Will state officials ‘knuckle under pressure,’ give up effort to save Texas horse tracks?

After nearly two years of talk in Texas about allowing historical racing — a controversial new way to gamble at horse tracks — the end may be near.

Texas Racing Commissioners, at odds with conservative lawmakers since approving rules in 2014 to allow the replaying of already-run races on slot machine-style devices, have one main item on their agenda Tuesday: historical racing.

The question is whether they will amend or repeal the rules, since key funding for the commission has only been allocated through the end of the month and state officials have indicated that they won’t approve more money if historical racing still exists.

“The Racing Commission has been resisting elected political authorities because they see other racing and gambling opportunities that would benefit Texas,” said Cal Jillson, a political science professor at Southern Methodist University in Dallas. “But if they run out of money, it’s hard for them to conduct their business.

“We will see if they knuckle under political pressure or continue to resist,” he said. “There’s an element of brinksmanship to this.”

This is the latest development in a nearly two-year feud over historical racing between the commission and some Republican lawmakers who oppose plans to expand gambling in Texas.

Commissioners have supported the plan to allow historical racing machines at Texas tracks since approving rules in 2014, but without state funding the agency will shut down — and horse tracks in Texas, including the Lone Star Park in Grand Prairie, will have to stop all racing — as soon as next week.

It would be the second time in a year Texas tracks had to shut down business because of this funding squabble.

“Absent further appropriations authority, all racing must end no later than midnight on Feb. 16,” according to a letter by Chuck Trout, executive director of the commission. “This includes both live and simulcast racing.”

As the ongoing debate over funding has continued, caught in the middle is a slumping racing industry made up of thousands of Texans who work as veterinarians, jockeys, grooms, breeders and more. The state estimates that horse racing contributes $5.5 billion to the Texas economy and creates 36,000 jobs.

New estimates from the horse racing industry indicate that if racing is shut down, taxpayers could have to shoulder millions in unemployment benefits.

Legal action

On Tuesday, racing commissioners are scheduled to meet in Austin to discuss historical racing, including a report “on the Executive Director’s Plan to Close the Agency in the Event that Additional Appropriations are not Approved.”

“The health of a very important industry [that] employes tens of thousands of people is at stake,” said Scott Wells, president of Lone Star Park. “We have 900 employees at Lone Star Park, all of whom are very concerned about whether they will have employment in the future.

“Our overriding desire is that we have a functioning racing commission. Without that, we can’t operate at all,” he said. “We are in favor of whatever is best for the Texas horse industry. But the politics are played out in such a way that ... we are at the mercy of the politicians in this matter.”

Live racing is scheduled to run April 7-July 17 at Lone Star Park, for the thoroughbred season. But group and event sales are on hold “as everyone is waiting to see what the result [of the Racing Commission vote] is going to be.”

Many in the industry wish the issue weren’t coming up again.

“A majority of the commissioners obviously feel that they have the authority to not only adopt the rules, but to keep the rules in place,” Marsha Rountree, executive director of the Texas Horsemen’s Partnership, wrote in a letter to the commission. “Three times they have voted on the rule package. Once to adopt and twice to vote down a proposed repeal.

“Our regulatory agency is being coerced by an unconstitutional action by a legislative body,” she wrote.

Many thought this issue might be resolved by the courts, through a lawsuit challenging how some of the commission’s funding is allocated by state budget writers.

But a hearing originally scheduled for earlier this month was moved to late February at the request of the Texas attorney general’s office.

“There is still strong support for historical racing,” said Mary Ruyle, executive director of the Texas Thoroughbred Association. “We hope that the commissioners will continue to stand strong on the issue of historical racing, and will not repeal the rules, thereby allowing the currently filed legal appeal to proceed through the court system.”

At issue in the lawsuit is a rider giving the Legislative Budget Board — the board on which state budget writers, Lt. Gov. Dan Patrick and House Speaker Joe Straus serve — the sole decision “to withhold all funds appropriated” for salaries and other services at the Racing Commission.

“Without the ability to spend these funds, the Racing Commission cannot perform any of its basic administrative or regulatory functions and, as a consequence, the Texas horse racing industry cannot operate,” according to the lawsuit.

Since this provision went into effect, “the LBB has made clear that it will not permit the Racing Commission to spend its essential funds until the agency repeals its rules allowing a form of pari-mutuel wagering called Historical Racing.”

State Sen. Jane Nelson, who says she wants horse racing to continue in Texas, is among those waiting to see what comes from the meeting Tuesday.

“The facts haven’t changed,” said Nelson, R-Flower Mound, who heads the Senate Finance Committee and serves on the budget board. “The commission never had the authority to take this action.

“If we do not hold them accountable, we are no better than Washington, D.C., where agencies just make up laws, ignore the constitution and circumvent the people’s elected representatives.”

Long controversy

At the heart of the fight is historical, or instant, racing, which 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 or tracks.

In 2014, some lawmakers asked the commission not to approve rules allowing historical racing and then sued and threatened to stop funding or dissolve the agency after commissioners went against their wishes.

An Austin judge stopped the historical racing process, agreeing with a lawsuit filed by bingo groups in Travis County, saying decisions on the machines should be made by the Legislature, not the commission.

Horse tracks in Texas appealed the ruling; a lawsuit on that issue is pending in court.

Commissioners voted again on historical racing rules in December, choosing again to leave them in place — despite the addition of two new commissioners picked by Gov. Greg Abbott.

New Chairman Rolando Pablos asked the staff for a plan to shut down the agency if no more state funding is released.

Call the bluff?

The commission is funded by the industry it regulates.

It collects millions a year in fees from 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.

“The racing industry is very frustrated that elected political authorities in Texas have been consistently anti-gambling,” Jillson said. “There’s a sense in which Texas is a small-government state in some instances, but a nanny state in others, dictating what people can and cannot do.

“There’s a tradition in Texas of opposition to gambling that goes back a century or more,” he said. “Racing commissioners are considering whether to keep pushing back to call the bluff.”

This story was originally published February 6, 2016 at 12:22 PM with the headline "Will state officials ‘knuckle under pressure,’ give up effort to save Texas horse tracks?."