BILL ANALYSIS Ó
Bill No: SB
398
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2013-2014 Regular Session
Staff Analysis
SB 398 Author: Galgiani
As Amended: April 1, 2013
Hearing Date: April 9, 2013
Consultant: Art Terzakis
SUBJECT
Horse Racing: charity days: distribution of proceeds
DESCRIPTION
SB 398 provides that revenue raised by racing associations,
from their mandated charity racing days, may be distributed
to a nonprofit corporation or trust that has as its sole
purpose the support of recognized fairs within the network
of California fairs.
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 grants the California Horse Racing Board
(CHRB) the authority to regulate the various forms of horse
racing authorized in this state.
Existing law provides that each licensed racing association
shall designate three to five racing days during any one
meeting (depending on the length of the meeting), as
charity days by the licensee for the purpose of
distribution of the net proceeds to charitable
beneficiaries.
Existing law provides that at least 20% of the distribution
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from charity day racing must be made to charities
associated with the horse racing industry. In addition to
this 20%, another 5% of the distribution must go to a
welfare fund established for the benefit of horsemen,
horsewomen and backstretch personnel, as specified, and
another 5% of the distribution must be provided to a
nonprofit corporation assisting horsemen, horsewomen and
backstretch personnel who are affected adversely as a
result of alcohol or substance abuse.
Existing law also requires that an additional 20% of the
distribution from charity day racing, up to a maximum of $2
million, be provided as an endowment for a nonprofit
corporation or trust which assists disabled jockeys.
BACKGROUND
Purpose of SB 398: The author's office points out that for
more than 75 years, horse racing license fees was the
primary source of funding for fairs. In 2009, as part of
the State Budget negotiations, SBxx 16 (Ashburn) shifted
the responsibility for funding fairs from horse racing
license fees to the state General Fund. Elimination of the
license fees was intended to help the racing industry and
provide a dedicated revenue stream from the General Fund
($32 million) to the network of fairs. In 2011, the
General Fund support for fairs was eliminated as part of a
package of cuts designed to help deal with the state's
ongoing fiscal crisis. According to the author's office,
this measure is intended to give the horse racing industry
the ability to, once again, contribute to the well-being of
California's fairs.
Staff Comments: The State's fair circuit generally
consists of the following fairs conducting approximately
90+ days of racing: San Joaquin County (Stockton), Alameda
County (Pleasanton), Solano County (Vallejo), Sonoma County
(Santa Rosa), San Mateo County (San Mateo), Humboldt County
(Ferndale), Fresno County (Fresno), and the Los Angeles
County Fair (Pomona). In addition to mixed-breed meets at
Cal-Expo (Sacramento), a harness (Standard-bred) racing
meet is conducted at various times of the year at the
Cal-Expo facility. Following the demolition of Bay Meadows
in 2008, which was adjacent to the San Mateo County
Fairgrounds and used by the fair to run its live horse
racing meet, San Mateo's dates have been run at Golden Gate
Fields in Albany. Solano's dates have been split between
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Alameda County and Sonoma County for which Solano receives
compensation.
Since the early 1940's, California racing associations have
been required to conduct charity racing days. By law, each
racing association must conduct a specified portion of its
race meeting for the benefit of charities meeting the
statutory criteria and approval of the CHRB. The law also
requires that at least 50% of the proceeds be distributed
to charitable groups within the horse racing industry. On
charity racing days, the racing association furnishes the
facilities and personnel necessary for the conduct of
racing. The income from all operations of the race meeting
on charitable racings days, less deductions for actual
expenses, is dedicated to charitable purposes. According
to the CHRB, charity racing day donations in the 2011-12
fiscal year totaled just over $577,000.00.
Prior to the passage and enactment of SB 16xx (Ashburn) of
2009, license fees assessed from the wagers made on horse
racing were deposited to the credit of the F&E Fund which,
in addition to providing general support for the annual
budget of the CHRB, supplemented the income of the State's
network of fairs. At that time, the law guaranteed the
Fair and Exposition (F&E) Fund would receive $40 million
annually from license fees. SB 16xx eliminated the license
fee on wagers as a means of helping the struggling horse
racing industry. In addition, it deleted the $40 million
"guarantee" from law. This amount is, instead, distributed
to the racing associations and horsemen and horsewomen.
The bill also provided that the state funding for the
network of California fairs shall be a continuous
appropriation of $32 million annually from the General
Fund.
The $32 million General Fund support for the network of
California fairs was eliminated in the 2011-2012 Budget due
to the state's growing fiscal problems.
PRIOR/RELATED LEGISLATION
SB 741 (Cannella) 2013-14 Session. Among other things,
would delete provisions requiring satellite wagering
license fees be deposited into a separate account in the
F&E Fund for specified purposes and would instead require
certain revenues paid by racing associations and fairs
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generated by parimutuel wagering and certain revenues from
live races paid by fair racing associations as license fees
be deposited into the F&E Fund for various purposes,
including, among others, capital improvements at
fairgrounds. (Pending in Senate Agriculture Committee;
dual referred to Senate G.O.)
SB 1418 (Berryhill), Chapter 225, Statutes of 2012.
Authorized combined fair horse racing meetings throughout
the year and deleted the requirement that the mixed breed
meetings be conducted by an entity other than Cal-Expo, as
specified, and that the mixed breed meetings encourage the
racing of emerging breeds of horses.
SB 1227 (Negrete McLeod) 2011-12 Session. Would have
deleted an existing requirement that 1% of the total amount
handled in daily conventional and exotic parimutuel pools
be distributed to the F&E Fund, and instead would have
required that those funds be equally distributed as
commissions and to the horsemen and horsewomen who
participated in the racing meet (as purses). (Held in
Assembly Appropriations Committee - suspense file)
SB 16xx (Ashburn), Chapter 12, Statutes of 2009-10 Second
Extraordinary Session . Among other things, eliminated the
$40 million floor on the amount the horse racing industry
is required to pay annually for support of the network of
California fairs, the CHRB, and the Kenneth L. Maddy Equine
Analytical Chemistry Laboratory at UC Davis. Other than
the supplemental 1% assessed against fair meets, it also
eliminated the license fee on horse racing wagers and
provided that beginning on July 1, 2009, and annually
thereafter, $32 million shall be appropriated from the
state's General Fund and paid into the F&E Fund for the
financial support of the State's network of fairs.
SB 1337 (Vincent), Chapter 904, Statutes of 2002. Provided
that, in addition to the 20% of the distribution from
charity day racing that is required to go to charities
associated with the horse racing industry, another 5% of
the distribution shall be provided to a welfare fund
established for the benefit of horsemen and backstretch
personnel, as specified, and another 5% of the distribution
shall be provided to a nonprofit corporation assisting
horsemen and backstretch personnel who are affected
adversely as a result of alcohol or substance abuse. Also,
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required that an additional 20% of the distribution from
charity day racing, up to a maximum of $2 million, be
provided as an endowment for a nonprofit corporation or
trust which assists disabled jockeys.
SB 1825 (Kelley) Chapter 342, Statutes of 2000. Provided
that, notwithstanding any other provision of law, if the
total amount paid to the state by racing associations and
fairs pursuant to the Horse Racing Law is less than $40
million in any calendar year, beginning January 1, 2001,
and thereafter, all associations and fairs that conducted
live racing during the year of shortfall shall remit to the
state, on a pro rata basis according to the amount handled
in-state by each association or fair, the amount necessary
to bring the total amount paid to the state to $40 million.
SB 27 (Maddy), Chapter 335, Statutes of 1998. Among other
things, granted major license fee relief ($40 million
annually) and limited out-of-state full-card simulcasting.
Proposition 3 of 1933. Legalized parimutuel wagering on
horse racing in California. With the passage of Proposition
3, the stated purpose of the new law was for the
"encouragement of agriculture and breeding of horses."
Furthermore, Proposition 3 included a "commitment for the
continuous funding of the fairs of California with an
annual allotment of racing revenues to be used for health,
safety and maintenance projects."
SUPPORT: As of April 5, 2013:
California Authority of Racing Fairs (sponsor)
OPPOSE: None on file as of April 5, 2013.
FISCAL COMMITTEE: Senate Appropriations Committee
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