Vol. 7 • No. 24 • June 29, 2009, Cover Stories

Kentucky Bails, Ohio Sails

A bill to add video lottery terminals to Kentucky’s racetracks, pushed by the governor as necessary to save racing, died in a state Senate committee. But in Ohio, gaming got a boost from the previously anti-gaming governor, Ted Strickland (l.), where the possibility remains for four casino complexes in the state’s major cities.

Two neighboring states going in different directions in gaming legalization


The Ohio River separates Kentucky and Ohio, and last week it was the line of demarcation between two gaming legalization efforts. The legalization of slots at racetracks took a turn for the worse in Kentucky, but in Ohio, it got renewed life as the governor reversed his stance that previously opposed gaming.

A bill that Kentucky Governor Steve Beshear plugged as the only savior for the state’s storied racing industry has died in a state Senate committee.

A measure to add video lottery terminals to Kentucky racetracks, proposed by the governor during an emergency legislative session called to address a budget shortfall, failed to clear the Senate Appropriations and Revenue Committee, which voted 10-5 against moving the proposal forward to the Senate floor.

The Senate considered the measure after the state House passed its own bill to allow slots at racetracks under the state lottery. The Kentucky attorney general two weeks ago issued a ruling that racetrack slots are permissible under the state constitution as long as they are under the state lottery.

The majority on the Senate committee, though, opposed the bill, saying its increase of purses and breeding funds could be addressed without adding slot machines. Several lawmakers took the position that the slot revenues would be accompanied by a drop in lottery revenues.

During the committee meeting, several lawmakers had called  on committee members to allow the full Senate to vote on the issue. State Senator Tim Shaughnessy told committee members that passage of racetrack slots eventually is inevitable, and that delaying it will only damage the state’s storied racing industry further.

“We’re talking about giving them the resources, tools, and strategy to compete,” Shaughnessy told the committee. “Whether we like it or not, the market has changed.”

In the end, opponents handed the racino question the latest of several rejections, using arguments ranging from a disagreement with Attorney General Jack Conway’s opinion on the constitutionality of racetrack slots to the age-old social-cost arguments that slots would increase problems like theft and foreclosures.

The vote fell on strict party lines in the Republican-dominated committee. Of the 12 Republicans on the committee, only one voted to send the VLT issue to the Senate floor, with one other abstaining. Shaughnessy, one of the five Democrats on the panel that voted to move the bill, said after the defeat that the measure would have stood a much greater chance in the full Senate, which is 42 percent Democratic.

The bill had been pushed by the Democratic governor and the Democratic House Speaker Greg Stumbo. but Republican Senate President David Williams was squarely against the plan.

Beshear expressed disappointment at the committee’s action, but vowed to continue to seek ways to save Kentucky’s racing industry.

“It is too early to determine what steps we will take in the future to try to protect our signature business, but I will continue to work on ideas and proposals that will ensure this vital industry’s continued health,” Beshear said in a statement.
“We must now move forward.”

Track owners, meanwhile, vowed to fight another day. “We really want to thank the speaker and governor for their courage and realizing the importance of our industry,” said Keeneland Racetrack President Nick Nicholson, who serves as the horse industry’s spokesman and who had testified in favor of the legislation. “We’re not going to go away. This is not the last you’ve heard on this issue.”


Ohio Governor’s Flip-Flop

After years of opposing gaming in all of its forms, the governor of Ohio, Ted Strickland, a Methodist minister, last week said he now favors allowing the state’s seven racetracks to become racinos by adding video lottery terminals. According to the governor a conservative estimate projected that the state would bring in over $765 million in taxes, which might help plug up its projected $3.2 billion budget deficit.

He urged quick action to adopt this expansion of the state lottery and avoid raising taxes.

"It is contrary to what I thought I would have to do," he admitted last week.

It didn’t take long before some wags began comparing the governor’s change of heart to George H.W. Bush’s vow, “Read my lips, no new taxes,” followed by new taxes.

But Strickland says that the changing economy has changed his mind, citing the state’s nearly 11 percent unemployment and the loss of auto manufacturing jobs. The governor notoriously hates racing taxes, especially since he lost a reelection bid 15 years ago over that issue, so finding some other way to chip away at the debt was probably inevitable.

In April the Ohio Racing Commission proposed that the state’s racetracks divide 14,000 slot machines between them, with half of the profits being taxed. Strickland opposed the suggestion then. His spokesman said that he didn’t know at this time whether the governor was now supporting that plan or coming up with a different one. The governor’s figures are certainly different than those put forward by the commission. His estimates for state taxes are about $200 million higher than those projected by the commission.

Longtime gaming supporter Rep. Clayton Luckie quickly gave the governor thumbs up. “It’s always been a good idea…We have gambling on every side of us.”

Gaming opponents were just as quick to condemn it. Rob Walgate, a spokesman for the Ohio Roundtable, declared, "When gambling has been expanded in Ohio, gambling projections have never come to fruition… At the end of the day they can't deliver on what they promised. They're going against the wishes of millions of Ohioans."

The governor’s support comes none to soon for racetracks like Thistledown, a Cleveland racetrack that has been poised on the edge for several years now. If slots are allowed there it will give it a shot in the arm that could revive it.

But he said that wasn’t a prominent factor in his decision.

Nevertheless, it didn’t take long for the state’s racetrack interests to start lobbying the legislature to pass Strickland’s proposal, which he says he would prefer to do by a bill rather than through a vote of the people. Strickland said he hopes for action by the end of June.

Complicating that is the fact that voters will be asked in November to decide on a plan to build four destination casinos in the state’s largest cities if Ohio Jobs & Growth succeeds in collecting 400,000 signatures by the end of June.

Legislator Dennis E. Murray Jr., a state representative, said that he is introducing a bill that he says would be better than the initiative because gaming would be allowed in six locations in any of the state’s 88 counties. If Ohio Jobs & Growth succeeds in getting its initiative on the ballot in November, Murray will ask his colleagues to put his on the ballot to compete with it.

Meanwhile, in neighboring Kentucky, politicians who have been trying for several years to legalize gaming, including Governor Steve Beshear, who ran for election on the issue, sounded the alarm that Ohio might beat them to it.

A Kentucky racetrack operator, Nick Nicholson, president of Keeneland, urged the Bluegrass state’s legislators to be off and running. "It will be tragic if they get started before we do. My assumption is they will move quickly, and we should do the same."

Patrick Neely, executive director of the Kentucky Equine Education Project, added, "Kentucky racing and breeding are at a severe disadvantage. This would just further the competitive disadvantage. It sends a clear signal that other states are anxious to take our signature industry from us."

By Staff