No Stability with Texas Commission Funding

Chaos surrounding the Texas Racing Commission will continue for the next 90 days.

A compromise late Tuesday, Sept. 1, that restored funding to the Texas Racing Commission for 90 days ended a shutdown of the state's racetracks, but the racing industry there is nowhere near stable ground.

The four state senators on the Texas Legislative Budget Board (LBB), led by co-chair Lt. Gov. Dan Patrick and board member Sen. Jane Nelson, proposed the 90-day reprieve to provide time for Gov. Greg Abbott to replace three members of the TRC, which Patrick and Nelson view as a rogue agency.

"Serious doubts have been raised about the leadership of this agency, which exceeded its authority and violated the Texas Constitution by approving Las Vegas-style slot machines, known as historical racing, last year," wrote Nelson, who is chair of the Senate Finance Committee, in an Aug. 31 letter to fellow LBB member Rep. John Otto, who is chairman of the House Appropriations Committee.

The TRC became a target last year when it approved rules for the implementation of historical racing machines at Texas racetracks. The electronic kiosk games look like video lottery terminals but are considered pari-mutuel because money is pooled and the outcome of each wager is determined by the result of a previously run horse race. A district judge ruled last November, however, that the commission had no legal standing to promulgate the historical racing rules. That decision has been appealed.

In the meantime, state legislators this summer approved a two-year budget for the TRC but added a provision making it mandatory for the commission to specifically request its $750,000 in annual operating funds from the LBB. The TRC was barred from using any other of its funds for operating expenses without approval from the LBB.

By midnight of Aug. 31, the end of Texas' fiscal year, a divided 10-member LBB could not agree on whether to release TRC operating funds and brought horse racing in Texas to a grinding halt the following day. Texas law requires the commission to provide three stewards and at least one veterinarian at every live race meeting, and state staff must oversee simulcasting operations to be sure regulations are followed and proper payouts are made. The one-day shutdown of racing was estimated to have cost the Texas industry about $750,000 in handle.

While House members of the LBB continued to push for full funding of the TRC, Otto eventually agreed to the 90-day extension the evening of Sept. 1.

Here is where the fight is just beginning.

"The primary reason the Senate is granting this extension is to allow the governor, if he chooses, time to replace three members of the commission whose terms have already expired," said Nelson in her letter.

Up for reappointment are the seats held by veterinarians Dr. Gary Aber and Dr. Michael Martin, and by Vicki Smith Weinberg. Aber and Martin were among four who voted during a high-profile meeting Aug. 25 in favor of TRC keeping in place the rules it had adopted to implement historical racing. Weinberg did not attend the meeting. The commission had indicated prior to the meeting that it would repeal the rules because of the court ruling, but state racing industry leaders lobbied for the TRC to hold the course. Repealing the rules would have nullified the appeal.

The decision to keep the rules in place angered Nelson and other legislators.

"Some in the racing industry have incorrectly stated that members of the Legislature want to end racing in Texas," Nelson wrote. "That is not the issue at hand. This disagreement is over whether a state agency should be allowed to circumvent the Legislature to approve an expansion of gambling—a clear violation of the Texas Constitution."

Patrick added after the compromise was announced: "I fully support the proposal by Senate members to allow the commission to use their existing appropriation dollars to continue covering administrative costs while racing board members adjust their focus from expansion of gaming to their statutory purpose of enforcing the Texas Racing Act and its rules to ensure the safety, integrity, and fairness of Texas pari-mutuel racing."

There is casino gambling in Texas, but it is solely controlled by the Kickapoo Traditional Tribe that runs a 100,000-square-foot casino near the border town of Eagle Pass, about a two-and-half hour drive west from San Antonio. The tribe offers "Class 2" machines, which include video lottery or electronic bingo machines.

The Kickapoos are also working the political system to keep alternative gaming, like historical racing, at bay. Among the tribe's beneficiaries are three members of the LBB on the Senate side: Patrick, who as lieutenant governor is president of the Senate; Nelson, and Sen. Kevin Eltife. The Kickaoo tribe donated $50,000 last December to the Texans for Dan Patrick political action committee, gave a $10,000 contribution to Nelson last October, and gave $5,000 to Eltife in November.

The LBB never actually met to discuss and vote on the TRC budget issue, which political observers say is commonly how this board operates. Given that the LBB's impasse and inaction led to a shutdown of racing statewide—even for a day—some racing executives said they were appalled at the process.

"Texans deserve transparency in government, especially when the government shuts down their entire business," said Andrea Young, president of Sam Houston Race Park on Sept. 1. "Two people from one chamber should not get to eliminate 36,000 Texas jobs without an official meeting. The full Legislative Budget Board should meet and decide the fate of Texas racing in full daylight, not through shady backroom deals and secret phone calls under cover of darkness."

Even after the deal was done, three months of funding did not offer anyone much comfort.

"We are glad to see our ability to operate our business restored," Young said after live racing and simulcasting resumed Sept. 2. "However, we remain extremely concerned with both the process and the extremely short period of funding. Like any business, we need to be able to plan farther out than three months.

"On behalf of all the hard-working Texans impacted by the recent shutdown, we plan to continue our efforts to strengthen the Texas racing industry. To that end, we look forward to having our day in court on historical racing," she said.