Court rules for video lottery terminals

Mark Johnson

Wednesday, May 4, 2005 | 9:42 a.m.

ALBANY, N.Y. -- The state's highest court on Tuesday ruled that video lottery terminals and Indian-owned casinos are constitutional, a victory for the legislature and governor who have increasingly relied on gambling to fill budget shortfalls.

In a 5-2 decision, the Court of Appeals overturned a lower court ruling that declared illegal the state law authorizing the slot machine-like VLTs because it sends a portion of VLT revenues to horse-racing breeding funds and enhanced track purses. It also upheld the Appellate Division's decision to allow the Indian casinos.

The ruling also could end a lengthy court fight waged by gambling opponents.

"That's a huge win for the legislative process" and the public, said Senate Majority Leader Joseph Bruno. "They got it right."

Last year, the Appellate Division said the VLT law violated the state constitution's provision that all the net proceeds from lottery games go to aid education in New York state. The Court of Appeals disagreed.

"These moneys are not a separate deduction, beyond other costs and expenses, from the amount paid to the racetracks as a vendor fee," Judge Carmen Beauchamp Ciparick wrote for the majority. "Rather, they constitute simply a part of the vendor fee itself -- but a part whose use the state has decided to regulate."

Gov. George Pataki was pleased with the court's decision.

"It totally upholds what we believe to be the law," Pataki said. He said there are no plans to expand what he has already proposed.

Pataki is counting on millions of dollars from VLTs to help fund a court-ordered increase in state aid to New York City schools. A court-appointed panel recommended in November that the state spend another $14 billion on the city's schools over the next four years.

Of the $848 million in increased educational funding included in this year's state budget, the state is counting on $325 million from VLTs, Pataki spokesman Michael Marr said.

The Court of Appeals approved the VLTs since they operate like a lottery and are not slot machines under the meaning of the state constitution. The constitution bans slot machines.

The court also upheld the authorization of up to six new Native American casinos. Two of those have been built so far by the Senecas in Niagara Falls and Salamanca. And the high court upheld the state's participation in the Mega Millions multistate lottery game by a 7-0 vote.

A group of antigambling organizations had sought to overturn a 2001 state law that authorized the broad expansion of legal gambling in New York. The gambling bill was approved as the state scrambled to find new revenues in the wake of the devastating terrorist attack on the World Trade Center. It was the largest expansion of state-sanctioned gambling in New York's history.

Cornelius Murray, an Albany lawyer representing anti-gambling interests, said he was disappointed by the ruling, but was considering an appeal on the casino issue to the U.S. Supreme Court. Indian-owned casinos are authorized under federal law.

Judge George Bundy Smith, dissenting on the casino issue, said that because casino gambling is prohibited under the state constitution, the Legislature did not have the power to authorize the governor to negotiate compacts with Indian tribes for casino gaming.

The federal Indian Gaming and Regulatory Act, which allows tribes to set up casinos on Indian land, "does not and cannot force or require the Legislature to pass a law authorizing the governor to execute agreements for the establishment of activity that" violates state law and public policy, Smith wrote.

As for the VLT and Mega Millions issues, Murray said: "This is probably end of the line."

More than 5,000 VLTs are currently operating at harness tracks in Saratoga Springs, Hamburg and Monticello, and at the Finger Lakes thoroughbred track near Rochester. Since the first VLT parlor opened in Saratoga Springs in January 2004, the machines have generated $277.8 million in revenue, Lottery spokeswoman Jennifer Mauer said.

Indian tribes seeking to settle land claims with the state through casino compacts said they were satisfied with Tuesday's court decision.

"The nation is pleased the state's highest court has recognized that Indian gaming is constitutional, governed by federal law and an important part of the state's economy," said Mark Emery, a spokesman for the Oneida Indian Nation of New York.

Those sentiments were echoed by representatives of the Oneida Tribe of Indians of Wisconsin and the Stockbridge-Munsee Band of Mohican Indians.

The Seneca-Cayuga Tribe of Oklahoma and the Akwesasne Mohawks are also seeking casino deals. They did not immediately return calls for comment.