Saratoga Harness Racing Assn., Inc. v. Agriculture and New York State Horse Breeding Development Fund, 22 N.Y.2d 119 (1968)

The New York State Constitution permits the legislature to allocate a portion of revenues from parimutuel betting to a fund dedicated to the improvement and growth of the horse racing industry, as this serves a legitimate public purpose, and such a fund is not necessarily considered a fund under the state’s direct management requiring strict budgetary control.

Summary

Saratoga Harness Racing Association challenged the constitutionality of the Agriculture and New York State Horse Breeding Development Fund, arguing that the diversion of breakage revenues (odd cents from parimutuel betting) to the fund violated the state constitution. The Association claimed the funds were not used for the support of government and that the fund operated without proper legislative control over expenditures. The Court of Appeals upheld the fund’s constitutionality, finding that the allocation of revenue to improve the horse racing industry served a valid public purpose and that the fund did not constitute a state-managed fund subject to strict appropriation requirements. The Court reasoned that the state constitution did not require all revenues from parimutuel betting to directly support the government, and the fund’s limited autonomy did not violate constitutional budgetary principles.

Facts

The New York Legislature created the Agriculture and New York State Horse Breeding Development Fund to promote the harness racing industry, a significant source of state revenue. The fund received 25% of the “breakage” from private racing associations, representing the odd cents over any multiple of ten from parimutuel betting payouts. Saratoga Harness Racing Association, a licensed racing corporation, refused to pay approximately $45,222.89 in breakage to the fund, arguing the legislation was unconstitutional.

Procedural History

Saratoga Harness Racing Association initiated an action to enjoin the fund from collecting the breakage moneys. The lower courts ruled in favor of the Agriculture and New York State Horse Breeding Development Fund, upholding the constitutionality of the legislation. The case was then appealed to the New York Court of Appeals.

Issue(s)

1. Whether the allocation of breakage revenues to the Agriculture and New York State Horse Breeding Development Fund violates Article I, Section 9 of the New York Constitution, which permits parimutuel betting if the state derives reasonable revenue for the support of government.
2. Whether the operation of the Agriculture and New York State Horse Breeding Development Fund violates Article VII, Section 7 of the New York Constitution, which requires legislative appropriation and control over state funds.

Holding

1. No, because the constitutional provision does not mandate that all revenues from parimutuel betting be directly used for the support of government; allocating a portion to improve the industry is permissible.
2. No, because the Agriculture and New York State Horse Breeding Development Fund is not a fund under the direct management of the state, and its limited autonomy in administering expenditures does not violate constitutional budgetary principles.

Court’s Reasoning

The Court reasoned that the constitutional amendment permitting parimutuel betting does not require all revenue exceeding expenses to directly support the government. The legislature can condition licensing for private racing associations by requiring a portion of revenue to be set aside for improving the sport and its facilities. The Agriculture and New York State Horse Breeding Fund is a legitimate tool for achieving this public interest.
Regarding Article VII, Section 7, the Court clarified that not all funds comprised of public moneys fall under this section’s purview. The critical factor is whether the fund’s operation undermines legislative control over expenditures, potentially leading to state obligations exceeding income. Here, the fund’s obligations do not become the state’s responsibility, and its expenditures are limited to its income. Furthermore, the legislation specifies the revenue source and allocates funds for various programs furthering the legislative purpose. The Court emphasized that “public visibility of legislative control over the raising of revenues and their disbursement” would not be endangered, as the legislation clearly defines how revenue is raised and allocated. The Court found that the fund’s role is primarily administrative, executing expenditures according to the legislative mandate. Therefore, striking down the legislation would “needlessly hamper and cripple a significant legislative program,” a result not mandated by the Constitution.