BILL ANALYSIS                                                                                                                                                                                                    






                                                       Bill No:  AB  
          1499
          
                 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
                       Senator Roderick D. Wright, Chair
                           2009-2010 Regular Session
                                 Staff Analysis



          AB 1499  Author:  Evans
          As Introduced:  February 27, 2009
          Hearing Date:  June 9, 2009
          Consultant:  Chris Lindstrom


                                     SUBJECT  

                      Horse racing: workers' compensation.

                                  DESCRIPTION
           
          AB 1499, an urgency measure, reauthorizes a fair to deduct  
          an additional 0.5% of the total amount handled in exotic  
          pari-mutuel pools of races for any breed, other than races  
          solely for thoroughbreds, to defray workers' compensation  
          insurance costs for trainers and owners who race at an  
          applicable fair.  Specifically, AB 1499:  

          1)Authorizes a fair to deduct an additional 0.5 percent of  
            the total amount handled in exotic pari-mutuel pools of  
            races for any breed, other than races solely for  
            thoroughbreds.  The additional deduction shall only be  
            permitted for a breed's races with the approval of the  
            organization representing the horsemen and horsewomen of  
            that breed at the fair.

          2)Provides the amounts distributed to the organization, as  
            described, and shall be deposited in a separate account  
            to defray workers' compensation insurance costs for  
            trainers and owners who are racing breeds other than  
            thoroughbreds at the applicable fair.  Any funds not  
            expended for this purpose in the calendar year in which  
            they are collected may either be used for the following  
            year's workers' compensation costs, or to benefit the  
            purse pool of each breed at the particular fair where the  




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            funds are generated in the same proportions as each breed  
            generated at that fair in the year the funds are  
            collected.

          3)Requires fairs and the organizations representing the  
            horsemen and horsewomen of each breed for which  
            deductions have been approved to form an organization to  
            which any funds deducted, as defined, shall be  
            distributed.  The fairs collectively shall have  
            representation equal to the collective representation of  
            the organizations representing horsemen and horsewomen on  
            the governing board of the organization formed pursuant  
            to this subdivision.

          4)Provides that if the fairs and the organizations  
            representing horsemen and horsewomen cannot agree on the  
            manner for distributing these funds to defray the costs  
            of workers' compensation insurance, the matter shall be  
            submitted to the CHRB, as specified.

          5)Sunsets the authorization created by the bill on January  
            1, 2014.

          6)Becomes effective immediately upon enactment in order to  
            ensure that trainers and owners of certain horse racing  
            breeds continue to receive assistance in defraying  
            workers' compensation insurance costs, as is currently  
            done for trainers and owners of other horse racing  
            breeds.

                                   EXISTING LAW

           Article IV, Section 19(b) of the Constitution of the State  
          of California provides that the Legislature may provide for  
          the regulation of horse races and horse race meetings and  
          wagering on the results.

          Existing law provides that the California Horse Racing  
          Board (CHRB) regulate the various forms of horse racing  
          authorized in this state.

          Existing law requires various deductions and distributions  
          to be made from pari-mutuel pools, as specified.

          Existing law provides that until January 1, 2014,  
          thoroughbred associations or fairs may deduct 0.5 percent  




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          of the amount of exotic pari-mutuel wagering on  
          thoroughbred races to defray the costs of workers'  
          compensation insurance. Provides that this deduction shall  
          pay for supplemental premiums that reduce rates, pay for  
          benefits of trainers and owners of thoroughbred horses, and  
          to reimburse these trainers and owners for the costs of  
          workers' compensation insurance.

          Existing law provides that funds not expended for workers'  
          compensation costs shall be carried forward to the  
          subsequent year, or used for the cost of health and safety  
          programs, research or safety equipment, or to make capital  
          improvements to prevent workplace accidents and to increase  
          the safety of jockeys, exercise riders, backstretch  
          employees, and other racetrack personnel.

          Existing law provides that if the racing association and  
          the organization representing horsemen and horsewomen  
          cannot agree on the manner of distribution of these funds  
          to defray the costs of workers' compensation insurance, the  
          matter is required to be submitted to CHRB for a decision.

                                    BACKGROUND
           
          Purpose of the bill.  According to the author, AB 2103  
          (Plescia), Chapter 443, Statutes of 2008, extended the  
          sunset date from January 1, 2009 to January 1, 2014, for  
          the law which established an internal workers compensation  
          insurance program for California's Horse Racing Industry.   
          AB 2103 allowed a fair race meet to deduct 0.5 percent from  
          the exotic wagering pools to help cover the costs of  
          workers' compensation for thoroughbreds but not the other  
          breeds (mules, appaloosas, quarter horses, and Arabians)  
          that race on the northern California Summer Fair Circuit.   
          Those specific breeds were inadvertently omitted from AB  
          2103 (Plescia).

          This bill reinstates the 0.5% workers compensation  
          insurance program deduction for non-thoroughbred breeds  
          that race at the fairs.  AB 1499 contains an urgency clause  
          to prevent adverse affects on the non-thoroughbred owners  
          and trainers who race on the northern California Fair  
          Racing Circuit when racing commences in June.  The author  
          notes, that a sunset date was added to this bill to stay  
          consistent with AB 2103 (Plescia) of 2008. 





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          Background.  Over the years, California's horse racing  
          industry has been significantly threatened by the  
          escalating cost of workers' compensation insurance, in that  
          the costs are not only causing horses and trainers to leave  
          this state, but also discouraging owners and trainers from  
          bringing horses into California to race.  In 2004, AB 701  
          (J. Horton), Chapter 40, Statutes of 2004 was enacted to  
          provide the horse racing industry with some workers'  
          compensation relief through the redistribution of 0.5  
          percent of the pari-mutuel handle on exotic wagers for  
          thoroughbred associations and live racing fairs.  The bill  
          passed with the industry in agreement that a trial period  
          was in order and therefore a January 1, 2009 sunset  
          provision was included in the bill.

          Last year, the provisions of AB 701 relating to  
          thoroughbreds were extended until January 1, 2014 in AB  
          2103 (Plescia), Chapter 443, Statutes of 2008.   

          The funds generated from the two bills have been used to  
          defray the costs of workers' compensation insurance  
          incurred in connection with horses that race in this state  
          through the payment of supplemental premiums that reduce  
          rates, payment to or for the benefit of trainers and owners  
          of such horses, based on the number of such horses they  
          start, in order to reimburse them for the costs of workers'  
          compensation insurance directly or indirectly incurred by  
          them, and other appropriate payments.

          Impact of workers' compensation relief bills.  After the  
          passage of AB 701 in 2004, the industry established its own  
          captive insurance program, referred to as the California  
          Horsemen's Safety Alliance (CHSA).  According to various  
          segments within the horse racing industry, the CHSA has  
          produced the following results:

          1)Workers' compensation costs have been reduced.

          2)The exodus of trainers and owners has decreased and new  
            trainers and owners are bringing horses into California.

          3)The CHSA established industry safety training programs,  
            treatment oversight programs, return to work programs,  
            and safety equipment research programs, which reduced the  
            number of accidents and cost of resulting claims.





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          4)Reductions of premiums and claim costs have occurred.  In  
            a six month period (12/02 - 7/03) prior to the law, there  
            were 123 insured participants with total premiums of  
            $2,929,585 and claims paid of $2,617,716.  In contrast,  
            in the 12-month policy period between July 2006 to June  
            2007, there were 399 insured participants with premiums  
            of $8,757,818 and claims paid of $2,830,121

                            PRIOR/RELATED LEGISLATION
           
           AB 2048 (Silva), Chapter 439, Statutes of 2008  .  Extends  
          the sunset date, from January 1, 2009, to January 1, 2014,  
          on a program to allow a Quarter Horse racing association to  
          deduct an additional 0.5% of the total amount handled in  
          exotic pari-mutuel pools to defray the costs of paying for  
          workers' compensation insurance.

           AB 2103 (Plescia), Chapter 443, Statutes of 2008  .  Extends  
          the sunset date, from January 1, 2009 to January 1, 2014,  
          on a deduction from pari-mutuel wagering on thoroughbred  
          horse racing in order to defray the costs of pay or  
          workers' compensation insurance. 

           AB 701 (J. Horton), Chapter 40, Statutes of 2004  .  Provided  
          a framework, until January 1, 2009, for the deduction from  
          the pari-mutuel pools in order to address increased costs  
          in workers' compensation insurance in the horse racing  
          industry.

           SUPPORT:   As of June 5, 2009:

          American Mule Association
          California Authority of Racing Fairs

           OPPOSE:  None on file as of June 5, 2009.

           FISCAL COMMITTEE:   Senate Appropriations Committee



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