Help for Illinois Racing? Maybe Yes, Maybe No

Many variables at play in helping Illinois horse racing industry.

By Bob Kieckhefer
In theory, Illinois horse racing should be on the verge of receiving tens of millions of dollars in revenue enhancements after a recent flurry of action by state and federal courts, the state legislature and Gov. Pat Quinn.

In reality – and as usual where Illinois politics meets gaming – the situation remains very much up in the air. When all is said and done, little or even no help could be forthcoming for the beleaguered horsemen and tracks.

Three different but interrelated balls are in the air.
-- Legislation passed in June that would permit race tracks to install slot machines as part of a massive expansion of Illinois gaming.

-- Legislation passed years ago but since bottled up in court that would require the top-grossing Illinois riverboat casinos to share their revenue with the racing industry.

-- A gigantic, statewide public works program to be funded largely by legalization of video poker at bars, fraternal halls and other sites.

Racing achieved a signal victory when the General Assembly approved the gaming expansion legislation this spring, including the long-sought provision for slots at tracks. The hitch is that Quinn has expressed serious reservations about the legislation and Aaron Jaffe, a respected former judge and former legislator who now heads the state gaming board, has warned that the influx of new casino operations would open the door to corruption and other misdeeds.

As a result, legislative leaders have held the bill on technical grounds, rather than sending it to Quinn and risking a quick veto. They hope to modify the legislation in a way that would bring the governor on board and still retain enough votes to approve a new version of the law.

So far, that has proved tricky but the support of new Chicago Mayor Rahm Emanuel provides some hope the job can be done.

The casino revenue-sharing plan was brought back to life Friday, July 8, when a federal appeals court in Chicago ruled it constitutional. The legislation requires casinos grossing more than $200 million a year to share 3% of their revenue with racing. Casino interests sued and the money has been held in escrow. Since the casinos still could ask the Supreme Court of the United States to consider the case, the cash is unlikely to flow anytime soon.

Even if the escrow money is finally released, horsemen would have to decide whether to distribute their share of the money retroactively – based on the results of races run during the escrow period – or to apply it to future purses. While leadership is working hard to avoid it, that could lead to another court battle.

The video poker question is not directly related to the other gaming issues but impacts the bigger picture in several ways. It is one of several revenue-producers designed to fund a multibillion-dollar capital program beloved of lawmakers everywhere. A state appeals court, however, struck down the measure on technical grounds, leaving the prospect of an even more gaping hole in the state’s already disastrous financial picture.

On Monday, July 11, the state Supreme Court ruled unanimously the law is constitutional. While good news for the construction industry, lawmakers and Quinn, the 7-0 decision could be bad news for racing for a couple reasons.

First, if Supreme Court had tossed the law, video poker revenue would have gone with it. That would have put even more pressure on Quinn to sign the new gaming expansion bill to help fill the gap.

Second, Quinn’s main argument against the new legislation is that it expands Illinois gaming too dramatically. And Jaffe argues it would be impossible to regulate such a massive, rapid expansion. Had video gaming gone away, those arguments would have been blunted – at least in part.

There is no timetable on the casino revenue-sharing issue. The casinos have yet to decide whether to appeal again and, if they do, timing would depend on whether the Supreme Court deigns to hear the case.

Quinn and the legislative leaders also have an open-return ticket on the bill passed earlier this year. It technically would be alive and available for amendment anytime before a new General Assembly is seated in January 2013. In reality, budget pressures at the state level and in Chicago likely will force at least an attempted showdown this fall.