Topeka Plans for four state-owned and -operated resort casinos will continue moving forward but without any doubt about their constitutionality.
In a unanimous ruling Friday, the state's highest court put to rest the question about last year's Kansas Expanded Lottery Act, which calls for casinos in Cherokee, Ford, Sumner and Wyandotte counties, plus slot machines at the Woodlands in Kansas City, Kan., and Camptown Greyhound Park in Frontenac.
Millions of dollars in profits for casino managers and revenue for the state were in the balance until the ruling. Eleven casino corporations are vying for the casino management contracts.
The key question was whether state owned and operated, as spelled out by the law, really was that.
"While the state is not the exclusive owner and operator of all aspects of the lottery enterprise under KELA, the state owns and operates the enterprise by itself and owns and operates key elements of the lottery," Justice Eric S. Rosen wrote for the Kansas Supreme Court.
"It is unnecessary that the state own the physical plant associated with the lottery. It suffices that the state own the game, or the scheme, or the enterprise. Such a definition is consistent with a standard review favoring the constitutionality of KELA," Rosen wrote.
The state constitution was rewritten by voters in 1986 to allow a state-owned and -operated lottery, and the court said in 1994 that the term "lottery" is broad enough to include slot machines and other casino games.
Twelve states have commercial casinos, but only Kansas would have state-owned and -operated facilities, according to the American Gaming Association. The state has four tribal casinos on reservations in northeast Kansas.
Concerned that developers would be reluctant to invest unless the law were upheld, Gov. Kathleen Sebelius asked the attorney general's office to get a ruling from the court.
The attorney general argued that the Kansas Lottery would regulate and control - but not own and operate - the casinos. The court rejected that argument.
"The statutory scheme, when read in its entirety, shows that these direct statements of ownership and operational control are not mere verbal camouflage," the court said.
The ruling didn't please everyone. House Speaker Melvin Neufeld, an Ingalls Republican, was disappointed.
"It is disingenuous to think when Kansans voted in 1986 to created a state-owned and -operated lottery and allow the sale of scratch game tickets, they were voting to allow casinos in our state," he said. "I would certainly prefer to sit down and find a way to make our state financially secure without literally staking our future on a bet."
State officials expect to get at least $200 million a year from the new gambling revenue. It already has received $236 million in privilege fees from applicants, but losers will get a refund. The state will end up keeping about $80.5 million plus interest earned from all the fees.
Legislators already planned to use some of the money for the budget year starting July 1, including a one-time $300 payment to state pension fund retirees, amounting to $7 million, and $20 million in bond payments for expanding the University of Kansas pharmacy school.
Woodlands general manager Jayme LaRocca said the ruling allows the operation to continue with plans to install 800 slots once it reaches a deal with the Lottery. He said it will take six to nine months to get the slots running after a contract is signed.
Ed Van Petten, Lottery executive director, said he was "very much relieved" by the ruling. He said the casinos are supposed to be open for business by 2011.
"Even though it wasn't a surprise, it is nice to have it behind us," Van Petten said.
Dan Biles, the Lottery's attorney, said the ruling would help defend against any challenges to how the law is implemented.
"This court is really embracing how this law is composed and how it intends for the state to have an active roll in the ownership of the games," he said.
Last month, the Lottery Commission approved 11 contracts to manage the four casinos and forwarded them to the seven-member Lottery Gaming Facility Review Board, which will pick the contractors for the Cherokee and Sumner casinos on Aug. 21-22 and the Ford and Wyandotte casinos on Sept. 18-19. All must pass a background check by the Kansas Racing and Gaming Commission.
"We have a schedule set and proceeded as though it would be upheld. It won't change our time as far as the process we are going through," said board Chairman Matt All. "If they had struck down the statute, I assume that would have eliminated any need for the review board."