A deal to give New York racetracks a greater share of proceeds from video lottery terminals appears to be falling apart, according to state budget negotiators.In early May, Gov. George Pataki and legislative leaders agreed to a more generous package for tracks that would bolster the amount operators get in a revenue-sharing deal with the state to offer the VLTs. Tracks have complained that under a law permitting VLTs, they would lose money because it would give them the lowest split in the nation among states with VLTs.But the deal is collapsing, sources said, and track lobbyists are claiming VLTs would not become a reality at most racetracks if the deal falls through. The only remnant of the deal remaining as of May 14 is a plan to extend the sunset provision from three years to five years.Racetracks had been seeking to get an additional 8% to 10% in additional revenue from VLTs. Pataki and legislative leaders agreed to an additional 5% beyond the 12.5% tracks are eligible to receive. The deal also would have permitted the tracks to operate the devices for more hours each day.But sources involved in the talks said the sides couldn't agree on how the extra 5% for the tracks would be generated. The Lottery Division, which is getting a 15% share to run the program, told negotiators it could not give up any of its share for the tracks. The only other possible source would be revenue targeted for education; the law requires that 60% go to education.Assembly Racing Committee chairman Alexander Gromack said some officials are also concerned about making the pot more lucrative for tracks because of a pending lawsuit that challenges the constitutionality of VLTs. The suit claims giving any money in revenue to racetracks is illegal."Some got nervous about taking money from lottery or education," Gromack said.Gromack said that while tracks are complaining, he does not believe they will walk away from the VLT program. "In the end, I think they will still find a way to put VLTs in racetracks," Gromack said.New York's VLT dilemma is being followed by racing insiders around the country. In Kentucky, where push for alternative gaming at racetracks failed during the regular legislative session, supporters are cautiously optimistic New York can still work out a deal to appease the tracks.Gene McLean, a lobbyist for Standardbred tracks and horsemen in Kentucky, said New York's VLT bill and the low amount it was willing to share with racetracks "makes no sense. We've seen the numbers. It can't work."McLean said Kentucky breeders and owners, given their ties to the New York racing market, should be concerned about whether the New York VLT law goes forth. "It behooves Kentucky to have a strong racing market in New York," he said.McLean said if New York does resolve its VLT dispute, that could be the impetus for Kentucky, ever mindful of increased competition from New York, to move on gaming legislation, possibly later this year in a special session. A viable New York VLT law, McLean said, would put Kentucky "in a serious competitive disadvantage" with New York."And when we start losing horses in our racing here because we're less competitive, then maybe we can get the Kentucky General Assembly to be more open to the opportunities with VLTs," McLean said.