LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 81ST LEGISLATIVE REGULAR SESSION March 25, 2009 TO: Honorable Edmund Kuempel, Chair, House Committee on Licensing & Administrative Procedures FROM: John S. O'Brien, Director, Legislative Budget Board IN RE:HB222 by Menendez (Relating to the authorization and regulation of poker gaming and the duties of the Texas Lottery Commission; providing civil and criminal penalties.), As Introduced Estimated Two-year Net Impact to General Revenue Related Funds for HB222, As Introduced: a positive impact of $1,022,223 through the biennium ending August 31, 2011. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 81ST LEGISLATIVE REGULAR SESSION
March 25, 2009
TO: Honorable Edmund Kuempel, Chair, House Committee on Licensing & Administrative Procedures FROM: John S. O'Brien, Director, Legislative Budget Board IN RE:HB222 by Menendez (Relating to the authorization and regulation of poker gaming and the duties of the Texas Lottery Commission; providing civil and criminal penalties.), As Introduced
TO: Honorable Edmund Kuempel, Chair, House Committee on Licensing & Administrative Procedures
FROM: John S. O'Brien, Director, Legislative Budget Board
IN RE: HB222 by Menendez (Relating to the authorization and regulation of poker gaming and the duties of the Texas Lottery Commission; providing civil and criminal penalties.), As Introduced
Honorable Edmund Kuempel, Chair, House Committee on Licensing & Administrative Procedures
Honorable Edmund Kuempel, Chair, House Committee on Licensing & Administrative Procedures
John S. O'Brien, Director, Legislative Budget Board
John S. O'Brien, Director, Legislative Budget Board
HB222 by Menendez (Relating to the authorization and regulation of poker gaming and the duties of the Texas Lottery Commission; providing civil and criminal penalties.), As Introduced
HB222 by Menendez (Relating to the authorization and regulation of poker gaming and the duties of the Texas Lottery Commission; providing civil and criminal penalties.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB222, As Introduced: a positive impact of $1,022,223 through the biennium ending August 31, 2011. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
Estimated Two-year Net Impact to General Revenue Related Funds for HB222, As Introduced: a positive impact of $1,022,223 through the biennium ending August 31, 2011.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
General Revenue-Related Funds, Five-Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds 2010 $662,607 2011 $359,616 2012 $559,616 2013 $634,616 2014 $709,616
2010 $662,607
2011 $359,616
2012 $559,616
2013 $634,616
2014 $709,616
All Funds, Five-Year Impact: Fiscal Year Probable Revenue Gain/(Loss) fromGeneral Revenue Fund1 Probable Savings/(Cost) fromGeneral Revenue Fund1 Probable Revenue Gain/(Loss) fromPoker Gaming Revenue Fund Probable Savings/(Cost) fromPoker Gaming Revenue Fund 2010 $1,508,000 ($845,393) $2,791,000 ($2,791,000) 2011 $1,190,000 ($830,384) $16,835,000 ($3,214,177) 2012 $1,390,000 ($830,384) $39,077,000 ($2,652,577) 2013 $1,465,000 ($830,384) $47,441,000 ($2,652,577) 2014 $1,540,000 ($830,384) $55,753,000 ($2,652,577) Fiscal Year Probable Revenue Gain/(Loss) fromTexas Racing Comm Acct597 Probable (Cost) fromTexas Racing Comm Acct597 Change in Number of State Employees from FY 2009 2010 $635,637 ($635,637) 40.0 2011 $635,637 ($635,637) 40.0 2012 $635,637 ($635,637) 40.0 2013 $635,637 ($635,637) 40.0 2014 $635,637 ($635,637) 40.0
Fiscal Year Probable Revenue Gain/(Loss) fromGeneral Revenue Fund1 Probable Savings/(Cost) fromGeneral Revenue Fund1 Probable Revenue Gain/(Loss) fromPoker Gaming Revenue Fund Probable Savings/(Cost) fromPoker Gaming Revenue Fund 2010 $1,508,000 ($845,393) $2,791,000 ($2,791,000) 2011 $1,190,000 ($830,384) $16,835,000 ($3,214,177) 2012 $1,390,000 ($830,384) $39,077,000 ($2,652,577) 2013 $1,465,000 ($830,384) $47,441,000 ($2,652,577) 2014 $1,540,000 ($830,384) $55,753,000 ($2,652,577)
2010 $1,508,000 ($845,393) $2,791,000 ($2,791,000)
2011 $1,190,000 ($830,384) $16,835,000 ($3,214,177)
2012 $1,390,000 ($830,384) $39,077,000 ($2,652,577)
2013 $1,465,000 ($830,384) $47,441,000 ($2,652,577)
2014 $1,540,000 ($830,384) $55,753,000 ($2,652,577)
Fiscal Year Probable Revenue Gain/(Loss) fromTexas Racing Comm Acct597 Probable (Cost) fromTexas Racing Comm Acct597 Change in Number of State Employees from FY 2009 2010 $635,637 ($635,637) 40.0 2011 $635,637 ($635,637) 40.0 2012 $635,637 ($635,637) 40.0 2013 $635,637 ($635,637) 40.0 2014 $635,637 ($635,637) 40.0
2010 $635,637 ($635,637) 40.0
2011 $635,637 ($635,637) 40.0
2012 $635,637 ($635,637) 40.0
2013 $635,637 ($635,637) 40.0
2014 $635,637 ($635,637) 40.0
Fiscal Analysis
The bill would add a new chapter to the Occupations Code to authorize and regulate poker gaming. The bill would establish a poker gaming division within the Texas Lottery Commission (TLC) to issue and oversee commercial and charitable operator's licenses. Both electronic and traditional poker tables would be allowed at licensed locations. Racetracks would be allowed the number of tables authorized by TLC rules. Non-track locations would be limited to four tables per establishmentsubject to a capital asset requirement of $1 million. The bill would establish a tax rate of 18 percent of gross receipts for commercial operators, 16 percent for a commercial operator who holds a pari-mutuel license with the Texas Racing Commission, and a five percent tax would be applied to the gross receipts from charitable poker tournaments. Penalties for delinquent taxes would be established. The bill would establish regulations and penalties for criminal behavior. The bill would establish application fees and license fees for operators, dealers, manufacturers, distributors, and nonprofit organizations involved in poker gaming. Operators would collect a limited fee on each poker hand played and would be allowed to charge limited buy-in fees, tournament registration fees, and promotion bonus fees. In addition to the gross receipts tax, promotion bonus fees, less administration and gross receipts tax, would be submitted to the state. The bill would allow federally recognized Indian tribes that have a reservation in this state to obtain a commercial operator's license to conduct poker gaming on their reservations. The bill would establish the Texas Poker Gaming Revenue Fund, which would exist outside of the State Treasury, to be used to cover the state's associated oversight and regulatory costs. Any remaining balance after operating costs would be transferred to the Texas Department of Housing and Community Affairs, with 50 percent allocated for grants to municipalities, counties, and nonprofits to benefit the homeless population, and the remainder to the Housing Trust Fund established in Section 2306.201 of the Government Code for housing loans and constructing adequate and sanitary housing. The bill would authorize TLC to access Criminal History Record Information (CHRI) maintained by Texas Department of Public Safety (DPS), the Federal Bureau of Investigation (FBI) or another law enforcement agency for the investigation of individuals as specified by the bill and during the license or permit approval process. The bill would require annual CHRI searches on all licensed operators, each holder of a 10 percent or greater equity or creditor interest in the licensed operator, and on licensed employees, manufacturers, and distributors. The bill would do one or more of the following: create or recreate a dedicated account in the General Revenue Fund, create or recreate a special or trust fund either with or outside of the Treasury, or create a dedicated revenue source. The fund, account, or revenue dedication included in this bill would be subject to funds consolidation review by the current Legislature. The bill would take effect on September 1, 2009.
The bill would add a new chapter to the Occupations Code to authorize and regulate poker gaming.
The bill would establish a poker gaming division within the Texas Lottery Commission (TLC) to issue and oversee commercial and charitable operator's licenses. Both electronic and traditional poker tables would be allowed at licensed locations. Racetracks would be allowed the number of tables authorized by TLC rules. Non-track locations would be limited to four tables per establishmentsubject to a capital asset requirement of $1 million.
The bill would establish a tax rate of 18 percent of gross receipts for commercial operators, 16 percent for a commercial operator who holds a pari-mutuel license with the Texas Racing Commission, and a five percent tax would be applied to the gross receipts from charitable poker tournaments. Penalties for delinquent taxes would be established. The bill would establish regulations and penalties for criminal behavior.
The bill would establish application fees and license fees for operators, dealers, manufacturers, distributors, and nonprofit organizations involved in poker gaming. Operators would collect a limited fee on each poker hand played and would be allowed to charge limited buy-in fees, tournament registration fees, and promotion bonus fees. In addition to the gross receipts tax, promotion bonus fees, less administration and gross receipts tax, would be submitted to the state.
The bill would allow federally recognized Indian tribes that have a reservation in this state to obtain a commercial operator's license to conduct poker gaming on their reservations.
The bill would establish the Texas Poker Gaming Revenue Fund, which would exist outside of the State Treasury, to be used to cover the state's associated oversight and regulatory costs. Any remaining balance after operating costs would be transferred to the Texas Department of Housing and Community Affairs, with 50 percent allocated for grants to municipalities, counties, and nonprofits to benefit the homeless population, and the remainder to the Housing Trust Fund established in Section 2306.201 of the Government Code for housing loans and constructing adequate and sanitary housing.
The bill would authorize TLC to access Criminal History Record Information (CHRI) maintained by Texas Department of Public Safety (DPS), the Federal Bureau of Investigation (FBI) or another law enforcement agency for the investigation of individuals as specified by the bill and during the license or permit approval process. The bill would require annual CHRI searches on all licensed operators, each holder of a 10 percent or greater equity or creditor interest in the licensed operator, and on licensed employees, manufacturers, and distributors.
The bill would do one or more of the following: create or recreate a dedicated account in the General Revenue Fund, create or recreate a special or trust fund either with or outside of the Treasury, or create a dedicated revenue source. The fund, account, or revenue dedication included in this bill would be subject to funds consolidation review by the current Legislature.
The bill would take effect on September 1, 2009.
Methodology
The fiscal impact was based on an estimated number of players, table occupancy rates, revenue per player per hour, hours of play, estimated number of license fees and promotions, the proportion of commercial play, the proportion of charitable tournament play, tax rates and license fees, and the number of tables necessary to meet the demand. Data from current poker operations in other states and estimates of the number of commercial Texas businesses that would qualify for a poker license as provided by the Texas Alcoholic Beverage Commission and TLC. Poker operations taxes would be payable to the Poker Gaming Revenue Fund. Distributions from the fund cannot be estimated, as this would depend on indeterminable factors affecting the operating costs of poker gaming. The bill would have an indeterminable impact on current lottery, bingo, and racing revenues. Although poker attracts different players than current Texas gambling options, state lottery and bingo revenues would likely be affected negatively. Because poker tables could be licensed in the state's racetrack venues and because the bill provides that some revenue from these venues goes to a racing purse fund, racing revenues would likely be affected positively. Based on the analysis of TLC, it is assumed the agency would require an additional 32 full-time-equivalent positions in each fiscal year to staff the poker gaming division. The associated costs from the Poker Gaming Revenue Fund are estimated to be $2,791,000 in fiscal year 2010; $3,214,177 in fiscal year 2011; $2,652,577 each year thereafter. Based on the analysis of DPS, it is assumed revenues collected for fingerprint-based CHRI fees would result in a revenue gain to the General Renenue Fund of $1,370,000 in fiscal year 2010 for intitial gaming license applicants and $860,000 each year thereafter for new applicants and license renewals. It is also assumed DPS would require 3 additional FTEs to handle the increased workload at a total salary cost of $101,391 each year with estimated employee benefits costs of 28,967. Other equipment and operating costs for DPS are estimated to be $715,305 in fiscal year 2010 and $700,026 each year thereafter. It is assumed these costs would be paid for with General Revenue Funds. Based on the analysis of the Texas Racing Commission, it is assumed the authorization of poker gaming at race tracks would result in the opening of one currently inactive pari-mutuel racetrack in fiscal year 2010, which would require an addtional 5 FTEs and costs of $635,637 in each fiscal year beginning in fiscal year 2010. The costs to the agency would be offset collected from the racetrack through licensing fees, breakage revenue, and outstanding ticket revenue. Note: As drafted, revenue from the taxes imposed on gaming gross receipts would go to the Poker Gaming Revenue Fund and revenue from the fees on applications and licenses would be deposited in an unnamed fund. Note: The bill language may be subject to interpretation with respect to the funds or accounts into which application and license fees and the state reimbursements mandated by Section 2004.4025(b)(1) would be made. For the purposes of this analysis, it was assumed that these revenues would be deposited to the General Revenue Fund.
The fiscal impact was based on an estimated number of players, table occupancy rates, revenue per player per hour, hours of play, estimated number of license fees and promotions, the proportion of commercial play, the proportion of charitable tournament play, tax rates and license fees, and the number of tables necessary to meet the demand. Data from current poker operations in other states and estimates of the number of commercial Texas businesses that would qualify for a poker license as provided by the Texas Alcoholic Beverage Commission and TLC. Poker operations taxes would be payable to the Poker Gaming Revenue Fund. Distributions from the fund cannot be estimated, as this would depend on indeterminable factors affecting the operating costs of poker gaming.
The bill would have an indeterminable impact on current lottery, bingo, and racing revenues. Although poker attracts different players than current Texas gambling options, state lottery and bingo revenues would likely be affected negatively. Because poker tables could be licensed in the state's racetrack venues and because the bill provides that some revenue from these venues goes to a racing purse fund, racing revenues would likely be affected positively.
Based on the analysis of TLC, it is assumed the agency would require an additional 32 full-time-equivalent positions in each fiscal year to staff the poker gaming division. The associated costs from the Poker Gaming Revenue Fund are estimated to be $2,791,000 in fiscal year 2010; $3,214,177 in fiscal year 2011; $2,652,577 each year thereafter.
Based on the analysis of DPS, it is assumed revenues collected for fingerprint-based CHRI fees would result in a revenue gain to the General Renenue Fund of $1,370,000 in fiscal year 2010 for intitial gaming license applicants and $860,000 each year thereafter for new applicants and license renewals. It is also assumed DPS would require 3 additional FTEs to handle the increased workload at a total salary cost of $101,391 each year with estimated employee benefits costs of 28,967. Other equipment and operating costs for DPS are estimated to be $715,305 in fiscal year 2010 and $700,026 each year thereafter. It is assumed these costs would be paid for with General Revenue Funds.
Based on the analysis of the Texas Racing Commission, it is assumed the authorization of poker gaming at race tracks would result in the opening of one currently inactive pari-mutuel racetrack in fiscal year 2010, which would require an addtional 5 FTEs and costs of $635,637 in each fiscal year beginning in fiscal year 2010. The costs to the agency would be offset collected from the racetrack through licensing fees, breakage revenue, and outstanding ticket revenue. Note: As drafted, revenue from the taxes imposed on gaming gross receipts would go to the Poker Gaming Revenue Fund and revenue from the fees on applications and licenses would be deposited in an unnamed fund.
Note: The bill language may be subject to interpretation with respect to the funds or accounts into which application and license fees and the state reimbursements mandated by Section 2004.4025(b)(1) would be made. For the purposes of this analysis, it was assumed that these revenues would be deposited to the General Revenue Fund.
Technology
Technology costs are estimated to be $551,100 in fiscal year 2010.
Local Government Impact
No significant fiscal implication to units of local government is anticipated.
Source Agencies: 302 Office of the Attorney General, 304 Comptroller of Public Accounts, 362 Texas Lottery Commission, 405 Department of Public Safety, 458 Alcoholic Beverage Commission, 476 Racing Commission
302 Office of the Attorney General, 304 Comptroller of Public Accounts, 362 Texas Lottery Commission, 405 Department of Public Safety, 458 Alcoholic Beverage Commission, 476 Racing Commission
LBB Staff: JOB, JRO, MW, TG, SD
JOB, JRO, MW, TG, SD