If I ever go on to have a second career as a world-famous economist, I already have one of those quirky market indicators that all world-famous economists seem to have. Mine would be known as the LVL economic indicator.
I contend that play on the nearly 7,500 Limited Video Lottery machines in bars and clubs around the state is a good indicator of West Virginia’s economic health.
From the advent of their legalization in 2001, these machines have been an extremely reliable source of income for the state, predictably chugging along at roughly $35 million a month in gross revenue, even as their racetrack casino slots brethren peaked and faded with competing casinos opening in Ohio, Pennsylvania and Maryland.
During the Great Recession, limited video play for the first time dropped to $32 million to $33 million a month. That trend held even as the national economy improved.
Monthly revenues began climbing back to $35 million in the second half of 2017 and remained there in the following years. Lottery officials credited an improving state economy with providing West Virginians more disposable income.
I had a different theory: Thousands of construction workers were laboring in the state, building natural gas pipelines. Mostly young men from Oklahoma and Texas with no family or friends in West Virginia, they were making salaries in the high five figures.
Limited video retailers in that neck of the woods confirmed my suspicions that these workers hit the bars in their off-hours and fed a substantial portion of their newfound fortune into the machines.
This brings us to 2020, when after a 10½-week shutdown of both the limited video machines and the bars and clubs that house them, video lottery play hit record levels.
In June, the first full month the slots were turned back on, limited video took in an all-time monthly record of $40.88 million followed by the second all-time highest month of $39.82 million in July.
Gov. Jim Justice’s spin on those records is that they are evidence of an economic revival, or as he said at Friday’s COVID-19 briefing, “West Virginia’s economy is absolutely a poster child.”
Justice and his administration consistently have ignored the fiscal impact of federal windfalls on the state economy during the pandemic, including more than $2.3 billion in stimulus checks and enhanced unemployment benefits (not counting $500 million-plus in state unemployment paid out during that time), along with $1.27 billion of CARES Act money — even though much of the latter is still unused.
So, was the jump in video lottery revenue a factor of so many West Virginians landing high-paying jobs in what Justice claims is a growing, diversified state economy, or a matter of West Virginians temporarily being flush with cash from $1,200 stimulus checks and $600 a week in enhanced unemployment benefits?
If it were the latter, we would expect limited video play to start petering out as those windfalls were expended and expired.
That is exactly what happened. Revenue dropped to $36.82 million in September, improving slightly to $37.3 million in October before falling to a recession-level $32.7 million in November.
Thus, what we see using my limited video economic indicator is not a resurgent state economy but a temporary, artificially driven spike.
Anyone know of a good School of Economics that accepts 61-year-old freshmen?
If you’re into conspiracy theories, let me try this one on you:
In the 2018 regular session, anticipating the U.S. Supreme Court would strike down a federal law prohibiting sports betting in most states, the Legislature set out to pass sports betting legislation so the law would be on the books when the justices gave the OK. The idea was to give West Virginia a head start on other states that would follow in legalizing sportsbooks.
However, Major League Baseball, wanting a 1% cut of the action in the form of an “integrity fee,” showed up with lawyers and lobbyists during that session, presumably thinking they could push around legislators in a rube state and, most importantly, set a precedent to impose integrity fees in other, larger states as they followed West Virginia’s lead to legalize sports betting.
Much to MLB’s surprise, state legislators did not budge, soundly rebuffing the proposal.
The bill’s lead sponsor, Delegate Shawn Fluharty, D-Ohio, trashed the concept in an interview, saying, “Essentially what [they’re] trying to do is extract money from West Virginia and send it to New York City and billionaire friends of the governor.”
(Justice, whose Greenbrier casino offers on-site sports betting and sports betting apps, was a strong supporter of integrity fees, at one point threatening to veto the sports betting bill, then proposing to take up integrity fees in special session, and even brokering a bizarre series of attempts during the summer of 2018 to add integrity fees to the state Lottery rules for sports betting.)
MLB Commissioner Rob Manfred got into the act, telling reporters the fee-less bill was “fatally flawed” and calling on Justice to veto it: “We believe the governor has a very good idea of the serious problems that would result from this bill.”
Ultimately, despite efforts by Justice and the MLB through the spring and summer, the Legislature and Lottery Commission did not waver, and integrity fees were shot down in West Virginia — and ultimately in a dozen other states that followed suit in legalizing sportsbooks.
Jump to 2020, and after a year in the works, MLB this month unveiled its plan to contract minor league baseball from 162 to 120 teams.
On Dec. 8, West Virginia was home to four professional baseball teams: the Class A West Virginia Power in Charleston, the short-season Class A West Virginia Black Bears in Morgantown and the rookie league Bluefield Blue Jays and Princeton Rays.
On Dec. 9, MLB wiped out affiliations for all four teams, leaving West Virginia with no minor league baseball.
Only two other states east of the Mississippi were left with no pro baseball teams: Rhode Island, which was already losing baseball with its Pawtucket team set to move to Worcester, Mass., beginning with the 2021 season, and Vermont, which lost its lone minor league team in Burlington with the MLB’s disbanding of the New York-Penn League.
West Virginia was the only state where MLB wiped out all of the state’s minor league teams. Coincidence?
That doesn’t mean that MLB didn’t have one final dagger to twist in West Virginia’s back, extending a minor league invitation to the team in Bowling Green, Ky., but placing it in the new Mid-Atlantic League.
This means to get to games with rivals in Maryland and points northeast, road trips for the Bowling Green team will mean driving right through Charleston.
Fans in Bluefield and Princeton should come out fine in this scheme. With MLB turning the Appalachian League into a collegiate wood bat league, those fans will see little difference in caliber of play or length of seasons.
Fans in Morgantown have a more iffy proposition, with the West Virginia Black Bears becoming part of the MLB Draft League, a new experiment where prospects (mostly college players) for the upcoming player draft will play about 30 games hoping to improve their draft position to be replaced after the draft for the remaining 30 or so games of the season with prospects for the next year’s draft.
Sounds awfully iffy, and my guess is the whole thing collapses after a couple of seasons.
Meanwhile, the Power is left in limbo, although as of the deadline for this column — Friday — the wheels could be turning. By the same day, the 120 teams invited to remain in the minor leagues must sign non-disclosure pacts and agree to waive their rights to sue MLB.
For decades, minor league baseball teams functioned as independent businesses that affiliated with the Major Leagues through player development agreements, working with the Minor League Baseball central office (since dissolved by MLB) to work out standards for fields and facilities, travel, scheduling, etc.
Under the new system, minor league teams will function more like franchisees, required to comply with a 60-page list of standards and requirements from MLB.
As Power General Manager Jeremy Taylor explained, that includes things like requiring teams to provide two charter buses for longer road trips and a weekly schedule of two three-game series, Tuesday through Thursday and Friday through Sunday.
The kicker is MLB stipulating at least a 4 p.m. start for “getaway day” games — referring to the final game of a series after which road teams leave town. That’s not a big problem on Sundays, when the minors traditionally play day games. However, the mandated 4 p.m. or earlier start on Thursdays would be a financial hit, as teams would lose a high-attendance night, one that for most teams involves “Thirsty Thursday” beer specials.
On top of that, MLB is mandating facility improvements, such as indoor batting cages — something Power Park has, but many minor league parks don’t.
Those additional expenses imposed on minor league teams by MLB will have to be made up somewhere. That almost certainly will be in the form of higher ticket and concession prices for the fans of those teams — making minor league baseball’s promise of affordable family fun less affordable and less fun.
For Charleston, the best option might be to join an independent league without MLB affiliation, although on game day that would mean watching palookas rather than Major League prospects.
Finally, have a happy, safe and socially distanced Festivus season, and let’s try to regroup on the other side of 2021.