CHICAGO — The Ohio Supreme Court ruled yesterday that Gov. Ted Strickland’s budget-balancing plan to install video lottery terminals at the state’s race tracks must go to voters.

The ruling is a significant defeat for the governor, who had crafted the measure as a key to balancing the current 2010-2011 budget. Strickland issued an executive order in August to fast-track the VLT plan after gaining legislative approval, and estimated that the slots proposal would raise $933 million in new education funding for the state.

The ruling came the same day as a report showing that gaming revenues across the country are down for the first time in at least 30 years, even as Ohio and 24 other states consider expanding gambling to raise new revenue to balance their budgets.

Strickland’s plan calls for the installation of 17,500 slot machines at the state’s seven horse-race tracks. An anti-gambling group, LetOhioVote.org, asked the court to allow Ohioans to vote on the VLT measure. The administration maintained the proposal was included as an appropriations provision in the current 2010-2011 budget, and therefore not subject to referendum. Strickland has also said that a vote would delay new revenue badly needed in the current fiscal year.

In its 6-1 ruling, the Ohio Supreme Court said the proposal should be subject to a statewide voter referendum under the state’s constitution. 

“We are not unmindful of the effect our decision may have on the state budget,” Justice Terrence O’Donnell wrote in the majority opinion. “However, our own constitutional duty is to ensure compliance with the requirements of the Ohio Constitution irrespective of their effect on the state’s current financial conditions.”

In a dissenting opinion, Justice Paul E. Pfeifer agreed with the Strickland administration that the proposal amounted to an appropriation. “The VLT legislation is at the very heart of the budget bill, at the very heart of how Ohio is going to pay for its spending over the next two years,” he wrote. “Without VLT-enabling legislation, the budget crumbles. … Without the income expected from VLTs, a large part of the funding for that appropriation vanishes, leaving an $851.5 million hole in the budget.”

In a statement Strickland said he would review the court’s decision before deciding on his next move. The Ohio Lottery Commission was to discuss the ruling yesterday

The VLT proposal is one of three budget proposals the state’s high court has considered over the past several weeks. The court last week ruled in favor of Strickland when it said Ohio’s new business tax should apply to grocers. It is continuing to weigh the  appeal to overturn a Franklin County court ruling blocking the state from using $230 million from the tobacco prevention fund to pay for health care and related services in the current budget.

Meanwhile, Ohioans will vote Nov. 3 on another controversial gaming expansion, one that would allow the establishment of four casinos in the state’s four largest cities.

Ohio’s reliance on gaming to increase revenue comes as states across the country are seeing gambling revenue decline for the first time in three decades, according to a report released Monday by the Rockefeller Institute of Government.

Despite the declines, at least 25 states in the last year have considered expanding gaming in order to generate new revenue and balance their budgets, according to the report, “For the First Time, A Smaller Jackpot: Trends in State Revenues from Gambling.”

“When normal revenue growth softens during economic downturns, states often consider expanded gambling operations among other options for balancing budgets,” Lucy Dadayan and Robert B. Ward, the study’s authors, wrote.

State and local gambling revenue — generated from lotteries, casinos, and racinos — declined by 2.8% on average in fiscal 2009, the biggest decline in three decades, the report said. Ohio gaming revenue fell 4.5% to $677 million in 2009 from $702 million in 2008.

Four states have VLTs in racinos: ­Delaware, New York, Rhode Island, and West Virginia. Video slot machines account for the fastest-growing element in states’ gambling portfolios, the Rockefeller report said.

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