Politics & Government

In last ditch effort, Texas horsemen sue state officials over historical racing

Horse racing last year at the Lone Star Park in Grand Prairie
Horse racing last year at the Lone Star Park in Grand Prairie Star-Telegram

Texas horsemen took legal steps this week to try to save their industry.

The Texas Horsemen’s Partnership filed a lawsuit against Comptroller Glen Hegar over a measure requiring the Legislative Budget board to sign off on administrative costs, such as salaries, for the Texas Racing Commission.

This is the latest development in a nearly two-year battle over historical racing — a controversial way to gamble at horse tracks by replaying already-run races on slot machine-like devices — between conservative Republican lawmakers who oppose expanding gambling in Texas and the racing commission.

“This lawsuit is a misplaced attempt to force my office into making a payment against the will of the Legislature,” Hegar said. “I am interested in a long term solution to this issue; however, wasting taxpayer dollars by taking advantage of the overburdened court system is not the answer.”

This comes as the commission could run out of funding by the end of Feburary, forcing it to close doors and tracks — including the Lone Star Park in Grand Prairie — to shut down for the second time in a year since there would be no state officials to oversee the horsing industry.

Racing Commissioners are scheduled to meet next month to decide what steps to take to repeal historical racing so lawmakers will continue funding or move toward shutting down the agency if the next wave of funding isn’t granted.

A shutdown could cause irreparable harm to the industry and its participants.

Texas Horsemen’s Partnership

“Absent relief from the (courts), the (racing commission) will cease all operations on March 1, 2016, which will result in an immediate shut down of the entire Texas horse racing industry,” a statement from the Texas Horsemen’s Partnership read. “Such a shutdown could cause irreparable harm to the industry and its participants.”

The racing commission declined to comment.

The lawsuit

The lawsuit states that the current funding method “poses an immediate, ongoing, and existential threat to the Horsemen’s Partnership and the entire Texas horse racing industry.”

At issue 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.

Historical racing involves replaying races on devices with sounds and symbols similar to slot machines.

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.”

While funding has been approved periodically during the past year, “the LBB has indicated that it will not approve any further stopgap measures to keep the Racing Commission operating” after Feb. 29, according to the lawsuit.

The lawsuit asks an Austin judge to declare this funding mechanism unconstitutional.

A long fight

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 and tracks.

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.

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.

The commission didn’t appeal the ruling; horse tracks in Texas did. A separate lawsuit on that issue is pending in court.

During last month’s racing commission meeting, many from the horse industry asked the commission to give them more time before voting on repealing the rules.

When a vote to repeal the rules failed, new Commissioner Rolando Pablos, recently named to the commission along with Margaret Martin of Boerne, asked staff for a plan to shut down the agency if no more state funding is released next month.

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.

After much discussion, the Legislature last year agreed to fund the agency — but stipulated that all central administrative funding such as salaries must be approved by the Legislative Budget Board.

Commissioners appeared to be on the verge of repealing historical racing rules but they didn’t. Then state officials couldn’t reach a funding agreement by Aug. 31, effectively shutting down the commission and preventing tracks from hosting races or allowing simulcast betting.

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

In early November, Abbott appointed new members to the commission and funding for 90 more days was granted, carrying the tracks through late February.

On Friday, state Sen. Jane Nelson, R-Flower Mound, chairwoman of the Senate Budget Committee, said she’s reviewing the lawsuit.

“But the facts haven’t changed,” she said. “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.

State Sen. Jane Nelson, R-Flower Mound

“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.”

Anna Tinsley: 817-390-7610, @annatinsley