BILL ANALYSIS Ó AB 1423 Page 1 Date of Hearing: April 24, 2013 ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION Hall III, Isadore, Chair AB 1423 (Committee on Governmental Organization) - As Introduced: March 21, 2013 SUBJECT : Horse racing: advance deposit wagering and exchange wagering deductions. SUMMARY : Corrects a provision in Horse Racing Law relating to how retroactive distributions for harness racing are to be distributed by the California Exposition and State Fair prior to the reenactment of Advance Deposit Wagering in 2008. In addition, the bill clarifies in law when the 10-year window begins upon which the jockeys' organization will receive specified funds for health and welfare benefits from the implementation of Exchange Wagering in California. Specifically, this bill : 1) Requires that specific amounts generated at harness race meetings that are held in trust by the California Exposition and State Fair to be distributed to the harness racing horsemen who participated in a certain racing meeting, and to the California Exposition and State Fair, in accordance with specified percentages (split 50/50) and requirements. 2) Authorizes exchange wagering, as defined, by an entity licensed by CHRB, in accordance with specified provisions of law. Existing law, until January 1, 2021, on an annual basis, requires a certain amount of exchange revenues collected by exchange wagering licensees to be distributed to provide health and welfare benefits to jockeys and their dependents. This bill would instead repeal those provisions on January 1 following the year in which the 10th annual distribution of those funds is made. 3) Makes technical changes. EXISTING LAW : 1) Provides that the California Horse Racing Board (CHRB) regulates the various forms of horse racing authorized in this state. AB 1423 Page 2 2) Authorizes advance deposit wagering to be conducted, with the approval of the CHRB, in accordance with specified provisions of law. 3) Requires a certain percentage of the amounts distributed for advance deposit wagering for racing meetings, except for harness racing meetings, to be deducted and distributed for the establishment and administration of a defined contribution retirement plan for California-licensed jockeys who retire on or after January 1, 2009, to supplement trainer-administered pension plans for backstretch personnel, and for distribution to a welfare fund established for horsemen and backstretch personnel, as specified. 4) Requires a certain percentage of amounts distributed on advance deposit wagers for harness racing meetings to be deducted and distributed to a welfare fund established for the benefit of horsemen and backstretch personnel, and for any amounts remaining to be utilized for the benefit of horsemen pursuant to a written agreement between the racing association that conducts the live harness race meeting and the organization representing the horsemen, as specified. 5) Mandates that until January 1, 2021, on an annual basis, that a specific amount of exchange revenues collected by exchange wagering licensees to be distributed to provide health and welfare benefits to jockeys and their dependents. FISCAL EFFECT : Unknown. COMMENTS : Purpose of the bill : According to the author, this bill corrects an oversight in previous legislation to provide that specific monies generated at harness racing meetings which are being held in trust by the California Exposition and State Fair may be distributed in accordance with specified percentages to the harness horsemen who ran horses at the 2012 race meeting and to the Fair. By requiring the distribution of the previously escrowed funds this bill will result in immediate financial assistance to the horsemen and horsewomen that participated in the prior race meeting while also providing a benefit to Cal Expo, as the former operator. AB 1423 Page 3 AB 1423 is important to the welfare of the harness horsemen and horsewomen and their families. Cal Expo is the only racetrack in the state that conducts harness racing. This year the California Exposition and State Fair entered into an agreement with a private operator to continue the tradition of harness racing at the facility. The industry is hopeful that the new operator will be financially successful and secure the long range future of the sport in California. Additionally, this bill ensures that distributions from exchange wagering revenues will continue for a period of ten years after the implementation of exchange wagering to provide health and welfare benefits to jockeys and their dependents, as intended in previous legislation. Background : SB 1072 (Ron Calderon), Chapter 283, Statutes of 2010, added Business and Professions Code section 19604.5 to provide that the CHRB shall prescribe rules, regulations, and conditions under which exchange wagering may be conducted in California. Exchange wagering is a relatively new form of wagering which was introduced in the United Kingdom in 2000. Exchange wagering account holders may buy, sell, or "back" and "lay" the outcome of horse races in a manner much like day trading on the stock exchange. The statute defines exchange wagering as a form of pari-mutuel wagering in which two or more persons place identically opposing wagers in a given market. Out-of-state residents, who live in states that allow wagering on California races, are also allowed to participate in exchange wagering. Exchange wagering can only commence after a California racetrack and the horsemen's organization at that racetrack reach an agreement with one or more exchange wagering companies and the agreement/operating plan is approved by the CHRB. Status of Exchange Wagering in California : In March 2013, the state's Office of Administrative Law (OAL) notified the CHRB that they disapproved the proposed exchange wagering regulations for failure to comply with specified standards and procedures of the California Administrative Procedure Act (APA). The rejected provisions were approved in November 2012 by the CHRB. The CHRB has stated that this will delay the implementation of exchange wagering in California for several months. The OAL cited problems with the manner in which the CHRB would assess its licensing fee to conduct exchange wagering. OAL also cited instances in the regulations that did not to comply with AB 1423 Page 4 government rule-making standards for clarity, consistency, and administrative procedures. Rules for exchange wagering cannot go into effect until approved by the OAL and sent to the Secretary of State's office for final consideration. REGISTERED SUPPORT / OPPOSITION : Support California Exposition and State Fair Opposition None on file Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531