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Casinos Keep New York School Money

When slot machines were legalized 14 years ago for the New York Lottery, they were supposed to pay the vast majority of their profits to education. Today they pay less than half.

Posted on September 28, 2015, at 7:54 a.m. ET

The New York Lottery / Via YouTube

In a New York Lottery ad last year, a choir of dancing schoolchildren surprised lottery players at a convenience store, singing "thank you for being a friend." The message was that betting on the lottery equals giving money to schoolkids — a message the state has used to justify the lottery since its inception in 1966.

After 9/11, the state legalized slot machines as part of the lottery.

One of the two enormous gambling floors at Resorts World, New York City’s first ever casino and the largest slot casino in the country / Kevin Townsend for BuzzFeed News

In the aftermath of 9/11, New York desperately needed money. So, in an emergency law passed just weeks after the attacks, the state expanded the lottery to include slot machines called 'video lottery terminals' or VLTs. That law required the machines send at least 60% of their winnings to a state education fund, and urged the lottery to "ensure the maximum lottery support for education."

These days, however, most of the slot machine money doesn’t go to schools.

BuzzFeed News / New York Lottery Monthly Financial Reports

When the first VLT casino opened in 2004, it contributed 61% of its profits to New York schools. But as VLTs expanded across the state, the casinos argued they weren't making enough money on each machine. By lobbying state legislators over the years, gaming interests have won themselves bigger and bigger chunks of the VLT revenue, including sweetheart deals like the one detailed in a recent BuzzFeed News investigation.

The New York State Division of the Budget counts 10 "significant legislations" changing VLT rules. Today, after all the nips and tucks to the law, New York schools get just 45% of VLT earnings.

As the share sent to schools went down, the casinos' cut went up. Initially, VLTs were legalized on the basis that casinos would keep no more than 25%. Today, casinos rake in 45%.

Despite casinos’ complaints, New York VLTs earn more than Vegas slots do.

BuzzFeed News // New York Lottery Monthly Financial Reports for fiscal year ending March 31, 2015; SEC Filings for Wynn Resorts and The Venetian / The Palazzo (the two largest casinos with publicly available data) for year ending December 31, 2014

While New York casinos won bigger slices of VLT profits by claiming their machines didn't win enough from gamblers, newer slot machines don't seem to have that problem. Resorts World — opened in 2011 as New York City's first ever casino — makes among the highest profits per machine of any casino in the entire country. Other VLT casinos in New York aren't far behind.

According to the publicly available data, the Queens VLT business earns nearly twice as much from each machine as any major Vegas casino. And, as one of only a small handful of casinos with more than 5,000 machines, that profitability makes Resorts World the largest slot machine casino, by revenue, in the United States.

To date, VLTs have underfunded education by $1.7B

BuzzFeed News / New York Lottery Monthly Financial Reports, Fiscal Year ending March 31

That's the difference between the original 60% minimum and what VLTs have actually contributed. That's enough money to pay the median salaries of 2,300 teachers for ten years, or to buy 24 million textbooks.

BuzzFeed News

VLT casinos have missed the 60% mark by over $250 million each of the last three years, enough to fund pre-kindergarten for every low-income family in New York City.

The stakes are high. New York has, by far, the country’s largest lottery.

BuzzFeed News / North American Association of State & Provincial Lotteries, Fiscal Year 2014

It rakes in nearly twice as much revenue as any other state lottery, earning about as much from gambling in 2014 as the Bellagio, the MGM Grand, and MGM Resorts' thirteen other domestic casinos combined.

VLTs are New York’s largest source of lottery revenue.

Office of the State Comptroller May 2014 Report "Trends in New York State Lottery Revenues and Gaming Expansions"

New York's post-9/11 push for gambling revenue led to huge growth in scratch-offs ("Instant Games" in the chart above) and numbered tickets like Mega Millions ("Multi-State Jackpots"). But VLTs rocketed past all other types of state gambling. As of 2015, it accounted for roughly one in every three of New York's lottery dollars.

Among New York’s major VLT operations, Resorts World – by far the largest – gives the least to schools.

BuzzFeed News / New York Lottery Monthly Financial Reports

The state gave Resorts World one of the biggest and most recent funding exceptions. Despite its enormous size, the Queens casino gives a below-average share to education — just 44%, the least of the state's four biggest casinos. What accounts for the gap? The 7% of VLT winnings that Resorts World sends to the New York Racing Association, or NYRA. To learn more about how that sweetheart deal came to be, read the recent BuzzFeed News investigation that exposed it.

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