized the legislature to provide for the establishment, operation, and regulation of bingo, lotto, and raffles conducted by “charitable, fraternal or religious organizations.” Or Const, Art XV, § 4.

Oregon Constitution, Article XV, section 4(3), provides in part:

“All proceeds from the State Lottery, including interest, but excluding costs of administration and payment of prizes, shall be used for the purpose of creating jobs and furthering economic development in Oregon.”

Article XV, section 4(4)(e) provides in part:

‘TTjhe State Lottery shall operate as a self-supporting revenue-raising agency of state government and no appropriations, loans, or other transfers of state funds shall be made to it. The State Lottery shall pay all prizes and all of its expenses out of the revenues it receives from the sale of tickets or shares to the public and turn over the net proceeds therefrom to a fund to be established by the Legislative Assembly from which the Legislative Assembly shall make appropriations for the benefit of the public purpose of creating jobs and furthering economic development in Oregon. At least 84% of the total annual revenues from the sale of all lottery tickets or shares shall be returned to the public in the form of prizes and net revenues benefiting the public purpose.”

About 6,000 video poker machines have been placed by the State Lottery Commission among approximately 1,300 retailer locations, with 90 percent of the retailers having the maximum of five machines per location. Cortright, Staff Report to the Joint Legislative Task Force on Lottery Oversight, “Do Current Video Lottery Retail Commissions Maximize Net State Revenue?” 2 (Feb. 1994). According to that report, gross wagering on video lottery games during fiscal year 1993 was nearly one billion, five-hundred eleven million dollars ($1,511,000,000). Id. at 6. After paying prizes, net revenues of nearly one-hundred sixty-eight million dollars ($168 million) were produced. Ibid. Video poker is played by a single player operating a video terminal. A player buys credits, recorded in the machine, for use in betting whether the single player will win or not. Id. at 8. The player’s winnings are also recorded as credits in. the machine and may be bet without a further infusion of cash by the player. The report does not describe whether the gross wagering revenue amount reported above is composed of player cash only or also includes the winnings credits recorded in the machine and wagered again therein.

It is also contended that spending the lottery money to hire mental health workers to provide services to gambling addicts creates jobs and, therefore, complies with the purposes of using the balance of the money, beyond administrative expenses, for prizes and “creation of jobs and furthering economic development.”

The “creation of jobs” argument appears to prove too much. Under it, any hiring of an employee by state or local government, whether the employee provided a new service or an existing service, would appear to qualify as “creating jobs,” thus permitting use of lottery funds to pay salaries of as many public employees as those funds were sufficient to cover.

Article XV, section 4(4)(e), provides in part:

“The State Lottery shall pay all prizes and all of its expenses out of the revenues it receives from the sale of tickets or shares to the public and turn over the net proceeds therefrom to a fund * * * for the benefit of the public purpose of creating jobs and furthering economic development in Oregon. At least 84% of *575the total annual revenues from the sale of all lottery tickets or shares shall be returned to the public in the form of prizes and net revenues benefiting the public purpose Tof creation of jobs and furthering economic development].” (Emphasis added.)

No issue is raised by the parties in this case concerning how this 84 percent provision fits with OAR 177-100-020, which compensates video poker retailers with “35 percent of the amount remaining of gross revenue after prizes have been paid to players. ’ ’ In fiscal year 1993, $58.4 million was paid to retailers of video lottery games on a net after prizes of $167.6 million. Cortright, supra note 3, at 6, citing to Lottery Commission Fiscal Year 1993 Financial Summary. This compares to commissions of $15 million paid to retailers of “traditional” lottery games on a net after prizes of $102.4 million for that year. At the time the State Lottery was created, what is now ORS 461.310 limited the percentage to be paid as compensation to retailers to 6 percent “of the retail price of the * * * shares,” ‘Tulntil the commission shall otherwise determine.”

ORS 254.175 permits printed ballots to omit the ballot title’s summary. Many counties do omit it.

The lead opinion disregards this knowledge about voter information and downgrades the caption and question printed on the ballot to a lesser status than that accorded the text of the measure. I cannot join in rejecting the most certain indicator of the voters’ intent.

I also find it unnecessary, and probably unwise, to look to statutes to interpret the meaning of initiated constitutional provisions. Even if that wore a generally proper method to determine voters’ intent, there are sufficient clear indicators of intent within the constitutional context to make a reference to contemporaneous statutes unnecessary.

Further, I cannot join the relegation of “legislative facts” to a lesser status than “text and context” in determining the intent of the voters, as the lead opinion’s footnote 8 does without citation to authority.