BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 777| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- UNFINISHED BUSINESS Bill No: SB 777 Author: Hernandez (D), et al. Amended: 2/25/14 Vote: 27 - Urgency PRIOR VOTES NOT RELEVANT ASSEMBLY FLOOR : 73-0, 3/13/14 - See last page for vote SUBJECT : Horse racing: workers' compensation SOURCE : California Authority of Racing Fairs California Thoroughbred Breeders Association California Thoroughbred Trainers Del Mar Thoroughbred Club Los Angeles Turf Club, Inc. Oak Tree Racing Association Santa Anita Park Thoroughbred Owners of California DIGEST : This bill 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. CONTINUED SB 777 Page 2 Assembly Amendments delete the Senate version of the bill relating to fireworks and insert the current language. The bill's author has also changed from Senator Calderon to Senator Hernandez. ANALYSIS : 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% 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% 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 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 CONTINUED SB 777 Page 3 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. This bill 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. 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. 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% of the pari-mutuel handle on exotic wagers for Thoroughbred associations and live racing fairs. The California Thoroughbred Business League, 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. CONTINUED SB 777 Page 4 FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes According to the Assembly Appropriations Committee, insignificant General Fund costs to the CHRB in connection with monitoring the programs. Funds for the programs will come from the pari-mutuel handle. SUPPORT : (Verified 3/14/14) California Authority of Racing Fairs (co-source) California Thoroughbred Breeders Association (co-source) California Thoroughbred Trainers (co-source) Del Mar Thoroughbred Club (co-source) Los Angeles Turf Club, Inc. (co-source) Oak Tree Racing Association (co-source) Santa Anita Park (co-source) Thoroughbred Owners of California (co-source) Jockeys' Guild Los Angeles County Fair, Fairplex ARGUMENTS IN SUPPORT : According to the author, "SB 777 aims to protect California's horse racing tradition by requiring thoroughbred associations and fairs to deduct 0.5% of the total amount handled in exotic pari-mutuel pools of thoroughbred, quarter horse, and harness races as well as pari-mutuel pools of races of any breed to defray workers' compensation costs. Specifically, SB 777 would reinstate sunsetted B&P codes 19605.76, 19605.77 and 19605.78, and prevent 19605.75 from full repeal on January 1, 2015." 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. ASSEMBLY FLOOR : 73-0, 3/13/14 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, CONTINUED SB 777 Page 5 Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley, Dababneh, Dahle, Daly, Dickinson, Donnelly, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Mansoor, Medina, Melendez, Morrell, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea, Quirk, Quirk-Silva, Rendon, Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Weber, Wieckowski, Wilk, Williams, Yamada, John A. Pérez NO VOTE RECORDED: Bloom, Eggman, Gorell, Maienschein, V. Manuel Pérez, Ridley-Thomas, Waldron MW:e 3/14/14 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED