Page 1
April 27, 2022
HB 22-1402
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 22-0882
Rep. Garnett
Date:
Bill Status:
Fiscal Analyst:
April 27, 2022
House Finance
Anna Gerstle | 303-866-4375
David Hansen | 303-866-2633
Bill Topic:
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☒ State Transfer
☐ TABOR Refund
☒ Local Government
☐ Statutory Public Entity
Appropriation
Summary:
Fiscal Note
Status:
Table 1
State Fiscal Impacts Under HB 22-1402
Budget Year
FY 2022-23
Out Year
FY 2023-24
Revenue
Cash Fund
$2.6 million
$5.9 million
Total Revenue
$2.6 million
$5.9 million
Expenditures
Cash Fund
$2,850,000
$2,700,000
Centrally Appropriated
$13,515
$16,618
Total Expenditures
$2,863,515
$2,716,618
Total FTE
0.8 FTE
1.0 FTE
Transfers
Limited Gaming Fund
($2,500,000)
($2,500,000)
Responsible Gaming Grant Prog. CF
$2,500,000
$2,500,000
Sports Betting Fund
($2,646,164)
($6,071,139)
Wagering Recipients Hold-Harm. CF
$158,770
$356,468
Water Plan Implementation CF
$2,487,394
$5,714,671
Net Transfer
$0
$0
Other Budget Impacts
-
-
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April 27, 2022
HB 22-1402
Summary of Legislation
Responsible Gaming Grant Program. The bill creates the Responsible Gaming Grant Program in the
Department of Revenue (DOR) to promote responsible gambling and address problem gambling. The
Limited Gaming Control Commission, in collaboration with the Behavioral Health Administration
(BHA), must administer the program and award grants. The bill specifies the contents of grant
applications and evaluation criteria for making awards. By September 1, 2023 and each year
thereafter, grantees must report to the commission on how the grant was used, and by
December 1, 2023 and each year thereafter, the commission must submit a summary report to the
relevant legislative committees and the BHA.
Cash fund. The bill creates the Responsible Gaming Grant Program Cash Fund, which is continuously
appropriated to the DOR and exempt from the limit on uncommitted reserves. The fund consists of
the following:
money in the Wagering Revenue Recipients Hold-Harmless Fund that is not disbursed within two
years of being credited to the fund, to be transferred on December 31, 2023, and annually
thereafter;
$2.5 million transferred to the fund from the Limited Gaming Fund, beginning in FY 2022-23 and
each year thereafter;
any gifts, grants, and donations; and
any other money appropriated to the fund by the General Assembly.
The commission may spend up to 5 percent of the grant amount awarded in given year for
administrative expenses. The program is repeated September 1, 2032, after a sunset review.
Free bets. The bill modifies the amount of free bets that may be deducted from net sports betting
proceeds. Until January 1, 2023, a sports betting operator or internet sports betting operator may
include all free bets placed, and carry forward unused free bet credits accumulated on or before
November 30, 2022. After January 1, 2023, a sports betting operator or internet sports betting operator
must only include a portion of the total free bets placed, as follows:
up to 2.5 percent of the total amount of all bets, from January 1, 2023 through June 30, 2024;
up to 2.25 percent of the total amount of all bets, in FY 2024-25;
up to 2.0 percent of the total amount of all bets, in FY 2025-26; and
up to 1.75 percent of the total amount of all bets, after July 1, 2026.
A sports betting operator or internet sports betting operator may not carry over free bets in excess of
the deduction; or carry forward any unused free bet credits accumulated before January 1, 2023.
Distribution of sports betting revenue. Under current law, $130,000 in sports betting revenue is
transferred to the Colorado Department of Human Services (CDHS) for a gambling addiction hotline,
and for prevention, education, and treatment services. Beginning January 1, 2024, the transfer is
repealed.
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April 27, 2022
HB 22-1402
Exclusion of certain individuals. On or after January 1, 2023, the Division of Gaming in the DOR
must operate a program to exclude the following individuals from participation in gaming activities:
individuals who have voluntarily requested to be excluded, through a process established by the
division;
individuals who are required by the commission to be excluded or ejected from a licensed gaming
establishment, as is currently allowed; and
certain sports betting individuals from placing wagers on certain sporting events.
Rules for this provision must be adopted by November 1, 2022, and a list of excluded individuals must
be provided to licensed gaming operators.
Reporting. By October 1, 2023, and each year thereafter, retail licensees, sports betting operators, and
internet sports betting operators must submit a report to the division that describes efforts of the
licensee to promote responsible gaming via advertising and other promotional methods.
Lottery changes. For FY 2022-23 and each year thereafter, the bill requires that the General Assembly
appropriate $200,000 from the Lottery Fund to the Lottery Division for the promotion of responsible
gaming in the state. The bill repeals the provision that the Lottery Commission rules must require
instant scratch game tickets be sold on a cash only basis.
Background
Sports Betting. Following voter approval in November 2019, House Bill 19-1327 took effect and
allowed both in-person and online sports betting beginning May 2020. The legislation established a
10 percent tax on net sports betting proceeds, and created the Sports Betting Fund, the Wagering
Recipients Hold-Harmless Fund, and the Water Plan Implementation Fund. After covering
administrative expenses, 6.0 percent of sports betting tax revenue is transferred to the Hold-Harmless
Fund, $130,000 is transferred to the Office of Behavioral Health in the Department of Human Services,
and remaining funds are transferred to the Water Plan Implementation Fund.
Under current law, net sports betting proceeds are equal to wagers less payments to players, a
0.25 percent federal excise tax, and free bets. Since inception, free bets have totaled about 3.6 percent
of total wagers.
Sports betting revenue is comprised of license fees, operations fees, other charges for services, and tax
revenue, among other sources. License fees, operations fees, and other charges for services are subject
to TABOR while sports betting tax revenue is TABOR exempt. In FY 2020-21, sports betting wagers
totaled more than $2.7 billion and $2.6 billion was paid out to players. In FY 2020-21, sports betting
tax revenue totaled $8.1 million, resulting in a transfer of $488,782 to the Wagering Recipients
Hold-Harmless Fund.
Wagering Recipients Hold-Harmless Fund. Created by House Bill 19-1327, the hold-harmless fund
distributes payments to communities or entities that may have lost revenue due to sports betting.
Payments are distributed through an application process administered by the gaming commission.
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April 27, 2022
HB 22-1402
Water Plan Implementation Cash Fund. Created by House Bill 19-1327, the fund awards grants to
eligible applicants for local public and private water conservation plans, water supply and
conservation projects, and other approved engagement and water projects. Funds are also used for
expenditures that will ensure compliance with interstate water allocation compacts, equitable
apportionment decrees, international treaties, and federal laws relating to interstate storage, release,
apportionment, and allocation of water.
State Revenue
The bill will increase sports betting tax revenue by $2.6 million in FY 2022-23 and by $5.9 million in
FY 2023-24, with increasing impacts in subsequent years with further growth in wagers and limited
free bet deductions. Sports betting tax revenue is deposited in the Sports Betting Fund and is exempt
from TABOR.
Sports betting tax revenue data and assumptions. The bill will increase sports betting tax revenue
from FY 2022-23 to FY 2026-27 as the amount of free bets that may be deducted incrementally
decreases as a share of wagers. This analysis assumes the amount of wagers and payments to players
increases by 68 percent from FY 2020-21 to FY 2021-22, in line with the year-over-year increase in
wagers from March 2021 to March 2022. Wagers and payments are assumed to increase another
10.0 percent in FY 2022-23 and 5.0 percent in FY 2023-24. Further, the analysis assumes free bets
comprise 3.6 percent of wagers through the analysis period based on data from the Division of Gaming
in the Department of Revenue. Assuming wagers continue to grow at 5.0 percent each year starting
in FY 2023-24, sports betting tax revenue could increase by around $11.5 million by FY 2026-27.
Gifts, grants, and donations. The bill potentially increases state revenue from gifts, grants, or
donations for the grant program; however, no sources have been identified at this time. Gifts, grants,
and donations are exempt from TABOR revenue limits.
State Transfers
The bill creates new transfers to the new Responsible Gaming Grant Program Cash Fund and impacts
the amount of funds transferred under existing sports betting distributions, as described below.
Transfers to Responsible Gaming Grant Program Cash Fund. Beginning in FY 2022-23, the bill
annually transfers $2.5 million from the Limited Gaming Fund to the newly created Responsible
Gaming Grant Program Cash Fund. In addition, beginning December 31, 2023, the bill annually
transfers to the Responsible Gaming Grant Program Cash Fund any money in the Wagering Revenue
Recipients Hold-Harmless Fund that is not disbursed within two years of being credited to the hold
harmless fund. This amount has not been estimated.
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April 27, 2022
HB 22-1402
Sports Betting Fund distributions. Increased sports betting tax revenue under the bill will increase
distributions from the Sports Betting Fund to the Wagering Recipients Hold-Harmless Fund and the
Water Plan Implementation Cash Fund, as shown in Table 2. Distributions to the Hold-Harmless
Fund equal 6.0 percent of sports betting tax revenue as estimated above in the State Revenue section.
Funds distributed to the Water Plan Implementation Fund depend on administrative expenses for the
Division of Gaming in the Department of Revenue. Table 2 also reflects the repeal of the transfer to
CDHS, which increases the transfer to the Water Plan Implementation Cash Fund by $130,000. This
analysis assumes annual administrative expenses total $3.5 million beginning in FY 2022-23.
Table 2
Sports Betting Tax Revenue Distributions Under HB 22-1402
FY 2022-23
FY 2023-24
Sports Betting Fund
($2.6 million)
($6.0 million)
Wagering Recipients Hold-Harmless Fund
$158,770
$356,468
Water Plan Implementation Cash Fund
$2.5 million
$5.7 million
Total
$0
$0
State Expenditures
The bill increases state expenditures in the DOR by $2.9 million in FY 2022-23 and $2.7 million in
FY 2023-24. Costs are split between the Lottery Fund, newly created grant program fund, and Limited
Gaming Fund. Expenditures are shown in Table 3 and detailed below.
Table 3
Expenditures Under HB22-1402
FY 2022-23
FY 2023-24
Department of Revenue
Personal Services
$61,309
$73,571
Operating Expenses
$1,080
$1,350
Capital Outlay Costs
$6,200
-
Database Costs
$150,000
-
Grants
$2,431,411
$2,425,079
Lottery Outreach
$200,000
$200,000
Centrally Appropriated Costs
1
$13,515
$16,618
Total Cost
$2,863,515
$2,716,618
Total FTE
0.8 FTE
1.0 FTE
1
Centrally appropriated costs are not included in the bill's appropriation.
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April 27, 2022
HB 22-1402
Department of Revenue. The bill increases expenditures in the Division of Gaming and the Lottery
Division within the DOR.
Limited Gaming Division. This division requires 1.0 FTE beginning in FY 2022-23 to manage the
grant program and the exclusion program. Staffing costs are prorated for a September start date
in the first year, and standard operating and capital outlay costs are included. After
administrative costs, about $2.4 million will be available for grants. These costs are from the
Responsible Gaming Grant Program Cash Fund.
The division will also require $150,000 in FY 2022-23 for the creation of a database to track the
number of free bets, ensure compliance with free bet limits, and report on entities that exceed the
new free bet limits, and manage the list of individuals who are not allowed to gamble. These costs
are assumed to be from the Limited Gaming Fund. Workload will also increase to promulgate
rules to align with the bill.
Lottery Division. The bill provides $200,000 in spending authority for the Lottery Division to
promote responsible gaming in the state. It is expected to be used for marketing and problem
gambling outreach. Workload will also increase to adopt rules to align with repealing the cash
only purchases of scratch games.
Behavioral Health Administration. The BHA in the Colorado Department of Human Services will
have increased workload to collaborate with the DOR to implement the grant program.
Other state programs. As discussed in the State Transfer section, the bill transfers $2.5 million from
the Limited Gaming Fund for the grant program, which correspondingly reduces the amount of
limited gaming revenue distributed to the General Fund that is available to fund other state programs.
Similarly, the increase in the amount transferred to the funds listed in Table 2 will result in additional
funding being available for entities that may have lost revenue due to sports betting, and for water
plan projects.
Centrally appropriated costs. Pursuant to a Joint Budget Committee policy, certain costs associated
with this bill are addressed through the annual budget process and centrally appropriated in the Long
Bill or supplemental appropriations bills, rather than in this bill. These costs, which include employee
insurance and supplemental employee retirement payments, are shown in Table 2.
Local Government
The bill will increase money in the Wagering Recipients Hold-Harmless Fund and the Water Plan
Implementation Cash Fund that could increase grants to cities and counties depending on approved
applications for hold-harmless funds and water conservation projects. The impact to local
governments has not been estimated.
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April 27, 2022
HB 22-1402
Effective Date
The bill takes effect 90 days following adjournment of the General Assembly sine die, assuming no
referendum petition is filed, except that changes to the distribution of sports betting revenue take
effect January 1, 2024.
State Appropriations
In FY 2022-23, the bill requires an appropriation of $200,000 from the Lottery Fund to the Department
of Revenue.
The Responsible Gaming Grant Program Cash Fund and Limited Gaming Fund are continuously
appropriated to the Department of Revenue, which requires 0.8 FTE.
State and Local Government Contacts
Human Services Information Technology Revenue
The revenue and expenditure impacts in this fiscal note represent changes from current law under the bill for each
fiscal year. For additional information about fiscal notes, please visit: leg.colorado.gov/fiscalnotes.