Could horse racing in Texas end Aug. 31? Regulator runs into budget limbo

The future of the Texas Racing Commission — and all Texas racetracks including Lone Star Park in Grand Prairie — is up in the air as officials wait to see whether they will receive state money to continue their mission.

If the funding doesn’t come, the agency can’t pay rent or employees “and will close at the end of the day on August 31, 2015,” commission Executive Director Chuck Trout wrote in a letter to an attorney representing tracks.

“If the agency closes, all racing will also stop.”

This is the latest development in a yearlong dispute between the Racing Commission and lawmakers who oppose allowing historical racing — replaying past races on slot-machinelike devices — at horse and dog tracks statewide.

Some lawmakers asked the commission not to approve the historical racing rules, and then sued and threatened to stop funding or dissolve the agency after commissioners approved the rules.

“If the TRC shuts down, it’s a concern for the whole industry,” said John Elliot, CEO of Global Gaming Solutions, which owns Lone Star and is owned by the Chickasaw Nation. “It obviously would have a devastating impact.

“We can only hope that it’s not going to happen.”

In May, lawmakers said the commission would continue to receive funding, but they added a provision that requires central administrative funding for the commission, such as salaries, to be approved by the Legislative Budget Board.

Shortly after that, commissioners announced they would move to repeal the historical-racing rules. They meet Aug. 25 to consider that proposal.

Racing Commission officials said they have yet to learn what criteria the budget board will use to determine whether to allow the funding.

Budget board spokesman R.J. DeSilva said late Monday that “before the next fiscal year begins, the Racing Commission will get information on how to proceed” with meeting requirements to receive funding.

Racing commission officials say they have yet to get that information.

“Until we hear from the LBB, we must prepare for the unlikely event that the approval will not be given and the Commission will be unable to regulate racing,” Trout wrote in an email sent to commission employees.

Trout said that he believes that the budget board will ultimately approve the funding, but employees must be prepared for business not to continue as usual.

“We certainly are in a little bit of limbo right now,” commission spokesman Robert Elrod said. “The sky isn’t falling. Is it a possibility [that the commission could close]? Yes.

“But we expect it will be approved and racing will continue in Texas.”

Yearlong controversy

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

It involves replaying races on devices with sounds and symbols similar to slot machines. Unlike slots in traditional casinos, the payoff is tied to past race results. The devices have no information that could help players identify the winners in advance, such as horse names, dates and tracks.

Last August, the commission approved historical racing at dog and horse tracks even though some lawmakers asked commissioners not to weigh in.

State Rep. Matt Krause, R-Fort Worth, asked a judge to prevent the commission from voting. After a judge in Tarrant County declined to issue a restraining order, commissioners voted 7-1 for historical racing.

Supporters say historical racing is needed to help struggling Texas tracks compete with out-of-state venues that offer casinos, bigger crowds and bigger purses. Opponents fear that the machines could bring a form of casino-style gambling to the state.

Krause sued, asserting that commissioners lacked the authority to allow the machines, but the case was dismissed.

A second lawsuit had more success. It 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 lawmakers.

Officials with the commission said they won’t appeal the ruling. A coalition of racetracks has said it will.

“We are in unusual waters at the moment,” said Elliot, of Global Gaming Solutions. “We are hoping the TRC gets funded and we move forward and continue to look for solutions that will help the industry.”

Legislative fallout

When state lawmakers began the legislative session in January, Sen. Jane Nelson, R-Flower Mound, filed a budget that stripped $15.4 million from the commission, and Sen. Craig Estes, R-Wichita Falls, filed a proposal to dissolve the commission.

During a hearing, Nelson said the commission is “an agency that has gone rogue, in my opinion.”

The commission is funded by the industry it regulates. It collects millions 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.

Estes’ bill, which would have transferred the commission’s duties to the Texas Department of Licensing and Regulation, never made it to a committee hearing. And when the state budget was finally approved, funding for the commission was included.

Nelson’s office did not respond to a request for comment Monday.

“Sen. Nelson is attempting to accomplish what Oklahoma and Louisiana interests have been trying to do for decades — destroy the Texas racing industry through behind-the-scenes lobbying,” said Andrea Young, president of the Sam Houston Race Park.

“Despite no legislative direction or enactment, Sen. Nelson is attempting to use the LBB as a personal political tool to bully the Racing Commission to get what she wants — the end of horse racing in Texas.”

Earlier this year, Ronald F. Ederer, the commission vice chairman, made the first motion to repeal historical racing rules in Texas.

“It’s no secret that the Senate, and various parties, have actually said our funding would be withheld if we continued with historical racing,” he said. “Why start a fight with them? They hold the purse strings.”

Not doing this “would start a war. And it’s a war we can’t win.”

This story was originally published August 10, 2015 at 4:43 PM with the headline "Could horse racing in Texas end Aug. 31? Regulator runs into budget limbo."