Division of the Budget
Landon State Office Building Phone: (785) 296-2436
900 SW Jackson Street, Room 504 adam.c.proffitt@ks.gov
Topeka, KS 66612 Division of the Budget http://budget.kansas.gov
Adam Proffitt, Director Laura Kelly, Governor


March 7, 2023


The Honorable Adam Smith, Chairperson
House Committee on Taxation
300 SW 10th Avenue, Room 346-S
Topeka, Kansas 66612
Dear Representative Smith:
SUBJECT: Fiscal Note for HB 2434 by House Committee on Taxation
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2434 is
respectfully submitted to your committee.
Under current law, the total amount wagered on historical horse race machines are subject
to the parimutuel tax at a rate of 3.0 percent that is deposited to the State Racing Fund. This fund
finances the regulatory expenditures of the Racing Operations Program of the Kansas Racing and
Gaming Commission. Any excess receipts not needed to regulate the parimutuel racing industry
are transferred to the State Gaming Revenues Fund and ultimately to the State General Fund at the
end of the fiscal year. HB 2434 would distribute one-third of the amount generated from the
parimutuel tax on historical horse race machines to the Kansas Horse Breeding Development Fund
and two-thirds to the Horse Fair Racing Benefit Fund.
The Kansas Racing and Gaming Commission indicates HB 2434 has the potential to
increase costs for the regulation of a fair association and nonprofit horsemen’s organization and
the disbursement of the parimutuel tax receipts to the Kansas Horse Breeding Development Fund
and Horse Fair Racing Benefit Fund. The Kansas Horse Breeding Development Fund is used to
provide purse supplements, stakes and awards for Kansas-bred horses, and research grants to
Kansas Regents Institutions for equine research. The Horse Fair Racing Benefit Fund is used for
fair associated costs, including the Commission’s regulatory costs, tote board expenses,
background investigations for fair association or non-profit organization’s members, purse
supplements, operating assistance grants, employment of key race officials, and capital
improvements to racetrack facilities.
The Commission assumes that existing staff would be able to accommodate the regulation
of a fair association and no additional staff would be needed. Any additional costs associated with
The Honorable Adam Smith, Chairperson
Page 2—HB 2434

the regulation of a fair association would need to be reimbursed by the fair association. Funding
for regulating racing activities has primarily come from the transfer of parimutuel tax receipts to
the State Racing Fund. The bill would eliminate that direct funding source for the regulation of
historic horse race machines by distributing the parimutuel tax generated from these machines to
the Kansas Horse Breeding Development Fund and the Horse Fair Racing Benefit Fund. This
would require the regulation costs to be billed directly to the operator of historic horse race
machines. The appropriations bill each year provides the authority for the Commission to bill each
facility for all costs related to regulating racing activity. Since an operator of historical horse race
machines has not been chosen by the Commission, it is not known if a facility would be open that
only offers historical horse race machines, but no other parimutuel activity that could produce
additional parimutuel taxes that could be used to help offset the regulatory costs of the
Commission.
A reliable estimate of the parimutuel tax revenue that might be generated from historical
horse race machines cannot be made without a detailed market study, which would include an
estimate as to when the facility would be operational, the location of the facility, the size of the
facility, and if the new facility would impact revenues from existing gaming facilities.
Local governments in a region with a fair association may see increased expenditures
associated with increased demands on public safety during the operation of a fair association.
However, the Commission does not have a reliable estimate of those additional costs. Any fiscal
effect associated with HB 2434 is not reflected in The FY 2024 Governor’s Budget Report.


Sincerely,

Adam Proffitt
Director of the Budget

cc: Brandi White, Racing & Gaming Commission


Statutes affected:
As introduced: 74-8823