22 N.Y.2d 119 (1968)
State funds, even those managed by public benefit corporations, generally require legislative appropriation for disbursement under Article VII, Section 7 of the New York State Constitution, ensuring legislative control over state finances.
Summary
Saratoga Harness Racing Association challenged the constitutionality of a New York law requiring racing associations to contribute a portion of their “breakage” (odd cents from pari-mutuel betting) to the Agriculture and New York State Horse Breeding Development Fund. The Association argued that the fund’s disbursement of these revenues without legislative appropriation violated Article VII, Section 7 of the New York Constitution. The Court of Appeals affirmed the lower court’s ruling, holding that the fund’s structure and limited scope did not violate the constitutional requirement for legislative appropriation, as the fund’s obligations did not become obligations of the state.
Facts
The New York legislature created the Agriculture and New York State Horse Breeding Development Fund, a public benefit corporation, to support the harness racing industry. The fund was financed by requiring private racing associations to pay 25% of their “breakage” to the fund. The fund was authorized to use these revenues for programs designed to improve the sport and facilities. Saratoga Harness Racing Association refused to pay $45,222.89 in breakage, arguing the legislative program violated the New York State Constitution.
Procedural History
Saratoga Harness Racing Association filed suit to enjoin the fund from collecting the breakage. The Supreme Court, Saratoga County, initially granted the fund’s cross-motion for summary judgment in part. The Appellate Division, Third Department, modified the order to allow the fund full recovery. The New York Court of Appeals granted review.
Issue(s)
Whether the legislative program requiring racing associations to pay a portion of their “breakage” to the Agriculture and New York State Horse Breeding Development Fund, which can then disburse those funds without legislative appropriation, violates Article VII, Section 7 of the New York Constitution.
Holding
No, because the Agriculture and New York State Horse Breeding Development Fund is not a fund under the management of the state, as the term is employed in the Constitution. The purpose of section 7 of article VII is to ensure legislative control over state expenditures to prevent the state from incurring obligations in excess of its income.
Court’s Reasoning
The Court reasoned that Article VII, Section 7 was designed to prevent the state from incurring obligations beyond its income by requiring legislative control over expenditures. The Court acknowledged that not every fund made up of public moneys is subject to this provision. The Court found that the Fund’s obligations did not become the obligations of the State because the legislature created a corporate entity whose obligations do not become the obligation of the State. Further, the court reasoned there was no risk to public visibility of legislative control because the method of raising revenue and proportion of funds allocated to various programs was specifically defined by the legislature. The court stated that “all that is left to the ‘Fund’ is the administration of the expenditures in accordance with the legislative mandate.” The dissenting opinion argued that the breakage moneys were funds under the management of the state, and that disbursement without appropriation violated the constitutional controls upon State finances. The dissent emphasized the importance of legislative control over revenues and disbursements, and the potential for evading constitutional safeguards.