Politics & Government

Gambling expansion remains on chopping block amid new shakeup at Texas Racing Commission

Solar Charge won the Premiere Stakes on last year’s opening day at Lone Star Park.
Solar Charge won the Premiere Stakes on last year’s opening day at Lone Star Park. Star-Telegram

There’s been another shakeup of top leadership at an embattled state agency as the push to derail historical racing — a hotly contested new way to gamble at tracks statewide — continues in Austin.

Gov. Greg Abbott has named Rolando Pablos of El Paso to lead the Texas Racing Commission, replacing local orthopedic surgeon Robert Schmidt, who has guided the agency since 2011.

Schmidt, who will continue to serve on the commission, resigned as chair after declining Abbott’s request to place the issue of repealing historical racing, the replaying of past races on slot machine-like devices, on next week’s agenda.

The governor accepted that resignation; a proposal to repeal historical racing rules is now on the commission’s Dec. 15 agenda.

“I think it’s an honest difference of opinion,” Schmidt said. “I respect the governor’s right to implement the policies he desires. We just have a difference of opinion on this.”

This is the latest development in a continuing feud over historical racing between the Racing Commission and conservative Republican lawmakers who oppose plans to expand gambling in Texas.

This more-than-yearlong fight reached such a fever pitch this year that Texas lawmakers missed a key deadline to sign off on funding for the agency.

As a result, the commission closed for a day in early September. During that time, Texas tracks, including Lone Star Park in Grand Prairie, could not allow live betting or live races because there was no state agency to regulate them.

After Abbott named two new members to the racing commission last month, state budget writers extended funding for the commission for another 90 days.

Lt. Gov. Dan Patrick has been among those calling for a repeal of historical racing rules, recently sending Schmidt a letter asking him to add the issue to this month’s meeting.

“I ask that you take this opportunity to unwind historical racing,” Patrick said in the letter. “As I have previously stated, I believe the decision to publish rules for the implementation of historical racing was not an appropriate action for the commission.

“The move runs afoul of the Texas Constitution and the express desire of many members of the Texas Legislature, including me.”

As the debate over this issue 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.

Some in the industry say they are disappointed with the request that the commission “hold yet another vote on the historic horse racing rules at their next meeting, and repeal the rules that were adopted after a lengthy, transparent and inclusive process,” said Mary Ruyle, executive director for the Texas Thoroughbred Association.

Schmidt said he was prepared to put the issue on the February agenda in order to give the new commissioners time to get up to speed on the issue and let the horsemen who have filed a lawsuit over the issue take their case to court next month.

“That was at odds with what the governor wanted,” Schmidt said.

Historical racing

At issue 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 and tracks.

“Historical racing does not in any way constitute an expansion of gambling,” Ruyle wrote in a letter to Patrick. “Historical racing terminals are not slot machines. Historical racing simply uses technology that is now available to present horse and greyhound racing in a new delivery system.”

Last year, 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.

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

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

The commission said it won’t appeal the ruling; a coalition of racetracks has filed a motion to appeal. The issue is expected to head to an Austin courtroom next month.

“The matter of historical racing remains pending before the Third Court of Appeals,” Ruyle wrote in her letter. “Due process under the law is one of the cornerstones of our democracy.

“It appears that you may wish to disregard the right of Texans to due process through the court system.”

Funding issues

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.

When the Legislature went to work in January, some lawmakers upset about the move to allow historical racing threatened to defund the Racing Commission or dissolve it completely.

Ultimately, the Legislature agreed to fund the agency — but stipulated that all central administrative funding such as salaries must be approved by the Legislative Budget Board. In turn, commission officials appeared to be on the verge of repealing the rules that allow the machines.

Then, in late August, the commission decided on a 4-3 vote not to repeal the rules.

Days later, House and Senate budget writers couldn’t reach a funding agreement by Aug. 31, effectively shutting down the commission and preventing tracks from hosting races or allowing simulcast betting.

Lawmakers couldn’t agree on how long to extend the funding. Some wanted it for 90 days; others wanted to give full funding for two years until lawmakers are back in session.

The next day, lawmakers reached a temporary agreement, letting the commission transfer some unappropriated funds to pay for administrative costs, which let Texas tracks reopen for business.

In early November, Abbott appointed two new members to the commission — Pablos, who previously served on the commission and as chair from 2008-2011, and Margaret Martin of Boerne — to replace two members whose terms had expired.

Shortly after that, another 90 days of funding was granted, carrying the tracks through late February.

“Short-term funding provides no reassurance to horsemen struggling with difficult decisions in the face of an uncertain future,” Ruyle wrote. “Foaling season begins in January. Breeders are now faced with making decisions on where their mares will foal, considering how the Texas-bred program compares with other options.

“The horsemen of Texas implore you to help protect jobs and family who depend on racing to sustain them.”

Moving forward?

In his letter, Patrick said he hopes to gather stakeholders — trainers, breeders and others who work in the industry estimates show contributes $5.5 billion to the Texas economy — for a discussion.

His goal is “to find ways to improve opportunities outside of expanding the gambling footprint in Texas. I want to restore certainty and predictability to the industry and allow them to prosper moving forward.

“The equine industry has a long and storied history in Texas, and I look forward to this opportunity to work together to ensure their long term success,” Patrick said.

Ruyle said she looks forward to that.

“We are confident there is an outcome where all parties and interests can come together for the good of Texas and Texans, and we can all make decisions based on facts and our common goals,” she said.

Anna Tinsley: 817-390-7610, @annatinsley