ANNAPOLIS – In the dark days of the budget crunch that followed the World Trade Center terrorist attacks, Gov. George Pataki and the New York Legislature approved a monstrous expansion of racetrack video lottery terminals.
The idea was to earn up to $1 billion for public education at a time when the state was $9 billion in the hole.
Fifteen months later, no one has gambled a quarter and the hundreds of millions in expected revenue that never materialized have left New York lawmakers facing more than $1.24 billion in education spending cuts.
The same scenario could play out in Maryland, with greater immediate consequences to the budget, say even proponents of the state’s plan to put slot machines at four Maryland racetracks.
If Gov. Robert Ehrlich’s proposal is not amended to be more beneficial to the racing industry, Maryland should expect a similar situation, said Tom Bowman, president of the Maryland Horsebreeder’s Association and the industry’s slots spokesman.
Because Ehrlich’s slots plan, and his first budget, depends on $350 million in up-front licensing fees, the pressure to get a workable bill is more immediate in Annapolis and may help the racing industry get a better cut in the long run.
“That won’t happen here,” said House Appropriations Chairman Howard P. Rawlings said. “We’ll make changes and put together a bill that will work.”
The governor’s office agrees.
“It’s inevitable the bill will be altered,” to be more favorable to the tracks, said Ken Masters, Ehrlich’s legislative director.
If Ehrlich’s bill is passed as written, a dollar lost in the slot machines would be split five ways: 61 cents to education; 23 cents to the tracks; 7.6 cents to the purses, breeders and tracks not included in the plan; 5 cents to administration, employees, and costs; and 2.85 cents to local governments affected by the expansion.
In New York, the state’s take was 60 cents — too much for anyone to make the investment, critics charged.
Negotiations in the Empire State for what could be 17,000 machines are still underway.
The racetracks didn’t get enough money to cover costs and the Legislature is going back to the drawing board, said New York Sen. Bill Larkin, R-Orange, the chairman of the committee on racing, gaming and wagering.
Larkin is submitting a new proposal to increase the tracks’ take and hours of operation in an effort to undo the logjam.
His proposal will increase education funding by at least $625.9 million the first year and $925.8 million in the third year of operation, a figure that contributed to the original measure’s passage.
New Yorkers are still skeptical. “It might work. It might not,” said Steve Casscles, Larkin’s legal adviser. “The tracks should come on line for this one . . . but we’ll have to wait and see.”
Other leading proponents suggest the video lottery revenue is worth the wait, especially in lean budget years.
“It’s going to mean a huge infusion of money for education,” said Assemblyman Alexander Gromack, chairman of the gaming and wagering committee in New York’s lower house.
After that cash flow was expected to begin 10 months ago, the state’s racing industry isn’t gambling on starting times, said Bill Nader, executive director for the NYRA said.
“We’re now looking into 2004 at this point.”
Looking back, it seemed like a great idea — money was fleeing that state and Pataki and other bill backers wanted to harness it for the state’s schools. When the bill passed 52-8 in the Senate and 92-41 in the State Assembly, it seemed like a sure bet.
Ehrlich’s goals are similar, but his opposition seems more strident. And his bill must work immediately.
Scrambling legislators will have to come up with a large-scale solution if it isn’t satisfactory enough for the racetracks.
Ehrlich expects Maryland will earn $600 million and the tracks will earn about $225 million in the first year.
“With the amount of up-front expenses the industry is asked to incur,” said horse industry spokesman Bowman, “It is understood (the tracks’ 23 percent) is not a workable number.”
Although Bowman fears a New York situation could occur, he’s confident a deal can be struck in the General Assembly.
Maryland’s slots proponents point to the fact that Ehrlich’s plan hands the racetrack twice the controversial percentage in New York, but certain factors present stronger similarities.
While the state’s percentage is higher than New York’s, Maryland adds the up-front licensing fees. Plus, one of the largest video lottery terminal tracks, Aqueduct, is run by a nonprofit organization, something should have lowered their profit concerns.
“We weren’t worried about making money,” said Nader. “We just wanted to pay for the infrastructure improvements and couldn’t get the financing.”
Aqueduct is planning an $80 million facility for 3,500 machines, but Maryland’s tracks expect to pay more for upgrades because of its proximity to the gaming halls of Delaware, said Joseph DeFrancis of the Jockey Club. Pimlico alone is expected to cost his group about $200 million.
The minimal amount New York’s tracks received spurred criticism about the commitment to the horseracing industry.
“If they’re not going to give the tracks any of the profits, why not just put them in a subway station or a dark corner somewhere,” said Bob Flynn, executive director of the New York Thoroughbred Horsemen’s Association.
“It was a bad law,” Flynn said. “The legislators just put it together so quickly that they just didn’t look at it.”
The New York experience is one of the driving factors for a moratorium bill gathering strength in the Maryland House of Delegates to quash slots legislation for one year, allow for a study, and then come vote on the issue next session.
“The governor’s bill has drawn a lot of criticism for omissions,” said Delegate Peter Franchot, D-Montgomery, a chief moratorium sponsor. It’s too critical an issue to pass a bill with several fundamental holes, he said. “It’s important to take the information you’ve gotten, study it for six or seven months, and then make a decision.”
New York, as it turns out, is doing its studying now to mend a bill that nearly all agree was poorly crafted.
Since it was passed Oct. 25, 2001, the bill has incurred a lawsuit challenging its legality, suffered criticism for the way it was passed, failed to satisfy any interested parties, forced new debates more than a year later, and will take at least nine more months before anything happens.
Maryland could avoid many of the same problems, Gromack said, advising: Know what it’s going to cost before you approve the bill, otherwise you have to wait for all the benefits. – 30 – CNS-2-7-03