By Joan Gralla

(Reuters) - New York state lawmakers have agreed to legalize public casinos and will amend the state constitution to allow seven new casinos to operate, lawmakers said on Wednesday.

The location of the new casinos will be decided in 2013.

New York currently only allows table gambling in Native American resorts. The state also allows companies to open and run video lottery terminals at so-called racinos in the city of Yonkers and in the New York City borough of Queens.

"We are finally confronting the reality that while New York is already in the gaming business, we need a real plan to regulate and capitalize on the industry," said New York Governor Andrew Cuomo, after the casino agreement was reached.

"This is a process that will ultimately put thousands of New Yorkers to work, drive our economy, and help keep billions of dollars spent by New Yorkers on gaming in the state," Cuomo said in a statement.

The proposal has been debated for more than a decade. Details on the casinos will be determined in 2013.

"We will deal with where, when and how next year in legislation," said Assembly Speaker Sheldon Silver in Albany.

New York can only legalize casinos if two successively elected legislatures enact bills. Voters would then have to approve a constitutional amendment legalizing this form of gambling.

"I am pleased we have reached an agreement to move forward with a constitutional amendment that will give New Yorkers a say on whether we expand casino gaming in New York State," Senate Majority Leader Dean Skelos said.

New casinos with table games could prove stiff competitors to counterparts in New Jersey's Atlantic City, Pennsylvania and Connecticut because the New Yorkers who now frequent those venues might prefer to gamble closer to home.

PENSION DEAL IN WORKS

Another possible deal was also in the works for one of the governor's other priorities: cutting the cost of contributions by the state and municipalities to the pension fund.

Silver said he expected the retirement age to be raised by one year to 63, instead of 65 as requested by Cuomo. Police officers and firefighters are not expected to be covered by the provision.

The minimum salary that determines when workers have to contribute to the plan should be $45,000, Silver said, not the $30,000 threshold recommended by Cuomo.

The amount of pension contributions public employees make would start at 3.5 percent, then rise on a sliding scale to 6 percent for salaries of $100,000 or more, while caps on how much overtime could be used to calculate pension benefits would not be reduced, Silver said.

(Reporting By Joan Gralla; Additional reporting by Karen Freifeld in NEW YORK and Dan Wiessner in ALBANY; Editing by Chris Lewis and Michael Perry)