BILL ANALYSIS Ó
SB 398
Page 1
Date of Hearing: June 12, 2013
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Isadore Hall, Chair
SB 398 (Galgiani) - As Amended: April 1, 2013
SENATE VOTE : 36-0
SUBJECT : Horse racing: charity days: distribution of proceeds.
SUMMARY : Provides that revenue raised by racing associations,
from their mandated charity racing days, may be distributed to a
non-profit corporation or trust that has as its sole purpose the
support of recognized fairs within the network of California
fairs. Specifically, this bill :
1) Provides that racing associations may make a separate
distribution from the revenue raised pursuant to the charity
racing days requirement to a nonprofit corporation or trust that
has as its sole purpose the support of recognized fairs or the
network of California fairs.
EXISTING LAW :
1) 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.
2) Grants the California Horse Racing Board (CHRB) the
authority to regulate the various forms of horse racing
authorized in this state.
3) 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.
4) Provides that at least 20% of the distribution 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
SB 398
Page 2
to a nonprofit corporation assisting horsemen, horsewomen and
backstretch personnel who are affected adversely as a result of
alcohol or substance abuse.
5) 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.
FISCAL EFFECT : Unknown.
COMMENTS :
Purpose of the bill : 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.
Background : 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 approved by the CHRB. The law also
requires that at least 50 percent of the proceeds be distributed
to charitable groups within the horse-racing industry. While
recognizing the worthwhile nature of all the charitable
organizations favored by the various distributing foundations,
the CHRB encourages the foundations to exceed this minimum
percentage.
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 charity
racing days, less deductions for actual expenses, is dedicated
to charitable purposes. The following racing associations
SB 398
Page 3
distributed funds last year: Los Angeles Turf Club, Hollywood
Park Racing Association, Del Mar Thoroughbred Club, and Los
Alamitos Quarter Horse Racing Association.
According to the CHRB, charity racing day donations in the
2011-12 Fiscal Year totaled just over $577,000.00.
Prior 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 generated
by pari-mutuel 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 the Assembly)
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 pari-mutuel 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. Increased,
from 20 percent to 40 percent, the amount of designated charity
day racing proceeds that must be distributed to charities
associated with the horse racing industry. The
additional 20 percent must be distributed through a specified
nonprofit corporation or trust as specified, to qualified
disabled jockeys, as defined.
SB 398
Page 4
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 pari-mutuel 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."
REGISTERED SUPPORT / OPPOSITION :
Support
California Authority of Racing Fairs (sponsor)
Opposition
None on file
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531