05/27/03

Columbus - Ohio's latest effort to bring slot machines to racetracks made its debut late one night in April.

Just before midnight and without a single public hearing, House members added it to the state budget bill.

Yet work on the plan began long before the public - or even most lawmakers - saw the details.

A racetrack lawyer wrote it.

A gambling industry lobbyist provided the financial projections to back it up.

The state's most powerful Republican lawmakers - whose political careers have been bolstered by generous gambling industry donations - promoted it.

And in their zeal to get the slots plan passed, lawmakers even made rare overtures to minority Democrats, who, for a change, could play a key role in helping their GOP colleagues swing open the door to expanded gambling.

Hearings on the measure are scheduled to continue this week in the Ohio Senate.

The plan is to ask voters to authorize the slots in November and entice them with a Democratic idea to use the proceeds for college scholarships for Ohio kids.

How did the plan get this far? Here's a look at the players behind the scenes in Ohio's slots game and how they made it happen.

Ohio House Speaker Larry Householder has emerged as the slots' biggest legislative backer - and one of the biggest recipients of the gambling industry's financial largesse.

Since 1999, gambling interests have donated more than $1 million to candidates, party and caucus accounts in Ohio, according to a December 2002 study by Ohio Citizen Action, a nonpartisan watchdog group. Groups representing horse owners and trainers have given $262,400; track owners contributed $107,750 and their lobbyists gave $142,481. Accounts controlled by Householder collected at least $83,200.

But Householder said his efforts to legalize slots have not been motivated by political contributions.

The Perry County Republican first pitched the idea two years ago as a way to help end a court fight over how Ohio pays for its public schools. Today, he promotes the idea as a means of balancing the state budget without a major tax increase.

Last November, with two gambling issues already rejected by voters and another slot plan dead in the legislature, Householder instructed the once-disjointed horse racing industry to unite behind a single plan. Most wanted the slots, but track owners and horsemen disagreed on how to split the proceeds, and some tracks were more willing than others to help pay for a pro-gambling campaign.

"I said, 'Gentlemen, . . . there's no agreement on your part, and so if you have any hopes of ever reaching the ballot, you're going to have to get your act together,' " Householder recalled.

Mindful of the speaker's advice, Beulah Park owner Charlie Ruma commissioned a public opinion poll in January to determine whether a ballot issue had any chance of passing. At the urging of his influential lobbying team, Republican Neil Clark and Democrat Paul Tipps, Ruma hired Democratic analyst Jerry Austin and Republican consultant Mark Weaver to interpret the results.

A majority of those surveyed said they would vote against the measure, Ruma said, "But when you tied it in to education, it becomes a very close race."

The poll showed more support among younger voters and Democrats and strong opposition from conservative Republicans. "The bottom line," Ruma said, "was we could win this."

All seven tracks eventually united to form the Ohio Horse Racing Council, an organization that aimed to speak with one voice. The voice they selected was that of racetrack lobbyist Scott Borgemenke.

As a former policy adviser to Gov. Bob Taft and former chief of staff in the Ohio Senate, Borgemenke understands politics and policy. As the son of a once-celebrated River Downs jockey, he appreciates Ohio's racing tradition and understands the competitive forces contributing to its demise.

As Borgemenke organized the racing council, House members struggled to craft a balanced budget. Taft's budget plan called for more than $3 billion in tax increases - increases Householder had deemed dead on arrival.

Householder began looking for ways to help raise more state money - without raising taxes. His staff called the racing council, the Chamber of Commerce and other groups, asking for what Householder prefers to call "revenue-enhancement plans."

According to Ruma, the speaker's office initiated the talks. Householder says the tracks called him. But just days later, House leaders had an industry-written plan in hand that relied on financial projections from an accounting firm that caters to casinos.

Modeled after a bill that died last November, it called for up to 2,500 machines at each of the seven tracks. The net proceeds would go to public schools.

The bulk of the amendment had been written by Gregg Haught, a lawyer and lobbyist whose firm represents Thistledown.

With the issue all but guaranteed to generate a legal challenge, companion legal advice came from former Ohio Supreme Court Justice Andy Douglas. His law firm represents International Game Technology, the nation's largest slot-machine manufacturer.

Douglas would not discuss details of his role. He did, however, notify the governor's office of his work for IGT, said the governor's chief of staff, Brian Hicks.

Rep. Tim Grendell, a Chester Township Republican who opposes the slot machines, said he finds it "offensive" for lobbyists to write amendments. Haught contends that it is not uncommon for industry lawyers to help draft complex legislation.

"In the legal world, this is shelf product," Haught said. "The object was to come up with a bill that does right by public schools and worked within our industry, to take it past everybody, do the legal analysis and then put it on a shelf."

After failing to reach a budget accord through a combination of cuts and higher taxes, Householder reached for the shelf.

Pick your poison

By the time the plan took shape in the House, it included an intriguing choice for voters: slots or a sales tax increase? The budget called for a 1-cent increase in the state's 5-cent sales tax, which voters could rescind after a year by approving slots, officially known as video lottery terminals, or VLTs, at racetracks.

While the provision would later draw sharp criticism in the Senate, Householder takes credit for linking the two issues.

Despite the speaker's power, he had a difficult time persuading his fellow Republicans to endorse the sales-tax hike.

So Householder reached out to Democrats, eventually persuading five to support the budget.

News of the defections spread quickly among House Democratic leaders, and slot machine supporters picked up rumors that Democrats would retaliate by voting as a bloc against the slots.

While Clark worked the Republicans, his Democratic partner, Tipps, made a pitch to Democrats.

"I suggested that the two issues [the budget vote and the slots amendment] were separate, and any concerns they had for the budget itself was one thing and a vote on the VLTs was another," said Tipps, former chairman of the Ohio Democratic Party.

All talk of blocking the slots ended. On the morning of the late-night vote, House members from both parties finally saw the complex amendment that had been rumored for weeks.

While leafing through the 43-page document, Parma's Dean DiPiero wondered about the confusing ballot language, which asked voters whether they wanted to "prohibit" the slots. That meant a "no" vote would authorize the slots, while a "yes" vote would reject them.

Some of DiPiero's fellow Democrats wanted more time to read the amendment. They asked for a caucus and invited Thistledown lawyer and lobbyist Haught, a fellow Democrat, to join them. No anti-gambling advocates asked for, or received, equal time.

Republicans received a companion, pro-gambling briefing from Chief of Staff Brett Buerck. That's when they learned that the speaker had tapped Rep. Bill Seitz, a Cincinnati Republican, to offer the amendment on the House floor.

Householder explains his choice: "Bill is from Cincinnati so he understands better than most that Ohio is losing gambling dollars" to Indiana's riverboat casinos and Kentucky's celebrated racetracks. And he wanted someone who could go toe to toe with gambling critics, such as Grendell and Euclid Democrat Ed Jerse.

"I figured Tim and Ed Jerse would lead the charge against this," Householder said.

Grendell stood firm in his opposition to the slots and remains critical of the process used to add them to the budget.

He described the gambling advocates as "a mosaic of the most powerful lobbyists in Columbus. And that helps answer the next question," Grendell said. "Why was the slot machine piece introduced at the 11th hour, in the form of an amendment on the floor, without even going through the committee process where people can have an opportunity to testify for or against the measure before it comes to a vote?"

Householder's reply: "This issue has been around the block for years . . . and just about everybody in the state of Ohio understands the issue, because they're usually climbing on a bus on their way to Indiana or West Virginia or Michigan so they can spend gambling money out of state."

A majority of House members agreed with his logic, voting 66 to 33 in favor of the slots amendment. Grendell and Jerse voted "no."

Betting on the Democrats

Just hours after the votes were tallied, gambling supporters learned of trouble ahead in the Senate. Calls from senators "started coming to me that morning," Clark recalled. The loudest critics were Republicans, who hold 22 of the chamber's 33 seats.

Some objected to the ballot language, he said. Others insisted that the budget wasn't really balanced because the sales-tax increase would generate more than the slots.

Backers realized that their plan would die unless Democrats could be brought on board.

While searching for a way to save the slots, gambling supporters toyed with the idea of embracing a plan long advocated by Sen. Eric Fingerhut, a Shaker Heights Democrat: Use the new gambling proceeds for college scholarships for high-performing high-school seniors.

Fingerhut is not just any Democrat. He is the Democrat who hopes to win his party's nomination for next year's U.S. Senate race.

In private conversations with Senate Republicans, Fingerhut pitched the merits of the plan, arguing that it would help make college more affordable and encourage Ohio's best and brightest to remain in the state. He found an ally in Ohio State University President Karen Holbrook, and he urged anyone with doubts to give her a call.

Informal conversations evolved into negotiations.

Haught began drafting a Senate amendment that incorporated Fingerhut's plan.

Buoyed by the prospect of Democratic support, Clark and other lobbyists began polling racetracks to see whether they would endorse the scholarship plan and help pay for a ballot issue. At least one track owner had already made up his mind.

Ted Arneault, president and CEO of the firm that purchased Scioto Downs racetrack near Columbus, told of plans to spend at least $500,000 on a slots campaign in Ohio. He will set aside an additional $1 million, he told a May 14 shareholders meeting, for lobbying in Ohio and neighboring Pennsylvania, which is also debating whether to allow slot machines. Although Arneault's business is gambling, Fingerhut suspects he has made a safe bet.

"The arguments against this are getting weaker and weaker," Fingerhut said. "We already have all these tracks around us, and money is leaving Ohio as a result. And this plan would expand gambling but in places where gambling is the whole purpose of the institution."

And while the arguments are getting weaker, Fingerhut said, "the pressure to do this is getting stronger. That's a powerful set of circumstances."

To reach this Plain Dealer reporter:

stheis@plaind.com, 1-800-228-8272