Already projected to run out of money sometime in 2021, the state Racing Commission could be dealt another financial blow with passage of a bill to legalize mobile wagering on state thoroughbred and greyhound races, members of the commission were warned Tuesday.
The legislation, now awaiting action by Gov. Jim Justice, taxes wagers placed using so-called Advanced Deposit Wagering via the internet or mobile phones at 6%. Only one-half percent of that would go to the Racing Commission for administrative costs, which executive director Joe Moore said is about half of what the commission needs to break even on ADW.
“The half-percent administrative fee will certainly cause the Racing Commission to lose money on the ADW endeavor,” he said.
Assuming Justice does not veto the bill (House Bill 4438), that will put additional strain on a state agency that is already running out of money.
In December, Moore told commissioners, “We’re eating into our reserve fund and general administrative fund to the tune of $50,000 a month.”
He said that, at a clip of $600,000 a year, both funds will exhaust their reserves during the 2021-22 fiscal year.
The Racing Commission, which receives no general revenue funds, is funded through taxes on pari-mutuel wagering at the state’s two thoroughbred tracks and two greyhound racetracks.
Those taxes are on a sliding scale, increasing in percentage as wagering “handles” increase. However, as attendance and live wagering at the four racetracks have decreased over time, the tax is not sufficient to cover the cost of salaries, benefits and operating expenses for the commission.
Moore reiterated that projection Tuesday.
“The current projection is that the Racing Commission will run out of funds during fiscal year 2022, in about a year and a half,” he said, adding, “The next legislative session is the session where something has got to get changed.”
Commission Chairman Jack Rossi said the commission has made the Legislature aware of the pending funding collapse, but said legislators haven’t been receptive to date.
“The Legislature, quite frankly, has rejected it,” he said.
Commissioner Ken Lowe Jr. said it’s frustrating to be saddled with another unfunded mandate from the Legislature.
“We’re going into this knowing it doesn’t work for us,” he said of administering ADW. “I feel almost helpless.”
Kelli Talbott, commission attorney, said she and Moore made legislators aware the half-percent was insufficient, but said lawmakers weren’t persuaded.
“We were very transparent about that,” she said.
Despite the financial implications for the commission, Joe Funkhouser, with the Charles Town Horsemen’s Benevolent Protective Association, said ADW could be a boon for the state’s four racetracks, providing an estimated $7 million to $10 million a year of new wagering.
“I think it’s a tremendous opportunity, and I encourage the Racing Commission to do its due diligence and get it right the first time,” he said of developing emergency rules in order to launch ADW on July 1.
“ADW is an area of new growth for the industry,” Funkhouser added. “Everybody’s doing stuff on their phones these days.”
Also during Tuesday’s commission meeting:
- Moore paraphrased Ed Martin, president of the Association of Racing Commissioners International, regarding the federal indictments in New York of 27 individuals accused of giving performance-enhancing drugs to thoroughbreds, who said the good news is the indictments show that routine lab testing of thoroughbreds successfully uncovered evidence of illegal activity.
“They may have gotten away with it for some time, but the processes are in place that ultimately exposed the activity,” Moore said.
- Talbott said the commission is not looking at pursuing legal action regarding claims raised during legislative hearings on the ADW bill that at least one ADW company may have been illegally taking bets on West Virginia races.
“There’s no damages for the state to recoup. That’s the fundamental issue,” she said.
Technically, West Virginians who used the ADW provider to place bets on in-state races could be prosecuted, although many may not have been aware that they were breaking the law.