Make a smart play for sports betting in New York State

Sunday evening, when the NCAA announces the teams for its men’s championship basketball tournament, fans and bracketologists will tune in with tremendous anticipation. So will bettors. March Madness is among the most popular wagering events of the year, cramming legal operations with gamblers loading up on the huge menu of games.

This year, New Yorkers who want to be part of that action legally must still take their money to another state, with New Jersey the closest option. Next year, though, they should be able to place bets in New York, as the last of the state’s consequential bans on betting disappears. And this might be New York’s best chance to get gambling right and correct the mistakes of the past.

Over the decades, a step-by-step loosening of the state’s betting ban allowed lotteries, bingo, off-track betting, Indian casinos and slot-machine “racinos.” Then in 2013, the state constitution was amended to allow seven non-Indian casinos. The four approved for the Southern Tier and upstate have opened. Three more, in New York City and downstate, can be licensed and built starting in a few years. Those 2013 changes also approved on-site sports gambling for casinos, a bonus that didn’t pay off until last year, when the U.S. Supreme Court struck down a ban on sports betting in most states.

With Gov. Andrew M. Cuomo fretting about prospective budget shortfalls in the billions and state lawmakers pushing new spending requests in the gazillions, the rush is on to approve as much gambling as possible as quickly as possible to harvest the perceived tax windfall. But experience with gaming expansions here and in other states indicates the money that gambling brings in will never be as much as the optimists hope. The revenue usually diminishes over time. And the increased gambling will bring with it societal costs that must be addressed.

Most important, unless management and oversight are structured properly, too much of the revenue gambling generates can find its way to jobs and subsidies for the politically powerful rather than tax relief and programs that benefit everyone.

Consider the state’s six off-track betting authorities, created as public benefit corporations starting in 1971. At first they prospered so much that they were able to pay hundreds of millions of dollars to state and local governments while padding payrolls with fat patronage jobs. But OTB payouts to government hit a high in 1988, then began to dwindle and bottom out. Horse racing’s popularity faded, and gambling revenue increasingly went to casinos in New Jersey, Connecticut, Pennsylvania and other nearby states. The horse racing was disappearing, but the structure of providing jobs with generous government benefits and pensions, and subsidies to thoroughbred racing interests, could not be eradicated. In 2010, the once-fantastically profitable New York City OTB went bankrupt, leaving $300 million in debt and as much as $700 million in liabilities for state taxpayers.

The Nassau and Suffolk OTBs would have been shuttered had lawmakers not approved deals to funnel “racino” profits from 1,000 video lottery terminals to each of them. And if the profits from these OTB slots did not have to go to prop up both horse owners and the OTBs, even more money could go into county coffers. Nassau County gets only $20 million a year from its
designated machines at Resorts World Casino in Queens, but the devices generate $3 million a week. Suffolk’s VLTs make $4 million a week, but the county is promised just $13 million over 10 years.

In January, Cuomo started talking about letting the OTBs shed their horse operations and concentrate on sports betting or slot parlors, a move that would need approval from the State Legislature. It’s a plan that makes no sense when VLTs and sports betting are better run by for-profit operators that would provide bigger chunks of tax revenue to government. And if the industry falters, taxpayers wouldn’t be left to prop up the OTBs even more.

In the intense negotiations surrounding the budget, it’s inevitable that sports betting will be seen as part of the answer. A State Senate bill outlines a crazy quilt of upstate and downstate casino trade-offs, with an improbably high revenue estimate of $90 million annually. A more limited proposal that would allow sports betting on mobile devices could net about $13 million a year. If it’s approved, there should be a deal to end OTBs once and for all. New York’s horse betting should be handled through licensed sports books, with a fair share of the proceeds going to the tracks and the thoroughbred industry.

Legal gambling is never a Cinderella story. At best, it is a fun entertainment and a decently profitable industry. At worst, when markets are oversaturated and oversight is poor, it’s a heartbreaker. Gambling is never a panacea for the communities that host it or the governments that seek its revenue, and addiction can be ruinous. Understanding that — and approaching more legalization with a fiscally smart, socially responsible and reliably profitable plan — is the best way to avoid a bracket buster.

— The editorial board