BILL ANALYSIS Ó
SB 777
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Date of Hearing: February 27, 2014
ASSEMBLY COMMITTEE ON INSURANCE
Henry T. Perea, Chair
SB 777 (Hernandez) - As Amended: February 25, 2014
SENATE VOTE : Not relevant
SUBJECT : Horse racing: workers' compensation fund
SUMMARY : Readopts a horse racing industry workers'
compensation funding program that terminated at the end of 2013
by operation of law, and specifies that the bill is an urgency
measure, to take effect immediately.
EXISTING LAW :
1) Requires every employer in the state to provide workers'
compensation benefits, as specified by statute, either by
obtaining a certificate of self-insurance from the Department of
Industrial Relations, or purchasing qualified workers'
compensation insurance from an insurer licensed in California to
sell this insurance.
2) Required 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.
3) Required 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.
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
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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 California Horse Racing Board with respect to the
expenditure and distribution of funds received by the
organization and obtain an independent audit of funds generated
and distributed.
7) Terminated the deduction for the horse racing workers'
compensation funding program on December 31, 2013.
COMMENTS :
1)Purpose of the bill : This bill reinstates provisions of law
which allowed for a deduction from pari-mutuel wagering on
live horse racing, in order to defray the costs of workers'
compensation insurance for California horse racing industry
employers. 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.
2)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 (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 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
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defraying these costs, 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.
3)Arguments in support : Proponents state that 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 argue this
bill will help restore California's racing industry to a level
where the best horses race and the best trainers and jockeys
compete.
4)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 (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.
FISCAL EFFECT : Undetermined.
REGISTERED SUPPORT / OPPOSITION :
SB 777
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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 received.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086