HISA informs states it will need a budget of $72.3 million in 2023

The Horseracing Integrity and Safety Authority informed state racing commissions this week that it will be seeking a total of $72.5 million for its operations in 2023, the first full year in which all the authority’s operations, including drug testing and investigations, are expected to be in place.

The total amount is a stark reminder of the scope and cost of HISA’s mission under the legislation that created the authority in late 2020 and granted it sweeping powers to be the national regulator for Thoroughbred racing. On Jan. 1, HISA is expected to launch its full medication and drug-testing program, which will collect and test thousands of samples from horses in both post-race and out-of-competition settings, coupled with data analysis and investigations designed to usher racing regulation into the modern age.

The size of HISA’s budget has been a matter of pressing concern to many racing commissions, most of which provide services that will be the responsibility of HISA in 2023 under its legislative mandate. Those include collecting samples, conducting investigations, and adjudicating violations.

Although racing commissions can pass the responsibility for assuming the assessments on to racetracks in the state, racing commissions that do elect to participate will be expected to weigh several options for providing the funds, including transferring some of their existing state budgets or generating new fees from the sport, putting immense pressure on an industry that is financially unstable without the massive subsidies currently provided by casino gambling in most states.

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HISA officials noted that the racing commissions will be eligible for up to a total of $23 million in credits against the total budget if they continue to pay for sample collection at state racetracks and provide “investigate services” to HISA in 2023. The officials also noted that racing commission will be “no longer responsible for individually paying for investigations, laboratory fees and shipping costs, or any legal expenses associated with prosecuting anti-doping and medication control violations or appeals of those prosecutions” under HISA’s mandate.

HISA has acknowledged that the authority is likely to significantly reduce the number of analytical tests that are performed on post-race samples, as compared to the industry’s current practice, under a program that relies more on “targeted testing” and out-of-competition sampling. Currently, the scope of Thoroughbred racing’s testing program far exceeds that of human sports due to its heavy reliance on race-day sampling and testing. That could reduce the total cost of testing for the industry, which is usually the single largest line item of any state’s regulatory budget.

“The 2023 assessment balances HISA’s commitment to cost efficiency with the fact that the industry has historically underinvested in safety and integrity,” said Liza Lazarus, the chief executive of HISA, in a statement. “We are focused on leveraging existing state resources for anti-doping as the foundation on which to build a first-class program for the sport.”

The anti-doping and medication control program will be administered on a day-to-day basis by Drug Free Sport International, a private company that directs testing and enforcement programs for several professional sports, such as the NFL and MLB. The entire program within HISA, which is organized as a non-profit private company, is being called the Horseracing Integrity and Welfare Unit. Budget numbers distributed by the authority said that Horseracing Integrity and Welfare Unit’s 2023 budget will be $58.1 million, or nearly three-quarters of the entire budget, “inclusive of all sample collection, laboratory analysis, enforcement, and other program costs.”

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The total current costs for Thoroughbred racing’s regulatory operations are difficult to estimate due to the variety of functions performed by state racing commissions, the combined roles of some of those commissions – which can include the regulation of Standardbred racing, Quarter Horse Racing, and, in some cases, all gambling operations in a state – and the wide variety of sources that are used to pay for those functions.

Ed Martin, the chief executive of the Association of Racing Commissioners International, said on Wednesday that he has previously estimated that the Thoroughbred industry benefits from “taxpayer-funded” regulatory programs totaling approximately $120 million. However, he said that the figure cannot adequately be compared to the HISA budget number or counted on to be transferred from state coffers to a national organization like the authority.

“It’s a transition, certainly, but at the end of the day, the question for my members is, ‘How much is it going to cost?’ ” he said. “It’s definitely going to be more costly. So the question then is, how much more costly?”

In a release, HISA said that the “full incremental cost to industry” – an economics term that refers to the additional expenses incurred as a result of a change in operations – “is difficult to calculate with certainty” but that the incremental cost is “significantly lower” than what the $72 million total “indicates.” That is due to “economies of scale in contracting costs and other economic efficiencies gained through a unified, national program,” HISA said.

Notably, some racing commissions have filed lawsuits against HISA seeking to invalidate its authority, generally through legal arguments contending that the legislation violated several Constitutional principles. Although two of the suits were initially dismissed, both have been appealed. Another suit filed this year has asked a court to invalidate the methodology used by HISA to calculate the assessments.

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Earlier this year, the Texas Racing Commission declined to approve an out-of-state simulcasting license for Lone Star Park, employing a strategy to escape regulation by HISA altogether when its safety rules went into effect on July 1. Lone Star Park had only a dozen days left in its meet at the time, and no Thoroughbred track was scheduled to run races until 2023.

The assessment documents prepared and distributed by HISA do not list Texas among the state racing commissions that are facing assessments.

HISA said in a letter to the state racing commissions that if they do not take responsibility for paying the assessments, the fees will be assessed on the state’s racetracks, a mechanism that was contained in the authority’s enabling legislation. In that case, each racetrack’s share of the assessment would be calculated through a weighted formula based on number of race dates and purses.

Although HISA has distributed a sample contract to states, it is expected that officials at the authority and state racing commissions will have to conduct extensive negotiations on the contracts to account for the wide variety of funding mechanisms and sources available in most states. In some states, legislation might be necessary or preferred to iron out the funding.

“It’s not going to be one-size-fits-all,” Martin said. “It’s going to look like a bowl of spaghetti for a while.”

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