BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 777
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          Date of Hearing:   February 24, 2014

                   ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
                                 Isadore Hall, Chair
                  SB 777 (Hernandez) - As Amended:  February 4, 2014

           SENATE VOTE  :   Vote not relevant.
           
          SUBJECT  :   Horse racing: workers' compensation.

           SUMMARY  :   Reestablishes provisions in Horse Racing Law which  
          sunsetted on January 1, 2014.  The provisions required a  
          Thoroughbred racing association, racing fair, quarter horse  
          racing association or harness racing association that conducts a  
          racing meeting to deduct a specified percentage of the total  
          amount handled in exotic pari-mutuel pools on live races, to be  
          distributed to a specified organization for the purpose of  
          defraying costs of workers' compensation insurance for trainers  
          and owners in connection with live horse racing, as defined.

           EXISTING LAW  :

          1)  Authorizes that the California Horse Racing Board (CHRB) to  
          regulate the various forms of horse racing authorized in this  
          state.

          2)  Requires a Thoroughbred association, quarter horse  
          association, and racing fairs, until January 1, 2014, to deduct  
          0.5 percent of the total amount handled in exotic pari-mutuel  
          pools of thoroughbred races in order to defray the costs of  
          workers' compensation insurance.  This additional deduction  
          shall only be permitted with the approval of the organization  
          representing horsemen and horsewomen at the applicable racing  
          association meeting.

          3) Requires a harness racing association until January 1, 2014,  
          to deduct an additional 1 percent of the total amount handled in  
          conventional pari-mutuel pools of harness races, as defined.

          4)  Provides that these deductions 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, as  
          defined.









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          5)  Requires that funds not expended on workers' compensation  
          costs to 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.

          6)  Requires that the deductions be managed by an organization  
          formed by the Thoroughbred racing association and the owners of  
          thoroughbred horses.  Requires the organization to account  
          annually to CHRB with respect to the expenditure and  
          distribution of funds received by the organization and obtain an  
          independent audit of funds generated and distributed.

          7)  Sunsets the deduction for the horse racing workers'  
          compensation insurance program on December 31, 2013.

           FISCAL EFFECT  :   Unknown.

           COMMENTS  :   

           Purpose of the bill  :  According to the author, this bill  
          reinstates Business and Professions Code Sections 19605.75,  
          19605.76 and 19605.77, which allowed for a deduction from  
          pari-mutuel wagering on live horse racing, in order to defray  
          the costs of workers' compensation insurance for horsemen and  
          horsewomen in California.  The specified code sections  
          inadvertently sunsetted on December 31, 2013.  Without these  
          funds, racing associations and fairs cannot be reimbursed for  
          costs such as workers' compensation insurance, health and safety  
          programs, research equipment or capital improvements that are  
          designed to prevent workplace accidents and increase the safety  
          of jockeys, exercise riders, backstretch employees and other  
          racetrack personnel.    

           Background  :  Over the years, the California 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.








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          The California Thoroughbred Business League (CTBL), a group  
          comprised of racing associations, horsemen's organizations and  
          fairs, is responsible for overseeing the funds that are utilized  
          for providing workers' compensation insurance relief to trainers  
          and owners.  In 2013, approximately $8.1 million was deducted  
          from pari-mutuel wagering on horse racing for defraying costs.   
          Industry rates have declined by over 70%, which has helped to  
          prevent the exodus of trainers and horses from California.   
          Generated funds have been used to defray the costs of workers'  
          compensation insurance 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.   

           Arguments in support  :    Proponents state, like other  
          businesses, the horse racing industry in California has suffered  
          from the tremendous increases in workers' compensation costs.    
          As a result, this bill is necessary because it will further help  
          defray the costs borne by trainers and owners in obtaining  
          workers' compensation coverage.  Moreover, it will prevent  
          Thoroughbred racehorses from leaving this state.  Supporters  
          feel this bill will help restore California's racing industry to  
          a level where the best horses race and the best trainers and  
          jockeys compete.

           Prior Legislation  :  AB 2103 (Plescia), Chapter 443, Statutes of  
          2008.  Extended 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.

          AB1289 (Price), Chapter 430, Statutes of 2008.  Extended the  
          sunset date, from January 1, 2009, to January 1, 2014, on a  
          program to allow a harness racing association to deduct an  
          additional one percent of the total amount handled in exotic  
          pari-mutuel pools to defray the costs of paying for workers'  
          compensation insurance.

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








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           Double-referral  : This measure is double-referred to the Assembly  
          Committee on Insurance.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          California Thoroughbred Breeders Association
          California Thoroughbred Trainers
          Del Mar Thoroughbred Club
          Jockeys' Guild
          Los Angeles County Fair, Fairplex
          Oak Tree Racing Association
          Santa Anita Park
          Thoroughbred Owners of California
           
            Opposition 
           
          None on file

           Analysis Prepared by  :    Eric Johnson / G. O. / (916) 319-2531