LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
May 21, 1997
TO: Honorable James E. "Pete" Laney IN RE: House Bill No. 1445, As Passed 2nd House
Speaker of the House Gray
House of Representatives
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on HB1445 ( Relating
to the continuation and functions of the Texas Racing Commission
and to the transfer of certain commission functions to the Texas
Department of Commerce; providing penalties.) this office has
detemined the following:
Biennial Net Impact to General Revenue Funds by HB1445-As Passed 2nd House
Implementing the provisions of the bill would result in a net
positive impact of $2,624,000 to General Revenue Related Funds
through the biennium ending August 31, 1999.
The bill would make no appropriation but could provide the legal
basis for an appropriation of funds to implement the provisions
of the bill.
Fiscal Analysis
House Bill 1445, 2nd House Substitute as passed, would continue
the Texas Racing Commission through August 31, 2005 and make
several changes to the enabling statute. The Texas Racing Commission
is subject to the provisions of the Texas Sunset Act, and unless
continued by the 75th Legislature, would be abolished September
1, 1997. The sections of the bill with a fiscal impact are
as follows:
A gain to General Revenue-Dedicated account 0597
would result from the collection of additional track officials
fees, increased occupational license fees and race day fees
from the opening of Valley Greyhound Park, increased race day
fees from cross-species simulcasting, and an increase in outstanding
ticket revenue from the increase in pari-mutuel handle. Costs
to General Revenue-Dedicated account 0597 would result from
the addition of the track officials at the racetracks, the addition
of an auditor and a programmer, the cost of criminal history
checks, travel costs, and the costs of computer phone lines
and hardware for cross-species simulcasting, and the re-opening
of Valley Greyhound Park.
A gain to general revenue would
include the increase in tax revenue from cross-species simulcasting,
the temporary increase in the simulcast tax, the increase in
revenue from automatic banking machines at the racetracks, and
the increase to General Revenue-Dedicated account 099 through
the fees to DPS for criminal history checks. The loss to general
revenue includes the reduction of the pari-mutuel tax on live
racing, and the repeal the .25 percent collected from simulcast
pools (currently transferred to Texas Commission on Alcohol
and Drug Abuse).
Methodolgy
Section 14 of the bill would require the Texas Racing Commission
to employ all racetrack stewards and judges. Currently, only
one of the three top regulatory officials is employed by the
agency. The other two are employed by the racetrack associations.
This section would increase the number of FTE's by 11 in fiscal
year 1998 and by 10 in years thereafter. The addition of these
FTE's would result in a cost of $794,402 in fiscal year 1997,
and $764,452 in fiscal year 1999 and thereafter. Since the
agency has the authority to recoup the costs of employing track
officials from the racetracks, these costs would be offset,
for a net zero impact. The costs that the agency would incur
are due to the addition of cross-species simulcasting and the
reopening of Valley Greyhound Park. The agency would need to
hire a programmer for the first two years to make necessary
changes to the database system. An additional auditor would
also be needed to handle accounting for purse funds, the cross-species
simulcasting funds, and Valley Greyhound Park. Additionally,
the cost of travel, data lines, and computer hardware would
increase, as well as the cost of criminal history checks for
occupational licensees.
Section 19 requires the agency to
cover the costs of criminal history checks conducted by DPS,
which incurs the costs. The cost for each criminal history
check is $15 per fingerprint card to DPS and $24 per card to
the FBI, for a total cost of $39 for each new license application.
Every five years a federal criminal history check is required,
at a cost of $24 per five year renewal. Based on projected
numbers of licensees, the amount the agency would collect is
expected to approximate $229,392 in fiscal year 1998, and $231,432
in each of fiscal years 1999 through 2002. Currently, the DPS
absorbs some of the cost, and bills the Texas Racing Commission
for a portion. The Texas Racing Commission does not currently
pass that cost on to the licensee, thus the net impact to the
state would be a gain to General Revenue-Dedicated account 0099.
The
changes to the simulcasting tax structure from Section 27 include
a temporary increase of .25 percent on regular simulcasting
through the earlier of January 1, 1999 or the date on which
the debt and accrued interest is repaid. Based on agency calculations,
the debt would not be paid off by January 1, 1999, so the additional
simulcast tax is calculated through January 1, 1999. The temporary
tax would be applied to the agency's debt. The .25 percent
tax is expected to generate $909,457 of additional revenue to
the general revenue fund in fiscal year 1998, and $300,832 in
fiscal year 1999. The Racing Commission projects that cross-species
simulcasting would generate additional wagering of $99 million
in fiscal year 1998, which would be taxed at 1.25 percent, and
thus would create $1,237,500 in revenue to general revenue for
fiscal year 1998. The Racing Commission expects cross-species
simulcasting to increase by 2 percent per year, and would generate
tax revenue of $1,262,250 in 1999, $1,287,495 in 2000, $1,313,245
in 2001, $1,339,510 in 2002, and $1,366,300 in 2003.
Section
28 alters the structure of the tax on live racing after January
1, 1999. The live tax would decrease by 1 percent for each
$100 million wagered at horse tracks and by 2 percent for each
$100 million wagered at greyhound tracks. This section would
result in a loss to general revenue beginning in fiscal year
1999. The amount of wagering on live racing is expected to
decrease by 5 percent per year. The Racing Commission estimates
that the amount of the estimated loss is: $1,819,724 in 1999,
$2,674,994 in 2000, $2,541,244 in 2001, $2,414,182 in 2002,
and $2,293,473 in 2003. Section 28 also would redirect the
funds currently allocated to the program for the prevention
of problem gambling to be used to repay the agency's debt until
that debt with interest thereon is repaid in full. The funds
are derived from .25 percent of all simulcast wagers. The funds
would be used to repay the debt until March 1999, which is when
the agency estimates that the debt and interest would be repaid.
After March 1999, the .25 percent of simulcast wagers would
not be collected by the state, and would result in a loss to
the state of $267,744 in fiscal year 1999, and losses of $902,497
in 2000, $920,547 in 2001, $938,958 in 2002, and $957,737 in
2003.
Section 39 of the bill provides for the allowance
of automatic banking machines at racetracks, with $1 from each
transaction going to the state's general revenue fund. Assuming
that 10 percent of all patrons would use an automatic banking
machine, $356,746 would be earned in additional revenue each
year.
Floor amendment number 3 clarifies that totalisator
services are subject to state sales tax. Although the taxes
are currently paid under protest, they are not included in the
revenue estimates. The services are approximately .002 percent
of total handle plus some rental fees, and at a tax rate of
6.25 percent, would generate approximately $100,000 per year
to the general revenue fund.
The probable fiscal implications of implementing the provisions
of the bill during each of the first five years following passage
is estimated as follows:
Five Year Impact:
Fiscal Year Probable Probable Revenue Probable Revenue Probable Revenue Change in Number
Savings/(Cost) Gain/(Loss) from Gain/(Loss) from Gain/(Loss) from of State
from Texas Texas Racing General Revenue Operators and Employees from
Racing Commission Fund Chauffeurs FY 1997
Commission Account/ License Account/
Account/ GR-Dedicated GR-Dedicated
GR-Dedicated
0597 0597 0001 0099
1998 ($957,474) $1,522,652 $2,372,000 $229,392 13.0
1998 (887,523) 1,502,601 252,000 231,432 12.0
2000 (821,262) 1,512,699 (1,624,000) 231,432 12.0
2001 (821,262) 1,522,999 (1,631,000) 231,432 12.0
2002 (821,262) 1,533,505 (1,637,000) 231,432 12.0
Net Impact on General Revenue Related Funds:
The probable fiscal implication to General Revenue related funds
during each of the first five years is estimated as follows:
Fiscal Year Probable Net Postive/(Negative)
General Revenue Related Funds
Funds
1998 $2,372,000
1999 252,000
2000 (1,624,000)
2001 (1,631,000)
2002 (1,637,000)
Similar annual fiscal implications would continue as long as
the provisions of the bill are in effect.
No fiscal implication to units of local government is anticipated.
Source: Agencies: 476 Racing Commission
304 Comptroller of Public Accounts
LBB Staff: JK ,JD ,JA