Aaron Rouse was just about to sit down for a sushi dinner with his family in the late afternoon of Friday, April 5, when he received a call from Jeff Goettman, Gov. Glenn Youngkin’s chief of staff.
Goettman wanted to know if Rouse, a Democratic state senator from Virginia Beach, was available for a phone call the next day to discuss his SB 212 that was sitting on the governor’s desk, awaiting his action. The measure, which would establish a regulatory framework and tax structure for so-called skill games in Virginia, had passed in the Senate by a 32-8 bipartisan vote.
“When I got the call I was very surprised,” Rouse said in a phone interview. “In my mind I’m thinking, tomorrow is Saturday. OK, sure, I’m here. I was expecting they might want to discuss a couple of amendments, but it turns out they wanted a complete rewrite of the bill — and that’s when I was like, wait a minute, this isn’t how we do things.”
When Youngkin sent Rouse’s bill back to the General Assembly, peppered with dozens of far-reaching amendments, just 3 minutes before the constitutional deadline last Monday, the news hit Virginia’s political landscape like a bombshell.
The General Assembly is set to convene Wednesday to consider the governor’s amendments to legislation emerging from the 2024 legislative session, and the skill games measure will likely be one of the most controversial proposals that lawmakers will debate this week.
In its amended form, Rouse’s legislation was barely recognizable to those who spent countless hours fine-tuning the original proposal.
“This bill took 60 days by a strong coalition of bipartisan members of the General Assembly to work it out and get it to the governor’s desk. Frankly, trying to rewrite it in 24 to 36 hours is an insult to the members of the General Assembly,” Rouse said.
Youngkin’s proposed changes would ban small businesses from offering the electronic betting machines in many cities across the commonwealth, including Roanoke, Bristol, Danville and Martinsville, by creating a 35-mile radius around other gaming establishments. In addition, the governor is seeking a 2,500-foot ban around schools, day care centers and churches.
Youngkin also wants to allow cities and counties to ban these games in their localities, charge small businesses $9,000 for licenses and transfer regulatory power from the Alcoholic Beverage Control Authority to the Virginia Lottery, which would cause a significant delay in making the games legally available after they were first banned in the commonwealth in 2020.
Additionally, the amended bill would raise taxes on small businesses by establishing a 35% tax rate — a 10% increase over the proposed rate in the original legislation — which would make it more difficult for hundreds of small businesses to host skill games. Restaurants would be excluded from offering the machines because of a new provision requiring host locations to be licensed lottery agents.
“This is a slap in the face to the thousands of small business owners like me, who have put our lives and livelihoods on hold to advocate for skill games this legislative session,” said Rich Kelly, president of Virginia Merchants and Amusement Coalition, or VA MAC, a group that has been involved in drafting Rouse’s proposal. “Governor Youngkin has done nothing but ignore our small-business owners and coalition in the process.”
As a form of protest, VA MAC on Monday rallied hundreds of convenience stores across the commonwealth to stop the sale of Virginia Lottery tickets, showing the economic impact that the closing of convenience stores would have on the Virginia Lottery, and the tax revenue they generate.
On Tuesday afternoon, many of the same stores agreed to close from 3:50 to 4:50 p.m. in a nod to Youngkin’s 35-mile radius ban and the proposed tax rate.
But Youngkin’s move also angered several lawmakers from both sides of the aisle who were part of a hastily assembled workgroup formed to negotiate with members of the administration over two grueling conference calls two weekends ago, less than two days before the constitutional deadline for the governor to take action on the legislation.
Participants described the effort as a big waste of time because none of their suggestions were taken up by the administration. Some accuse Youngkin of not following the legislative process while overstepping his gubernatorial authority by attempting to rewrite legislation that the General Assembly passed on a bipartisan basis.
“We were upset, and I voiced my frustration with this,” Rouse said in the interview. “And I told them that this isn’t the way we do things, this isn’t the way you legislate, this is too important to be doing this in the eleventh hour, on a phone call, not even an in-person meeting.”
Youngkin spokesman Christian Martinez said in an email that the governor “appreciates the extensive work done by the General Assembly” on this issue during the legislative session.
“The proposed legislative amendments, stemming from discussions with bipartisan members and dozens of outside stakeholders, establishes a robust regulatory framework overseen by the Virginia Lottery, enhances consumer and public safety protections, and grants localities and Virginians a voice,” Martinez said. “The governor urges the General Assembly to give due consideration and he is greatly appreciative of the work done by this bipartisan group of legislators to address these concerns.”
Martinez added that in the last five years, the commonwealth has experienced a massive expansion of legalized gambling, and Rouse’s proposal as passed by the General Assembly would “further expand gambling opportunities, and it needs to be done with appropriate public safety and consumer protection safeguards.”
Besides Rouse and Del. Cliff Hayes, D-Chesapeake, who carried the skill games bill in the House of Delegates, Goettman — Youngkin’s chief of staff — also invited Sens. Bill Stanley, R-Franklin County; Adam Ebbin, D-Alexandria; and Dels. Terry Kilgore, R-Scott County, and Paul Krizek, D-Fairfax County, to join the workgroup.
The lawmakers got on the first conference call at around 5 p.m. on Saturday, April 6, believing there was genuine interest from the administration to hear them out and find common ground towards an agreement for how Virginia should move forward with regulating skill games.
“I thought of it as an opportunity to try as a workgroup to come to some amicable conclusions or answer questions that they might have,” Stanley said in a phone interview. “It was unusual, but on some level it had to be, because it was the Saturday before the Monday deadline. Things happen that way now, I guess.”
But the two-hour call quickly escalated from an opening exchange of niceties to anger and disbelief when Goettman shared a two-page outline of seven topics to discuss, including the proposed tax hike on small businesses, a cap on the number of machines a business would be allowed to host, and a provision that would prevent children from having access to skill games, among other issues.
“We started off with certain things that were pretty egregious when finding out what they were interested in. I know I objected to a lot of it,” Hayes, the delegate from Chesapeake, said in a phone interview.
Rouse added that he was “very disappointed and frustrated” that the administration chose to go about what he called a rushed process of amending his proposal. “Especially on a Saturday, on a conference call. Not even the respect for legislators and my colleagues to have a Zoom call, let alone work through the amendments to this bill throughout the week,” he said.
Stanley, an attorney who has represented former NASCAR driver and entrepreneur Hermie Sadler in his fight to have Virginia’s ban of skill games overturned in court, took the lead on drafting legislative amendments that addressed five of the seven topics raised by the administration.
The bill’s sponsors and other legislators on the call proposed strengthening the amended language to include background investigations with regard to board members, officers and employees working for manufacturers and the owners of the convenience stores, not including regular employees.
But Youngkin’s finalized amendment calls for anyone with a stake of at least 10% in a convenience store that has a license to offer skill games to be subject to a background investigation, including a criminal history records check and fingerprinting.
Youngkin also amended the bill to give regulatory power to the Virginia Lottery, which would begin accepting applications for licenses on Jan. 1, 2025 — and would have to begin building a regulatory framework from scratch.
The legislators then proposed a transition period that would allow for the ABC to regulate skill games on a six-month basis. ”That way the ABC could set it up and put in the regulations we know that worked in the past, so by the time the lottery takes it over, they’ve got a system set up,” Stanley said. But his proposal was also denied.
To Rouse, it became increasingly clear as that phone call went on that the administration was attempting to “rewrite the bill in favor of their casino friends.”
“That’s when I said, Hey, I feel very uncomfortable about working this way. I’m not sure what process you all have, but legislators are very important and this is a very notable bill,” Rouse said.
“But they were like, Whatever, this is what we are going to do. They weren’t interested in hearing what the bill’s chief patron had to say. They had their marching orders. They were never really interested in really finding common ground nor were they interested in the work my bipartisan coalition put in,” he said.
Krizek, the Democrat from Fairfax County, said in a text message Tuesday that the administration didn’t have to do anything.
“Indeed, they didn’t call me about my two bills that were vetoed. My colleagues worked very hard on their bill and it’s understandable that they feel that way. If it was my bill I’d probably feel the same way. But I do think it could have included an opt-in process rather than the opt out, and that changed because of those discussions.”
Hayes said he felt that Goettman and his team misled members of the workgroup by making them believe their input mattered to Youngkin’s thinking about the amendments.
“They thanked us for providing our information which they said would be helpful in their deliberations,” Hayes said. “As that call ended, because so much of it was egregious, they promised to go back and think through things, and that Sunday they would let us know in a subsequent call what was acceptable to them in the items that we had pushed back on.”
When the workgroup and administration officials got on that second conference call the next afternoon, which lasted close to three hours, the lawmakers hoped that their concerns about the proposed changes had been taken into consideration. But the amendments that Goettman and his team provided that day were an even more significant departure from the original legislation.
“Not only were the proposals egregious, but they misled us into thinking that they were really trying to make it better. They were thanking everybody for educating them on the matters, and then on Sunday they came back with an even worse bill, that really was a waste of time,” Hayes said.
“They just want to be able to say they met with a committee of folks interested in working on this bill, but I didn’t see any concessions or any ideas about working towards helping these small businesses get what they have been asking for. The meeting was insulting.”
When Stanley saw the final version of the amended bill, he thought he had wasted a whole weekend. In particular, the provision that would ban skill games within a 35-mile radius of Rosie’s Gaming Emporiums and casinos was troubling, he said.
“If we give a special license to Lowe’s and we say Home Depot cannot be near you within 35 miles, that’s unconstitutional and anti-free market. They didn’t think about the constitutional provisions,” Stanley said.
Last week, Stanley turned to X, the social media platform formerly known as Twitter, and posted a map showing that in combination with the 2,500-feet radius around day care centers, schools or places of worship, the 35-mile radius would ban skill games in around 90% of Virginia.
The bans would also be difficult to enforce because the amended bill lacked a definition of where the 35-mile or 2,500-feet radius actually begins, Stanley said.
“Do you measure from the outside wall of the church, the church parking lot or the altar until you hit the skill game? Or is it the parking lot of the convenience store? That’s important because these are criminal laws; they make people felons. If I’m operating a skill game 2,495 feet away from a Catholic church, I’m a felon.”
While some of Youngkin’s proposals “sound great on paper,” their implementation would be more than challenging, Stanley said.
Adding to the confusion was Youngkin’s proposed gaming tax increase. Instead of the 25% that the General Assembly had agreed on, the governor’s amendment calls for a 35% percent tax, including 5% to benefit a newly created Gaming Regulatory Fund and another 5% to be deposited in the College Partnership Laboratory School Fund.
But many lawmakers and stakeholders interpreted the language in the amended bill as a 10% tax hike on top of the proposed 35%.
“If you add on even more fees that they put on there, the tax rate would be at around 50%, which is like that of Sweden, but there everyone gets a free college education and health care for that,” Stanley said.
Martinez, the Youngkin spokesman, clarified in an email that the tax increases benefiting the two funds were included in the 35% gaming tax, not on top of it.
“The tax equals 35% and does not go up to as much as 45%. Therefore, it is not considered an additional tax,” Martinez said, referring to the language used in the 5% sections in the legislation.
Kilgore, another member of the workgroup, could not be reached for comment Tuesday. But Krizek, his Democratic colleague, said that he believed that at least Youngkin’s proposal to make the Virginia Lottery the regulatory agency over skill games was a critical piece, for the sake of public safety.
“To be clear, Lottery is uniquely able to set up mechanisms for verifying ‘age and identity’ before a player can use the machines, a system that will block anyone under 21 from playing and importantly exclude people with gambling problems who want to ban themselves from gambling away their money on skill games,” Krizek said in a text message.
Still, Rouse said that some of Youngkin’s amendments were written in a sloppy fashion because the administration didn’t take the time to put in the work.
“Since Youngkin has become governor, he has never been interested in doing the actual hard work of governing. He tries to dictate to a co-equal branch of government, and it doesn’t work out. They did this so fast, I’m not even sure they fully understand what they put out, and that is a disservice not just to the small business owners, but to every Virginian,” Rouse said.
Youngkin needs to realize that he has to respect the work of the legislature and recognize that it is a co-equal branch of government, he said.
“This governor doesn’t get to rewrite and create his own legislation; he has to work with us. This is government — this is not a private equity firm, and he is not a dictator. You have people who don’t understand how to run government, and they run it like they would run a Fortune 500 company, and many of the processes just don’t align. The governor himself tries to run Virginia like the Carlyle Group, and we see how this turned out for him.”
Stephen Farnsworth, a political scientist at the University of Mary Washington, said that Youngkin continues to struggle with “the very basic governing concept that the legislature needs to be treated with respect if not deference” if a governor wishes to get something done.
“Usually governors get the message in year one or at least year two, if they don’t already know it at the start,” Farnsworth said. “It takes a lot of frustration before a Republican lawmaker will vote to override a Republican governor’s veto, but the skill gaming bill may be one case where the bipartisan anger is strong enough that a successful override may be a real possibility.”
But the lawmakers who were part of the workgroup on skill games legislation are unwilling to predict what the General Assembly will do with Youngkin’s amendments.
“I really don’t know: you got a lot of emotion that now has intertwined the budget with the skill game bill, and you got a lot of politics and partisanship going on as we return to the Capitol on Wednesday. And then you have two chambers which have their own individual personalities to consider,” Stanley said.
Hayes said that he has no idea what will happen with the legislation during this week’s veto session.
“All I know is that there is a bipartisan group that came together to work on this, and even Republicans are furious at the attempts by the administration to waste their time and insult folks’ intelligence by pretending like they were trying to negotiate.”
In order to pass successful legislation in the General Assembly, everyone involved in the process understands that “at some point you have got to be serious about collaborating in order to get something across the finish line,” Hayes said. “You’ve got to have legitimacy.”
Although he wasn’t part of the skill games negotiations with the Youngkin administration, Sen. Mark Peake, R-Lynchburg, said the fact that the legislation passed in the House by a much tighter margin and more along party lines than in the Senate could be an indicator of where the most action will be on Wednesday.
“In the Senate it passed pretty clearly, so I think a lot of the action may be to see what the House does with this.”
But the bigger issue, Peake said, is that the skill games bill was a truly bipartisan effort. “There are some Republicans and Democrats that like skill games, and there are some that don’t; so it’s really difficult how this is going to play out. You can’t really look at party lines.”
Unlike some of the members in the skill games workgroup, Peake — who voted in favor of Rouse’s measure — believes that Youngkin has acted within his constitutional limits.
“The governor is allowed to make amendments that he wants, and while I think these amendments make significant changes, it’s up to the legislature to accept or reject them. This is how it works, we pass legislation, we send it to him, he can veto or amend it, he has amended it, now we can accept or reject these amendments, and then he can accept or veto what we send him back.”
Agreeing with his colleagues, Peake said that he had no predictions of what might happen during the veto session.
“It is wide open; everybody is talking about it. There are several different avenues that we can go down, and nobody has any idea how this is going to play out next week. It’s wide open, as far as I can tell,” he said.
Sadler, the former NASCAR driver and one-time candidate for the Republican nomination in the newly created 17th state Senate District who found himself at the center of the legal battle over skill games, said that there probably is enough blame to go around for everybody as to why there’s a disconnect between lawmakers and the Youngkin administration.
“But what we got now is because of politics and a power struggle between the governor and the General Assembly, small businesses are getting crushed and getting unfairly treated,” Sadler said. “And that’s all because the skill games issue is caught in the middle of a bunch of other disagreements and problems between Youngkin and the General Assembly, and because of this overreach by the governor to appease the casino industry.”