UPDATE 2-Ohio court rules voter OK needed for video lottery

(Adds referendum date, comments from LetOhioVote)

CHICAGO, Sept 21 (Reuters) - The Ohio Supreme Court ruled on Monday that the state's plan to allow up to 17,500 video lottery terminals at horse racing tracks is subject to a statewide voter referendum.

The 6-1 ruling by the high court puts a potential dent in Ohio's plan to raise $933 million over two years as the earliest date for a referendum is November 2010. The money from the terminals was a key component in addressing a $3.2 billion shortfall in the state's new two-year budget for the fiscal biennium that began July 1 without raising taxes.

"While I am disappointed by this decision, we need to fully review the court's judgment before determining next steps," Ohio Governor Ted Strickland said in a statement.

"The Ohio Lottery Commission has modified its agenda for this afternoon's scheduled meeting, which was to include the video lottery terminal implementation rules, to ensure adequate time to fully review and understand the impact of the court's decision," he added.

The lawsuit was filed by LetOhioVote.org, a ballot issue committee, which argued that the state constitution requires voter approval of the gambling plan.

Carlo LoParo, a spokesman for the group, said it was confident that 241,365 valid signatures will be collected on petitions the group will circulate to place a referendum on the November, 2010 ballot.

The court ordered Ohio's secretary of state to allow LetOhioVote to pursue a referendum on the terminals.

Two other lawsuits were also filed in the Ohio Supreme Court, challenging actions taken by the governor and legislature earlier this year regarding the video lottery terminals.

In its ruling, the court rejected the state's position that the terminals were essentially part of the appropriation process with their revenue allocated to education and therefore not subject to any referendum.

"We are not unmindful of the effect our decision may have on the state budget, nor of the commendable efforts of the members of the executive and legislative branches of state government to fulfill their constitutional duties to balance the budget in Ohio; however, our own constitutional duty is to ensure compliance with the requirements of the Ohio Constitution irrespective of their effect on the state's current financial conditions," the ruling stated.

In June, even before Ohio completed work on its new budget, the state was hit with rating downgrades. Moody's Investors Service dropped the general obligation rating to Aa2 from Aa1, while Fitch Ratings downgraded the rating to AA from AA-plus. (Reporting by Karen Pierog; Editing by Kenneth Barry)