Texas lawmakers fire back at Racing Commission

02/07/2015 3:21 PM

02/07/2015 4:23 PM

The horse-racing industry was looking forward to getting a financial boost from the machines at Lone Star Park at Grand Prairie and other major tracks. But a number of lawmakers objected, saying that only the Legislature can move to expand gambling in the state.

Now legislators are firing back, making some proponents of historical racing worry that their plans could be sidetracked.

One lawmaker filed a state budget that strips funding from the Racing Commission. Another wants to dissolve it entirely and transfer its duties to another agency.

“They totally ignored our request to wait until the Legislature met,” Sen. Jane Nelson, R-Flower Mound, said when she filed the Senate’s budget bill. Expanding gambling “is a decision the Legislature should be making.”

As a result, she said, “we are not funding the Racing Commission.”

Sen. Craig Estes, R-Wichita Falls, said his proposal to eliminate the agency should give racing officials what they want.

“Since, by its conduct, the Racing Commission has refused to do the job we gave it, my bill will give its power to an agency that will,” he said.

The Legislature, which works for 140 days every other year — barring special sessions — wasn’t in session when the commission moved forward with the plan. But lawmakers reconvened Jan. 13 and wasted little time addressing their concerns.

“There’s definitely a message being sent,” said Bill Miller, an Austin-based political consultant. “When you exclude funding for an agency, that’s about as loud and clear a signal as you could ask for.”

When asked whether legislative moves could kill historical racing, the top official on the commission had one response: “It certainly has the potential,” said Robert Schmidt, a Fort Worth orthopedic surgeon.

Historical racing, or instant racing, has been controversial in Texas, where lawmakers consistently reject requests to expand gambling.

Supporters say the machines will help struggling racetracks compete with out-of-state tracks that offer casinos, bigger crowds and bigger purses. Opponents say the devices look and act much like slot machines and would essentially bring a form of casino gambling to Texas.

Last year, the commission received a petition from the horse industry asking for a rule change to allow betting on historical races. Unlike casino slots, the payoff from the machines is tied to past race results. No information is included that could help players identify the winners in advance, such as horse names, dates and tracks.

The agency received more than 13,000 responses on the issue, about 3-to-1 in favor of the machines, officials say.

“These rules appear to be an attempt by the Racing Commission to circumvent the Legislature’s authority to decide what types of gambling are and are not legal,” stated a letter sent at the time by Nelson, Estes and others in the Senate GOP Caucus. “This is not an appropriate decision for the Racing Commission.”

Commission vote

In August, after a judge in Tarrant County declined to issue a restraining order against the agency, commissioners voted 7-1 to allow historical racing.

“We weren’t trying to be disrespectful to the Senate in any way,” Schmidt said. “We received a lot of comments — including those from state representatives and senators — on both sides.

“It’s real important to the horsemen.”

Rep. Matt Krause, R-Fort Worth, filed a lawsuit in Tarrant County saying commissioners lacked the authority to allow the machines. That suit was dismissed.

A second lawsuit was filed in Travis County by a coalition of charitable bingo groups that said the machines might run them out of business. An Austin judge agreed, saying such decisions should be left to the Legislature.

The commission has until March 5 to appeal, spokesman Robert Elrod said.

‘Shot across the bow’

When Nelson announced that she had filed the Senate’s version of the budget, she said the $15.4 million earmarked for the Racing Commission was gone — but the bill was just a starting point.

“I want the Racing Commission to continue and the horse-racing industry to succeed,” Nelson, who heads the powerful Senate Finance Committee and whose district includes part of Fort Worth, said last week. “However, its board willfully ignored strong statements from the Legislature by approving instant racing.

“No agency should expect such actions to go unnoticed. It is the Legislature’s role, not that of the Racing Commission, to determine the footprint of gambling in this state.”

The Racing Commission is self-funded by the industry it regulates. It collects millions of dollars a year in fees paid by racetracks and license holders such as owners, trainers and jockeys. That money is turned over to the state, which allocates it back to the commission.

Meanwhile, Estes filed Senate Bill 364 to abolish the commission and transfer its duties to the Texas Commission of Licensing and Regulation.

That commission oversees licensing of trades ranging from auctioneers and cosmetologists to elevator and escalator safety and polygraph examiners.

Estes’ bill has been referred to the Senate State Affairs Committee, on which both Estes and Nelson serve.

“The Racing Commission’s conduct shows that it is not willing to limit its authority to the authority granted to it by the Legislature,” Estes said. “We cannot have an agency trying to seize power that was not granted to it by the people of Texas.”

Krause said he was glad to see the Senate eliminate funding for the agency — and he hopes the House will follow suit.

“The Legislature has the power of the purse,” he said. “It’s one way to get the attention of state agencies.”

He and other lawmakers are worried that state agencies are usurping the Legislature’s power and overstepping their limits.

“I think this was a shot across the bow,” Krause said of the Senate budget. “Anytime there’s an executive commission acting outside their bounds … the Legislature needs to do what it can to insert sovereignty over that subject.

“Hopefully this sends a signal … that the entire Legislature is serious about these kind of issues.”

Industry reacts

The Racing Commission is scheduled to meet this week, although the funding issue is not on the agenda. Senate budget hearings begin later this month.

Schmidt said he and other commissioners plan to review lawmakers’ concerns and try to set up meetings to discuss the issue.

“We want to understand the senators’ positions and let them understand ours,” he said.

He said he realizes that Nelson is “strongly opposed to historical racing.”

“We certainly have to discuss that issue with her,” he said, noting that while the commission approved the rule change, it has yet to approve any machines. “We need to understand her position, meet with her, get clarity on what she wants and be as responsive as we can.”

Those in the horse-racing industry say they are disappointed with legislative measures to defund and dissolve the commission.

“We consider the TRC to be a very specialized regulatory body dealing with issues unique to the horse industry,” said Mary Ruyle, executive director of the Texas Thoroughbred Association. “The agency supports the many jobs in the industry and our livelihoods.”

Ruyle said the commission’s move to allow historical racing was meant to save the industry in Texas.

“We are struggling to survive against competition from surrounding states supported with gaming dollars,” she said. “We believe [historical-racing] wagers are pari-mutuel and the rules were not developed as an act of defiance toward the Legislature.”