Rule2023-06023
Procedures for Oversight of the Horseracing Integrity and Safety Authority's Annual Budget
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 27, 2023
Effective
March 27, 2023
Issuing agencies
Federal Trade Commission
Abstract
The Federal Trade Commission ("Commission") is issuing rules pursuant to the Horseracing Integrity and Safety Act ("Act") to provide procedures for the Commission's oversight of the annual budget of the Horseracing Integrity and Safety Authority ("Authority").
Full Text
<html>
<head>
<title>Federal Register, Volume 88 Issue 58 (Monday, March 27, 2023)</title>
</head>
<body><pre>
[Federal Register Volume 88, Number 58 (Monday, March 27, 2023)]
[Rules and Regulations]
[Pages 18034-18037]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-06023]
=======================================================================
-----------------------------------------------------------------------
FEDERAL TRADE COMMISSION
16 CFR Part 1
Procedures for Oversight of the Horseracing Integrity and Safety
Authority's Annual Budget
AGENCY: Federal Trade Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Federal Trade Commission (``Commission'') is issuing rules
pursuant to the Horseracing Integrity and Safety Act (``Act'') to
provide procedures for the Commission's oversight of the annual budget
of the Horseracing Integrity and Safety Authority (``Authority'').
DATES: This rule is effective on March 27, 2023.
FOR FURTHER INFORMATION CONTACT: John H. Seesel (202-326-2702), Office
of the General Counsel, Federal Trade Commission, 600 Pennsylvania
Avenue NW, Washington, DC 20580.
SUPPLEMENTARY INFORMATION: The Horseracing Integrity & Safety Act,\1\
enacted on December 27, 2020, and amended on December 29, 2022, directs
the Federal Trade Commission to oversee the activities of a private,
self-regulatory organization called the Horseracing Integrity and
Safety Authority.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 3051 through 3060.
---------------------------------------------------------------------------
The Act, in subsection 15 U.S.C. 3052(f), sets forth certain
requirements for the Authority's budget. On the revenue side, as for
initial funding, the Authority is to obtain loans,\2\ and generally it
``may borrow funds toward the funding of its operations.'' \3\ After
the program effective date of July 1, 2022, the Authority performs an
annual calculation of the ``amount required'' from each State in which
covered horseracing takes place, which estimates the amount required
from each State ``to fund the State's proportionate share of the
horseracing anti-doping and medication control program and the
racetrack safety program for the next calendar year'' and ``to
liquidate the State's proportionate share of any loan or funding
shortfall.'' \4\ The amount required by each State is calculated under
the Assessment Methodology rule \5\ and must be ``based on,'' among
[[Page 18035]]
other things, ``the annual budget of the Authority for the following
calendar year.'' \6\
---------------------------------------------------------------------------
\2\ See 15 U.S.C. 3052(f)(1)(A).
\3\ Id. 3052(f)(1)(B).
\4\ Id. 3052(f)(1)(C)(i).
\5\ The Assessment Methodology proposed rule was published in
the Federal Register and approved by the Commission after a period
of public comment. See Fed. Trade Comm'n, Notice of HISA Assessment
Methodology Proposed Rule, 87 FR 9349 (Feb. 28, 2022), <a href="https://www.federalregister.gov/documents/2022/02/18/2022-03717/hisa-assessment-methodology-rule">https://www.federalregister.gov/documents/2022/02/18/2022-03717/hisa-assessment-methodology-rule</a> (containing the text of the Assessment
Methodology proposed rule as submitted by the Authority); Fed. Trade
Comm'n, Order Approving the Assessment Methodology Rule Proposed by
the Horseracing Integrity & Safety Auth., at 1 (Apr. 1, 2022),
available at <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/Order%20re%20HISA%20Assessment%20Methodology.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/Order%20re%20HISA%20Assessment%20Methodology.pdf</a>. The Authority
later submitted a proposed rule modification to Assessment
Methodology, which was also published in the Federal Register and
approved by the Commission after a period of public comment. See
Fed. Trade Comm'n, Notice of HISA Assessment Methodology Proposed
Rule Modification, 87 FR 67915 (Nov. 10, 2022), <a href="https://www.federalregister.gov/documents/2022/11/10/2022-24609/hisa-assessment-methodology-rule-modification">https://www.federalregister.gov/documents/2022/11/10/2022-24609/hisa-assessment-methodology-rule-modification</a>; Fed. Trade Comm'n, Order
Approving the Assessment Methodology Rule Modification Proposed by
the Horseracing Integrity & Safety Auth., at 1 (Jan. 9, 2023),
available at <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/order_re_hisa_assessment_methodology_modification_not_signed_002_0.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/order_re_hisa_assessment_methodology_modification_not_signed_002_0.pdf</a>.
\6\ 15 U.S.C. 3052(f)(1)(C)(ii)(I)(aa).
---------------------------------------------------------------------------
On the expenditure side of the budget, the Act provides that the
``initial budget'' requires approval by a two-thirds supermajority of
the Authority's Board of Directors, as does any ``subsequent budget
that exceeds the budget of the preceding calendar year by more than 5
percent.'' \7\ The Act has two more relevant provisions: ``A proposed
increase in the amount required under this subparagraph''--in other
words, the Authority's budget--``shall be reported to the Commission.''
\8\ And: ``The Commission shall publish in the Federal Register such a
proposed increase and provide an opportunity for public comment.'' \9\
---------------------------------------------------------------------------
\7\ Id. 3052(f)(1)(C)(iii)(I), (II). Implicitly, subsequent
budgets that do not exceed by more than 5 percent the budget of the
preceding calendar year require only a simple majority of the
Authority's Board of Directors.
\8\ Id. 3052(f)(1)(C)(iv)(I).
\9\ Id. 3052(f)(1)(C)(iv)(II).
---------------------------------------------------------------------------
The Act does not specify whether the Authority's proposed budget
takes effect upon the closing of the public-comment period or whether
the Commission is to consider the public comments and then decide
whether to approve or disapprove the Authority's proposed budget. On
the one hand, the Authority's budget is not listed among the eleven
enumerated items in 15 U.S.C. 3053(a) that ``shall not take effect
unless . . . approved by the Commission.'' \10\ On the other hand, what
the Authority submits (in the event of an increase in the amount
required) is a ``proposed increase,'' which implies that a Commission
decision to approve or disapprove the proposal will follow.\11\
Although the Act does not identify criteria by which the Commission
should evaluate the Authority's proposed budget, in December 2022
Congress conferred on the Commission the power to issue rules ``as the
Commission finds necessary or appropriate to ensure the fair
administration of the Authority . . . or otherwise in furtherance of
the purposes of this Act.'' \12\
---------------------------------------------------------------------------
\10\ Id. 3053(b)(2).
\11\ Id. 3052(f)(1)(C)(iv)(I), (II) (emphasis added).
\12\ Consolidated Appropriations Act, 2023, H.R. 2617, 117th
Cong., Division O, Title VII (2022) (to be codified at 15 U.S.C.
3053(e)).
---------------------------------------------------------------------------
The Commission hereby exercises this newly granted rulemaking
authority to clarify the Commission's role in approving and overseeing
the Authority's budget, as well as the public's role in providing
comment, and to set forth clear requirements as to the Authority's
budget. Specifically, the Commission adds a new subpart U to part 1 of
its Rules of Practice, to provide procedures for the Commission's
oversight of the Authority's budget.\13\
---------------------------------------------------------------------------
\13\ In addition, the Commission intends in the near future to
engage in further rulemaking prescribing oversight of non-budgetary
aspects of the Authority's operations.
---------------------------------------------------------------------------
I. Section 1.150--Authority's Proposed Budget Submissions
Section 1.150 provides for the Authority's proposed annual budget
to use the calendar year as its fiscal year and to be submitted to the
Commission by September 1 of the preceding year. The submission of the
proposed budget is required regardless of whether the Authority's
budget contains a ``proposed increase in the amount required'' as
compared to the previous year.\14\ The Commission believes that its
oversight of the Authority's budget is best performed consistently
rather than only when the amount required increases. In short, annual
rather than less-frequent budget oversight is a baseline requirement
``to ensure the fair administration of the Authority.'' \15\ The
Authority's submission must contain: an indication of the vote of its
Board of Directors; sufficient revenue and expenditure information,
broken out by line item, as would be required for members of the Board
of Directors to exercise their fiduciary duty of care; and a comparison
of the current year's actual revenues and expenditures with those that
were approved. The submission should address the Commission's budget
approval decision criteria: that the proposed budget serves the goals
of the Horseracing Integrity and Safety Act in a prudent and cost-
effective manner, utilizing commercially reasonable terms with all
outside vendors, and that its anticipated revenues are sufficient to
meet its anticipated expenditures. If the Commission determines that
the proposed budget as submitted satisfies the requirements, the
Commission will publish the proposed budget in the Federal Register for
14 days of public comment.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 3052(f)(1)(C)(iv).
\15\ Id. 3053(e).
---------------------------------------------------------------------------
In addition, and notwithstanding the September 1 deadline for
submission of the Authority's next year's budget to the Commission,
Sec. 1.150 requires the Authority to post its anticipated budget for
the following year as early as is practicable in the preceding year.
The Authority's posting of its planned next year's budget shall include
an invitation to the public to submit comments to the Authority
concerning any aspect of the planned annual budget. The Authority is
required to post those public comments as they arrive on its website
and to review the comments in order to ascertain whether to revise the
budget in any manner. Further, Sec. 1.150 requires the Authority to
promptly provide the public comments that it receives to the
Commission, together with an assessment of such public comments that
the Authority believes would assist the Commission's evaluation of the
planned budget.
II. Section 1.151--Commission Decision on Authority's Proposed Budget
Section 1.151 provides that the Authority's proposed budget takes
effect only if approved by the Commission. This provision mirrors
others in the Act that require proposals made by the Authority, such as
for rules and rule modifications, to receive Commission approval before
they take effect. For ease of administration and to account for the
time the Commission may take to render a decision on the proposed
budget, the Authority is permitted to conditionally collect fees, and
State racing commissions (and covered persons in States that do not
elect to remit fees) are permitted to pay, based on the annual budget
as approved by the Authority's Board of Directors.
The criteria by which the Commission will decide whether to approve
or disapprove the Authority's proposed budget are in Sec. 1.151(c),
which provides that the Commission will approve the proposed budget if
the Commission determines, on balance, the proposed budget serves the
goals of the Act in a prudent and cost-effective manner, utilizing
commercially reasonable terms with all outside vendors, and anticipated
revenues are sufficient to meet its anticipated expenditures. With
respect to revenues and expenditures, the Commission may also modify
any line item. The Commission will publish the Authority's proposed
budget in the Federal Register for 14 days of public
[[Page 18036]]
comment. Public comments are welcomed as to both whether the submission
satisfies the Commission's decisional criteria and whether the
Commission should modify any line items.
III. Section 1.152--Deviation From Approved Budget
Section 1.152 sets forth what happens in circumstances in which
actual revenues or expenditures deviate from those approved in the
annual budget. When the Authority determines that, for a given
expenditure's line item, the actual expenditure is likely to exceed the
approved expenditure by more than 10 percent, it must immediately
notify the Commission. Such a notice must indicate whether the
Authority proposes to repurpose money from the line item of another
expenditure to make up the difference for the expenditure whose likely
actual amount will exceed the approved amount. So, too, when the
Authority determines that its overall expenditures will exceed its
approved expenditures, it must immediately notify the Commission. Such
a notice must indicate the means by which the Authority intends to make
up the difference, such as obtaining loans. For both overall-
expenditure and line-item deviations, the Commission retains the right
to disapprove the proposed repurposing or means of making up the
difference, which it must do within seven business days of receiving
the Authority's notice. If the Commission takes no action, the
Authority's proposal takes effect as an amendment to its budget.
Because these rules relate solely to agency procedure and practice,
publication for notice and comment is not required under the
Administrative Procedure Act. 5 U.S.C. 553(b).\16\
---------------------------------------------------------------------------
\16\ For this reason, the requirements of the Regulatory
Flexibility Act, 5 U.S.C. 601(2), 604(a), are also inapplicable.
Likewise, the amendments do not modify any FTC collections of
information within the meaning of the Paperwork Reduction Act, 44
U.S.C. 3501 through 3521.
---------------------------------------------------------------------------
List of Subjects in 16 CFR Part 1
Administrative practice and procedure.
For the reasons set forth in the preamble, the Federal Trade
Commission amends title 16, chapter I, subchapter A of the Code of
Federal Regulations as follows:
PART 1--GENERAL PROCEDURES
0
1. The authority citation for part 1 continues to read as follows:
Authority: 15 U.S.C. 46; 15 U.S.C. 57a; 5 U.S.C. 552; 5 U.S.C.
601 note.
0
2. Add subpart U to read as follows:
Subpart U--Procedures for Oversight of the Horseracing Integrity
and Safety Authority's Annual Budget
Sec.
1.150 Authority's proposed budget submissions.
1.151 Commission's decision on Authority's proposed budget.
1.152 Deviation from approved budget.
Sec. 1.150 Authority's proposed budget submissions.
(a) Mandatory annual submission. The Authority must submit a
proposed annual budget to the Commission every year, irrespective of
whether there is a ``proposed increase in the amount required'' under
15 U.S.C. 3052(f)(1)(C)(iv). The submission of the proposed budget for
the following year must be made by September 1 of the current year,
following the procedures set forth in Sec. 1.143. The Authority's
annual budget will use the calendar year as its fiscal year.
(b) Public comments. In addition to submitting its planned budget
to the Commission by September 1 of the preceding year, the Authority
shall post such planned budget on its own website as early as is
practicable, with an invitation to the public to submit comments to the
Authority on any aspect of the planned next year's budget. The
Authority shall post such comments on its website upon their arrival
and shall review them to ascertain whether to revise the budget in any
manner. In addition, the Authority shall promptly forward to the
Commission:
(1) Any such public comments that it receives; and
(2) An assessment of such public comments that it believes would
assist the Commission's evaluation of the Authority's planned budget.
(c) Contents of submission--(1) Indication of Board vote. The
Authority's proposed budget must be approved by a majority of its Board
of Directors (or, in the case of its initial budget or a budget that
exceeds the preceding year's budget by 5 percent or more, a two-thirds
supermajority) and must state the Board vote on the motion to approve
the budget.
(2) Revenue information. The proposed budget must identify both the
estimated amount required from each State racing commission as
calculated under 15 U.S.C. 3052(f) and all other sources of Authority
revenue as well as any loans proposed to be obtained by the Authority.
(3) Expenditure information. The proposed budget must identify
expenditures separately for:
(i) The racetrack safety program;
(ii) The anti-doping and medication control program;
(iii) All other programmatic expenditures other than for racetrack
safety and anti-doping and medication control, such as the
administration of the Authority or its technological needs;
(iv) Repayment of any loans; and
(v) Any funding shortfall incurred.
(4) Line items. For both revenue and expenditure information, the
Authority's proposed budget must provide sufficient information, by
line item, as would be required for members of the Authority's Board of
Directors to exercise their fiduciary duty of care. For example, the
proposed budget's expenditure information for anti-doping and
medication control might include separate line items for in-house
salaries, the costs of testing of laboratory samples, the costs of
arbitrators, and all the costs associated with contracting with an
anti-doping and medication control enforcement agency. The proposed
budget must include a narrative component that provides a brief
explanation of each line item's utility in carrying out the purposes of
the Horseracing Integrity and Safety Act.
(5) Comparison of approved budget to actual revenues and
expenditures. The proposed budget must provide a comparison showing,
for each approved line item, the actual revenues and expenditures for
the current year along with a narrative component explaining why any
line item is anticipated to deviate by 10 percent or more during the
current year.
(d) Approval and publication of submission. The Commission will
publish the Authority's proposed budget in the Federal Register if the
Commission determines that the proposed budget contains sufficient
information for the members of the Board of Directors of the Authority
to exercise their fiduciary duty of care and meets the requirements of
this subpart. Members of the public will then have 14 days in which to
file comments on the proposed budget.
Sec. 1.151 Commission's decision on Authority's proposed budget.
(a) Commission approval required. The Authority's proposed budget
takes effect only if approved by the Commission. The Commission will
approve or disapprove the proposed budget after considering the public
comments filed and the Commission's internal review per the submission
requirements in Sec. 1.150. The
[[Page 18037]]
Commission will vote on the Authority's proposed budget no later than
November 1.
(b) Conditional collection of fees allowed. The notice required to
be sent to State racing commissions estimating the amount required from
each State for the subsequent year must state that the amount required
is based on the proposed annual budget, as approved by the Board of
Directors, which takes effect only if approved by the Commission. The
State racing commissions (or covered persons in States that do not
elect to remit fees) may nevertheless elect to remit fees, and the
Authority may conditionally collect them, even before the Commission
approves the proposed budget. If the Commission makes any modifications
to line items under paragraph (d) of this section that have the net
effect of reducing the budget, the Authority must refund any State
racing commission or covered person that has conditionally paid by the
proportionate amount owed within 30 days. If the Commission makes any
modifications to line items under paragraph (d) of this section that
have the net effect of increasing the budget, the Authority may obtain
loans to make up the difference or may account for the difference as a
funding shortfall incurred in the subsequent year's proposed budget.
(c) Decisional criteria. The Commission will approve the proposed
budget if the Commission determines that, on balance, the proposed
budget serves the goals of the Horseracing Integrity and Safety Act in
a prudent and cost-effective manner, utilizing commercially reasonable
terms with all outside vendors, and that its anticipated revenues are
sufficient to meet its anticipated expenditures.
(d) Modification of line items. In its decision on the proposed
budget, the Commission may modify the amount of any line item.
(e) Public comments. Public comments on the Authority's proposed
budget should provide commenters' views as to the decisional criteria
and whether any line items should be modified.
Sec. 1.152 Deviation from approved budget.
(a) When notice to the Commission is required. The Authority may
deviate from the approved budget's expenditure information in a year as
to any line item by up to 10 percent in a year. If the Authority
determines that it is likely to expend more than the approved
expenditure of any line item by 10 percent or more, or if it will
exceed its approved total expenditure by any amount, it must notify the
Commission immediately upon such a determination.
(b) Line-item deviations of more than 10 percent. If the Authority
determines that it is likely to expend more than the approved
expenditure of any line item by 10 percent or more, its notice to the
Commission must indicate whether it intends to repurpose funds from one
or more different line items to cover the increased expenditure. The
Commission retains the discretion to disapprove such a proposed
repurposing. The Commission must issue any decision to disapprove a
proposed repurposing within 7 business days of receiving notice of the
Authority's proposal to repurpose funds from another line item. If the
Commission takes no action, the Authority's proposal takes effect as an
amendment to its approved budget.
(c) Total expenditure deviation. If the Authority determines that
it is likely to expend more than the total approved expenditure, its
notice to the Commission must indicate by what means it proposes to
cover the difference. The Commission retains the discretion to
disapprove the proposed means of covering the difference. The
Commission must issue any decision to disapprove a proposed means of
covering the difference within 7 business days of receiving notice of
the Authority's proposal to cover the difference. If the Commission
takes no action, the Authority's proposal takes effect as an amendment
to its approved budget.
By direction of the Commission, Commissioner Wilson not
participating.
April J. Tabor,
Secretary.
[FR Doc. 2023-06023 Filed 3-24-23; 8:45 am]
BILLING CODE 6750-01-P
</pre></body>
</html>Indexed from Federal Register on March 27, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.