TORONTO - The government is right to pull the plug on slot revenues propping up horse tracks but will need to improve transition funding to wean the industry off slots, a handpicked panel recommended Friday in an interim report.

"The program has provided far more money than was needed to stabilize the industry - its original purpose - and has done so without compelling the industry to invest in a better consumer experience," the report says.

"Slots revenue has enabled the industry to avoid facing up to the challenges of today's intensely competitive gaming and entertainment marketplace."

The province's 17 racetracks have received $3.7 billion in slots revenue since the program began in 1998, and took in $345 million in 2011-12 alone.

The panel did acknowledge that losing slots could kill the industry, and said the $50-million in transition funding, spread over three years, will not be enough.

"Our government is focused on balancing its budget while protecting vital services that families rely on, like health care and education," Agriculture Minister Ted McMeekin said in a news release.

"That's why any public transitional investment in the horse racing industry must include clear public-interest principles of fiscal accountability, transparency, a renewed focus on the consumer and a business case showing that each public dollar invested is returned to the province through tax revenues. This means the industry needs to display financial transparency."

McMeekin said he hopes the panel - which includes former cabinet ministers Elmer Buchanan, John Snobelen and John Wilkinson - will continue to consult with the industry before turning in a final report in late September.

The Ontario Horse Racing Industry Association said in a release it was encouraged the panel found more transition cash was needed.

"We see this report as a positive step toward working with our government to achieve an outcome where the horse racing industry will continue its valuable contribution to Ontario's economy," OHRIA president Sue Leslie said.