concluding that video lottery played using video lottery terminals (VLTs) is a valid lottery under N.Y. Const. art. I, § 9 (1), which provides that "no lottery or the sale of lottery tickets . . . except lotteries operated by the state and the sale of lottery tickets in connection therewith . . . shall hereafter be authorized or allowed within this state," and that "rather than slot machines, VLTs are simply mechanical devices for the implementation of the video lottery."
How later courts described this case
- concluding that video lottery played using video lottery terminals (VLTs) is a valid lottery under N.Y. Const. art. I, § 9 (1), which provides that "no lottery or the sale of lottery tickets . . . except lotteries operated by the state and the sale of lottery tickets in connection therewith . . . shall hereafter be authorized or allowed within this state," and that "rather than slot machines, VLTs are simply mechanical devices for the implementation of the video lottery."
- “The Division of the Lottery regularly contracts with outside vendors and other entities for various equipment and services to assist in the operation of the state lottery,” under state constitutional provision prohibiting lotteries unless “operated by the state”
- "IGRA confers a benefit on the state by allowing it to negotiate and to have some input into how class III gaming will be conducted."
Written by the judges who cited it.
The opinion
R.S. Smith, J.
(dissenting). I dissent from the majority’s holding that part C of chapter 383 of the Laws of 2001 is constitutional, and would affirm the Appellate Division’s holding that it is not. The requirement of article I, § 9 (1) of the New York Constitution that the net proceeds of a lottery “shall be applied exclusively to or in aid or support of education” can be too easily evaded if the Legislature may require vendors to spend a portion of the funds they receive from the lottery for noneducational purposes of the Legislature’s choosing.
The statute as originally enacted provided for a “vendor’s fee” to racetracks of between 12% and 25% of the revenue remaining after payment of prizes, and required the vendors to “reinvest” between 35% and 45% of that fee in enhanced purses and a breeding fund. In other words, the Legislature required that between 4.2% and 11.25% of after-prize revenue be devoted to increasing racetrack prizes and breeding horses—not to the “aid or support of education.” The Legislature could not have appropriated lottery funds for racetrack purses or horse breeding, and should not be allowed to accomplish the same end by directing vendors to “reinvest.”
To me, the issue is that simple. It is not relevant that, as the majority notes, other statutes direct racetracks to divert some of their income to purses and breeding funds (majority op at 267-268); the income to which those statutes apply is not lottery income and is not subject to the “exclusively to . . . education” restriction of article I, § 9. Nor is it relevant that the maximum vendor’s fee under part C was increased from 25% to 29% of revenue remaining after prizes (majority op at 269); the reinvestment was included in both fee levels, so the increase proves nothing about whether the reinvestment had the effect of inflating the fee.
The essence of the majority’s position is that plaintiffs have not proved that the reinvestment is a device to thwart the constitutional limitation. The majority suggests that the vendor’s fee called for by the statute is not inflated by the required reinvestments—that the fee may be the lowest a *302 vendor would take in any event, and that the reinvestments may he expenditures the racetracks would make anyway. The majority also says that “[t]he Legislature was entitled to determine” that the reinvestment expenditures are a reasonable way to enhance racetrack attendance, and that increased attendance will in turn increase lottery revenues (majority op at 268).
I agree that plaintiffs have not proved that the reinvestment provisions of part C were designed to evade the constitutional requirement; it is very hard to prove such evasion, or to disprove it. I also agree with the majority that “[i]t is generally not for the courts to determine whether a particular vendor’s fee ... is reasonable” (majority op at 269); indeed, it will usually be impossible for courts to do so. That is precisely why a “reinvestment” requirement offers a temptation to a Legislature that wants to escape the constitutional restriction. Indeed, in saying that it “can perhaps imagine” a case where a “flagrant end run” around the constitutional requirement would be invalidated (majority op at 269), the majority seems to sanction in advance any end run that falls short of being flagrant. I find this too lax an approach to the enforcement of article I, § 9, and I think we should hold simply that no legislatively-directed diversions of funds from lottery vendor’s fees to noneducational purposes are allowed.
Chief Judge Kaye and Judges Rosenblatt, Graffeo and Read concur with Judge Ciparick; Judge G.B. Smith dissents in part and votes to modify by declaring part B of chapter 383 of the Laws of 2001 unconstitutional in a separate opinion; Judge R.S. Smith dissents in part and votes to affirm in another opinion in which Judge G.B. Smith concurs in so much thereof as pertains to part C of chapter 383 of the Laws of 2001.
Order modified, etc.