[Congressional Record Volume 149, Number 54 (Thursday, April 3, 2003)]
[Extensions of Remarks]
[Pages E665-E666]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   REVISED COST ESTIMATE FOR H.R. 21, THE UNLAWFUL INTERNET GAMBLING 
                        FUNDING PROHIBITION ACT

                                 ______
                                 

                         HON. MICHAEL G. OXLEY

                                of ohio

                    in the house of representatives

                        Thursday, April 3, 2003

  Mr. OXLEY. Mr. Speaker, I am submitting a revised cost estimate from 
the Congressional Budget Office for H.R. 21, the Unlawful Internet 
Gambling Funding Prohibition Act. This revised estimate, dated April 2, 
2003, describes the private-sector mandate that would be imposed by the 
legislation. The CBO's estimate of its impact on the Federal budget and 
on State and local governments is unchanged.
  The original estimate was included in the Committee's report on H.R. 
21 (H. Rept. 108-51, Part I) and was dated March 27, 2003.

                                                    April 2, 2003.
     Hon. Michael G. Oxley,
     Chairman, Committee on Financial Services, House of 
         Representatives, Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office has 
     prepared the enclosed revised cost estimate for H.R. 21, the 
     Unlawful Internet Gambling Funding Prohibition Act. This cost 
     estimate supersedes the previous estimate. The cost estimate 
     provided to the committee on March 27, 2003, did not identify 
     or describe the private-sector mandate that would be imposed 
     by H.R. 21. Our estimate of the bill's impact on the federal 
     budget and on state and local governments is unchanged.
       If you wish further details on this estimate, we will be 
     pleased to provide them. The CBO staff contacts are Mark 
     Hadley (for federal costs), and Cecil McPherson (for the 
     impact on the private sector.
           Sincerely,
                                              Douglas Holtz-Eakin,
                                                         Director.
       Enclosure.
     H.R. 21--Unlawful Internet Gambling Funding Prohibition Act
       Summary: H.R. 21 would prohibit gambling businesses from 
     accepting credit cards,

[[Page E666]]

     checks, or other bank instruments from gamblers who illegally 
     bet over the Internet. The bill also would require financial 
     institutions to take steps to identify and block gambling-
     related transactions that are transmitted through their 
     payment systems. The Office of the Comptroller of the 
     Currency (OCC), the Board of Governors of the Federal Reserve 
     System, the Federal Deposit Insurance Corporation (FDIC), the 
     Office of Thrift Supervision (OTS), and the National Credit 
     Union Administration (NCUA) would enforce the provisions of 
     H.R. 21 as they apply to financial institutions.
       CBO estimates that implementing this legislation would 
     result in no significant cost to the federal government. The 
     bill could affect direct spending and revenues, but CBO 
     estimates that any impact on direct spending and revenues 
     would not be significant.
       H.R. 21 would create no new intergovernmental mandates as 
     defined in the Unfunded Mandates Reform Act (UMRA) and would 
     impose no costs on state, local, or tribal governments. The 
     bill would impose a private-sector mandate, but CBO estimates 
     that the direct costs of the mandate would fall below the 
     annual threshold established in UMRA ($117 million in 2003, 
     adjusted annually for inflation) in any of the next five 
     years.
       Estimated cost to the Federal Government: CBO estimates 
     that the government would incur no significant costs under 
     H.R. 21. CBO estimates that implementing H.R. 21 would 
     increase administrative costs of the Department of Justice, 
     but any such costs would be negligible. The bill also would 
     have a small effect on the operating costs of the FDIC and 
     the Federal Reserve System. Finally, the bill would have a 
     negligible effect on the collection and spending of criminal 
     penalties.
     Basis of estimate
       The bill would have only minor budgetary effects, as 
     described below.
       Spending subject to appropriation
       Because H.R. 21 would establish new federal crimes relating 
     to Internet gambling, the federal government would be able to 
     pursue cases that it otherwise would not be able to 
     prosecute. CBO expects, however, that most cases would be 
     pursued under existing state laws. Therefore, we estimate 
     that any increase in federal costs for law enforcement, court 
     proceedings, or prison operations would not be significant. 
     Any such additional costs would be subject to the 
     availability of appropriated funds.
       H.R. 21 would require the Department of the Treasury to 
     submit an annual report on deliberations with other countries 
     on issues related to Internet gambling. CBO estimates that 
     preparing and completing the report would cost less than 
     $100,000 a year, subject to the availability of appropriated 
     funds.
       Direct spending and revenues
       The NCUA, the OTS, and the OCC charge fees to cover all 
     their administrative costs; therefore, any additional 
     spending by those agencies to implement the bill would have 
     no net budgetary effect. That is not the case with the FDIC, 
     however, which uses deposit insurance premiums paid by banks 
     to cover the expenses it incurs to supervise state-chartered 
     institutions. (Under current law, CBO estimates that the vast 
     majority of thrift institutions insured by the FDIC would not 
     pay any premiums for most of the 2004-2013 period.)
       The bill would cause a small increase in FDIC spending but 
     would not affect its premium income. In total, CBO estimates 
     that H.R. 21 would increase direct spending and offsetting 
     receipts of the NCUA, OTS, OCC, and FDIC by less than 
     $500,000 a year over the 2002-2006 period.
       Budgetary effects on the Federal Reserve are recorded as 
     changes in revenues (governmental receipts). Based on 
     information from the Federal Reserve, CBO estimates that 
     enacting H.R. 21 would reduce such revenues by less than 
     $500,000 a year.
       Because those prosecuted and convicted under the bill could 
     be subject to criminal fines, the federal government might 
     collect additional fines if the bill is enacted. Collections 
     of such fines are recorded in the budget as governmental 
     receipts (i.e., revenues), which are deposited in the Crime 
     Victims Fund and spent in subsequent years. Any additional 
     collections are likely to be negligible because of the small 
     number of cases involved. Because any increase in direct 
     spending would equal the amount of fines collected (with a 
     lag of one year or more), the additional direct spending also 
     would be negligible.
       Estimated impact on state and local governments: Although 
     H.R. 21 would prohibit gambling businesses from accepting 
     credit card payments and other bank instruments from gamblers 
     who bet illegally over the Internet, the bill would not 
     create a new intergovernmental mandate as defined in UMRA. 
     Under current federal and state law, gambling businesses are 
     generally prohibited from accepting bets or wagers over the 
     Internet. Thus, H.R. 21 does not contain a new mandate 
     relative to current law and would impose no costs on state, 
     local, or tribal governments.
       Estimated impact on the private sector: H.R. 21 would 
     impose a new federal mandate on the private sector. The bill 
     would require designated payment systems to establish 
     policies and procedures designed to identify and prevent 
     transactions in connection with unlawful Internet gambling. 
     Designated payment systems are defined in the bill to include 
     any system utilized by businesses such as creditors, credit 
     card issuers, or financial institutions to effect a credit 
     transaction, an electronic fund transfer, or other transfer 
     of funds. Information provided by representatives of the 
     financial services industry indicates that such transactions 
     can currently be identified through the use of codes. Most 
     financial institutions are currently able to identify and 
     block restricted transactions by using the coding system. 
     Thus, CBO estimates that the private sector's cost to comply 
     with the mandate would be small. There also could be direct 
     savings to those entities subject to the mandate as the bill 
     limits their liability arising from their compliance with the 
     requirement. CBO estimates that the total direct costs for 
     private-sector mandates in this bill would fall well below 
     the annual threshold ($117 million in 2003, adjusted annually 
     for inflation) established in UMRA.
       Although section 3 would prohibit gambling businesses from 
     accepting credit card payments and other bank instruments 
     from gamblers who bet illegally over the Internet, those 
     provisions would not create a new private-sector mandate as 
     defined in UMRA. Under current federal and state law, 
     gambling businesses are generally prohibited from accepting 
     bets or wagers over the Internet. Thus, those provisions do 
     not contain a new mandate relative to current law.
       Previous estimate: The cost estimate for H.R. 21 
     transmitted to the House Committee on Financial Services on 
     March 27, 2003, did not identify or describe the private-
     sector mandate that would be imposed by the bill. This cost 
     estimate supersedes that previous estimate. The estimate of 
     the bill's impact on the federal budget and on state and 
     local governments is unchanged.
       Estimate prepared by: Federal spending: Ken Johnson and 
     Mark Hadley; federal revenues: Mark Booth; impact on state, 
     local, and tribal governments: Victoria Heid Hall; impact on 
     the private sector: Cecil McPherson.
       Estimate approved by: Peter H. Fontaine, Deputy Assistant 
     Director for Budget Analysis.

                          ____________________