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State ex rel. Loontjer v. Gale

Supreme Court of Nebraska

September 5, 2014

STATE OF NEBRASKA EX REL. PATRICIA A. LOONTJER, RELATOR,
v.
HONORABLE JOHN A. GALE, SECRETARY OF STATE OF THE STATE OF NEBRASKA, RESPONDENT

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Original action.

L. Steven Grasz and Mark D. Hill, of Husch Blackwell, L.L.P., for relator.

Jon Bruning, Attorney General, L. Jay Bartel, and Lynn A. Melson for respondent.

HEAVICAN, C.J., WRIGHT, CONNOLLY, STEPHAN, MCCORMACK, MILLER-LERMAN, and CASSEL, JJ.

OPINION

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[288 Neb. 975] Connolly, J.

I. SUMMARY

In April 2014, the Legislature passed L.R. 41CA,[1] a resolution to amend the Nebraska Constitution. Neb. Const. art. III, § 24, generally prohibits the Legislature from authorizing games of chance, but it contains an exception for live horseracing under specified conditions. L.R. 41CA would amend article III, § 24(4)(a), in two ways. First, it would permit wagering on " replayed" horseraces in addition to wagering on live horseraces. Second, it would specify how the Legislature must appropriate the proceeds from a tax placed on wagering for both live and replayed horseraces.

Secretary of State John A. Gale, respondent, denied a request to withhold the proposed amendment from the November 2014 general election ballot. The Secretary determined that the amendment was not facially invalid under the " separate-vote" provision of Neb. Const. art. XVI, § 1. After that, Patricia A. Loontjer, relator, applied for leave to [288 Neb. 976] commence an original action in this court to keep the proposed amendment off the ballot. We granted the petition and expedited the proceeding.

We exercise original jurisdiction under Neb. Const. art. V, § 2, because this is a cause of action relating to revenue, in which the State has a direct interest, and because Loontjer has requested a writ of mandamus.[2] We hold as follows:

o We conclude that an alleged violation of the separate-vote provision of Neb. Const. art. XVI, § 1, presents a preelection justiciable issue for a proposed constitutional amendment.

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o We also conclude that the separate-vote provision requires the Legislature to present constitutional amendments to voters in a manner that allows them to vote separately on distinct and independent subjects.
o Finally, because L.R. 41CA violates the separate-vote provision, we conclude that article XVI, § 1, bars its placement on the November 2014 general election ballot.

II. BACKGROUND

1. Legislative Efforts to Authorize Wagering on Replayed Horseraces

Neb. Const. art. III, § 24(1), states that " [e]xcept as provided in this section, the Legislature shall not authorize any game of chance . . . ." Section 24(2) specifically authorizes the state lottery. And § 24(4) provides that the games-of-chance prohibition does not apply to wagering on live horseraces and specified bingo games. Subsection (4)(a) relates to horseracing. It currently authorizes the Legislature to enact " laws providing for the licensing and regulation of wagering on the results of horseraces, wherever run, either within or outside the state, by the parimutuel method, when such wagering is conducted by licensees within a licensed racetrack enclosure."

Article III, § 24, does not define " parimutuel" betting. Generally, it is a gambling system in which the bettor has [288 Neb. 977] a stake in all wagers placed on a race in proportion to the money that the bettor waged.[3] Section 2-1207 allows a licensee to deduct a percentage from all wagers placed on a race and divide the remaining pool among those holding winning tickets. The Legislature has authorized parimutuel betting on live horseraces at enclosed, licensed racetracks. The race can be conducted at that track or simulcast from another licensed track.[4] In 1988, the voters adopted an amendment to article III, § 24, to permit wagering on " horseraces, wherever run, either within or outside of the state, . . . when such wagering is conducted by licensees within a licensed racetrack enclosure." [5]

In 2010, three senators introduced a bill to authorize the State Racing Commission to " license and regulate parimutuel wagering on historic horseraces." [6] In the bill's statement of intent, the introducer stated that the bill would provide " an additional mode of horse race wagering inside the premises of a licensed horse racetrack" by allowing the operators to " install and operate Instant Racing Terminals." [7] But the Attorney General's office issued an opinion that this court would likely determine the bill was unconstitutional under article III, § 24.[8]

The Attorney General's office concluded that historical horseracing referred to a patented wagering system that was discussed by the Wyoming Supreme Court in a 2006 decision. That court held that instant racing parimutuel wagering terminals were illegal gambling devices and that the Wyoming Pari-mutuel Commission had

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no power to authorize them.[9] The [288 Neb. 978] Nebraska Attorney General's office explained the new wagering system:

The " Instant Racing" system allows bettors to wager on the results of previously run or " historic" races through electronic " Instant Racing Terminals" [" IRTs" ]. The machines reportedly can access over 200,000 historic races. Wagers are made by coin or currency. Players can utilize [a] limited Daily Racing Form [for] past performance data (i.e. winning percentages, average earnings per start, trainer and jockey success, etc.) provided in graphic form before making their selections. The data is provided in such a way that bettors cannot identify the exact race. The machines contain a video screen which allows bettors to view the entire race after placing their wagers, or only a short clip of the stretch run of the race.
. . . Unlike most parimutuel wagering, where many wagers are made on a single race, Instant Racing involves wagers on many different races. Winners receive graduated payoffs based on their correct selection of the order of finish. Payoffs are also determined by timing - the bettor who hits first receives the highest payoff.
In appearance and operation, IRTs resemble slot machines or video lottery devices. The " bells and whistles" associated with slot machines or video lottery devices are all present (except for the pull-handle).[10]

The Attorney General's office concluded that wagering through instant racing terminals (IRT's) was inconsistent with the type of wagering allowed under article III, § 24. The opinion pointed out that § 24 allows bettors to wager on simulcast horseraces from another state, but not on races conducted at another time. Ultimately, the office concluded that because of the similarity between IRT's and slot machines, this court would probably agree with the Wyoming Supreme Court that IRT's were impermissible gambling devices. After this opinion [288 Neb. 979] was issued, the historic horseracing bill was indefinitely postponed in April 2010.[11]

In January 2013, Senator Scott Lautenbaugh introduced L.R. 41CA, the current proposed constitutional amendment to article III, § 24(4).[12] In his statement of intent, Senator Lautenbaugh stated that the proposed measure, together with a bill he was also introducing, would ensure the use of IRT's at horseracing facilities in Nebraska. The IRT's, as an additional mode of wagering on horseracing, would provide revenue to the state and its licensed racetracks.[13] L.R. 41CA would expand the type of wagering the Legislature can authorize to include " live or replayed" horseraces. Originally, the resolution did not appropriate any new or existing tax revenues.[14] Instead, the taxes and appropriations of tax revenues were set out in L.B. 590,[15] the bill that accompanied L.R. 41CA.

Currently, the Legislature places a tax on parimutuel wagering. Neb. Rev. Stat. § 2-1209 (Reissue 2012) authorizes the

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State Racing Commission to pay its own expenses and staff compensation out of these revenues first. It also requires the Commission to maintain a reserve fund that does not exceed 10 percent of the funds used for the commission's expenses. And any excess funds must be credited to the state's general fund.[16]

If it had passed, L.B. 590 would have immediately authorized the installation of IRT's. It would not have changed the existing tax scheme, but it would have imposed a separate and new tax on historical horseracing wagers. After paying administrative expenses, one-half of the new tax revenues would [288 Neb. 980] have been paid to the State Racing Commission's cash fund for equine therapy programs (for veterans and youths). The other half would have been credited to the Compulsive Gamblers Assistance Fund.[17]

After contentious floor debates, L.B. 590 was indefinitely postponed at Senator Lautenbaugh's request.[18] But the Legislature advanced L.R. 41CA to the select file [19] and carried it over to the next session.[20] In March 2014, Senator Lautenbaugh filed an amendment to L.R. 41CA.[21] Amendment 1910 included appropriations for all proceeds from taxes on " wagering by the parimutuel method." [22] Similar to the appropriation schemes under the current statutes and the unsuccessful L.B. 590, the proposed new appropriations under the amendment would require " regulatory expenses" to be paid first from the tax revenues.[23] But unlike the proposed new tax and appropriations under L.B. 590, amendment 1910 does not limit its proposed new appropriations to tax revenues from only historical horseracing wagers. Instead, amendment 1910 would also change the way that existing tax revenues from live horseracing wagers must be appropriated. That is, those revenues would not be used to maintain a reserve fund, and excess funds would not be credited to the state's general fund.

In April 2014, L.R. 41CA, as modified by amendment 1910, passed by the required three-fifths majority of the Legislature.[24] The final version would amend article III, § 24, as follows:

(4)(a) Nothing in this section shall be construed to prohibit (a) the enactment of laws providing for the licensing and regulation of wagering on the results of live or [288 Neb. 981] replayed horseraces, wherever run, either within or outside of the state, by the parimutuel method, when such wagering is conducted by licensees within a licensed racetrack enclosure. The state's proceeds from a tax placed on wagering by the parimutuel method shall be appropriated by the Legislature for the costs of regulating wagering by the parimutuel method and for the following purposes:
(i) Forty-nine percent of the money remaining after the payment of regulatory expenses shall be used for elementary and secondary education statewide;
(ii) Forty-nine percent of the money remaining after the payment of regulatory

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expenses shall be used to reduce property taxes statewide; and
(iii) Two percent of the money remaining after the payment of regulatory expenses shall be transferred to the Compulsive Gamblers Assistance Fund.[25]

Section 2 of L.R. 41CA requires the resolution to be submitted to the electors with the following ballot language:

A constitutional amendment to provide for enactment of laws providing for licensing and regulation of wagering on live or replayed horseraces, wherever run, either within or outside of the state, by the parimutuel method, when such wagering is conducted by licensees within a licensed racetrack enclosure, and to require appropriation of certain parimutuel taxes for regulation of parimutuel wagering, for education, for property tax relief, and for the Compulsive Gamblers Assistance Fund. For Against [26]

2. Laws and Facts Relevant to Relator's Challenge to Proposed Amendment

Neb. Const. art. XVI, § 1, governs the procedure by which the Legislature may propose amendments to the constitution. Generally, a proposed amendment must be published and [288 Neb. 982] submitted to the electorate on a separate ballot for approval or rejection at the next general election or at a special election if called for by a four-fifths vote of the Legislature. And under the separate-vote provision, " [w]hen two or more amendments are submitted at the same election, they shall be so submitted as to enable the electors to vote on each amendment separately." [27]

In addition, except for special elections, Neb. Rev. Stat. § 49-202.01(1) (Reissue 2010) imposes a statutory requirement: The Executive Board of the Legislative Counsel must submit to the Secretary a clear, concise statement explaining the effect of a vote for or against a proposed constitutional amendment. The board must submit this statement 4 months before the general election at which the voters will decide whether to amend the constitution, and the statement must precede the proposed amendment on the ballot. Under Neb. Rev. Stat. § 32-801 (Reissue 2008), the Secretary must certify the contents of a statewide ballot 50 days before a primary ...


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