BILL ANALYSIS
AB 2103
Page 1
Date of Hearing: April 9, 2008
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Alberto Torrico, Chairman
AB 2103 (Plescia) - As Introduced: February 20, 2008
SUBJECT : Horse racing: thoroughbred racing: workers'
compensation.
SUMMARY : Extends the sunset date from January 1, 2009 to
January 1, 2014 within current law, to provide relief to the
thoroughbred horseracing industry through a captive workers
compensation insurance program. Specifically, this bill :
1)Provides that a Thoroughbred association or fair that conducts
a live race meet shall deduct an additional 0.5% of the total
amount handled in exotic pari-mutuel pools of Thoroughbred
races. The deduction shall be from the exotic pari-mutuel
pools at the racing inclosure, at satellite facilities, at
betting systems that accept wagers from California residents,
and at betting systems that accept wagers on California races
from residents of other states, on Thoroughbred races as
specified.
2)Provides that the additional 0.5% shall be distributed to an
organization formed pursuant to this bill's provisions to
mitigate workers' compensation costs, as specified. Provide
that the funds shall be deposited in a separate account to
defray the cost of workers' compensation insurance. Any
unexpended funds at the end of a calendar year are to be
carried forward to the next year or distributed to the
organizations that fund offsite stabling, as specified.
3)Provides that the organization shall have a total of 34 voting
interests, of which 16 shall be allocated to the organization
representing Thoroughbred owners, one shall be allocated to
the official registering agency for Thoroughbreds
in California, and one shall be allocated to the organization
representing Thoroughbred trainers. The remaining 16 votes
shall be allocated among the licensed racing associations and
racing fairs in the state. Any decision of this organization
with respect to the allocation of funds shall require the
affirmative vote of 25 of these voting interests. In the
event that the required number of affirmative votes cannot be
obtained, the matter shall be submitted to the California
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Horse Racing Board (CHRB) and the decision of CHRB shall be
final.
4)States that the organization shall account annually to CHRB
with respect to the expenditure and distribution of funds
received by the organization and shall obtain an independent
audit of funds generated and distributed.
5)Provides that no earlier than 18 months and no later than two
years following the effective date of this bill, the
organization shall commission an independent evaluation of the
effectiveness of this bill along with recommendations for any
improvements or modifications to the program. A copy of that
evaluation along with a report detailing the organization's
response to the evaluation shall be filed with CHRB within 30
days of the receipt of the final evaluation.
6)Provides a sunset date of January 1, 2014.
EXISTING LAW :
1)Provides that CHRB regulate the various forms of horse racing
authorized in this state.
2)Provides that a Thoroughbred association or fair that conducts
a live race meet shall deduct an additional 0.5% of the total
amount handled in exotic pari-mutuel pools of Thoroughbred
races. The deduction shall be from the exotic pari-mutuel
pools at the racing inclosure, at satellite facilities, at
betting systems that accept wagers from California residents,
and at betting systems that accept wagers on California races
from residents of other states, on Thoroughbred races as
specified.
3)Provides that the additional 0.5% shall be distributed to an
organization formed pursuant to this bill's provisions to
mitigate workers' compensation costs, as specified. Provide
that the funds shall be deposited in a separate account to
defray the cost of workers' compensation insurance. Any
unexpended funds at the end of a calendar year are to be
carried forward to the next year or distributed to the
organizations that fund offsite stabling, as specified.
4)Provides that the organization shall have a total of 34 voting
interests, of which 16 shall be allocated to the organization
AB 2103
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representing Thoroughbred owners, one shall be allocated to
the official registering agency for Thoroughbreds
in California, and one shall be allocated to the organization
representing Thoroughbred trainers. The remaining 16 votes
shall be allocated among the licensed racing associations and
racing fairs in the state. Any decision of this organization
with respect to the allocation of funds shall require the
affirmative vote of 25 of these voting interests. In the
event that the required number of affirmative votes cannot be
obtained, the matter shall be submitted to CHRB and the
decision of CHRB shall be final.
5)States that the organization shall account annually to CHRB
with respect to the expenditure and distribution of funds
received by the organization and shall obtain an independent
audit of funds generated and distributed.
6)Provides that no earlier than 18 months and no later than two
years following the effective date of this bill, the
organization shall commission an independent evaluation of the
effectiveness of this bill along with recommendations for any
improvements or modifications to the program. A copy of that
evaluation along with a report detailing the organization's
response to the evaluation shall be filed with CHRB within 30
days of the receipt of the final evaluation.
7)Authorizes a racing fair to deduct an additional 0.5 % of the
total amount handled in exotic pari-mutuel pools of races for
any breed, other than Thoroughbred races. These funds will be
used to defray workers' compensation insurance costs for
trainers and owners who are racing breeds other than
Thoroughbreds at the applicable fair. The fairs will form an
organization to administer the funds.
8)Provides a sunset date of January 1, 2009.
FISCAL EFFECT : Unknown.
COMMENTS :
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
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race. In 2004, AB 701 (J. Horton), Chapter 40, Statutes of 2004
was instituted 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 funds generated from AB 701 have been used to defray the
costs of workers' compensation insurance incurred in connection
with horses that race in this state 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.
There is a dramatic need for the horse racing industry to
address the workers' compensation issue. Costs of workers'
compensation rates in California have reached unprecedented
heights, in some cases; they have doubled and even tripled in
certain years.
Purpose of the bill . This bill extends the sunset date (January
1, 2009 to January 1, 2014) for the law establishing the
horseracing industry's own captive workers compensation
insurance program, which has been overwhelmingly successful at
containing skyrocketing rates since its inception in 2004.
After the passage of AB 701, the industry established its own
captive insurance program, referred to as the California
Horsemen's Safety Alliance (CHSA). This bill passed with the
industry in agreement that a trial period was in order and
therefore a sunset provision was included in the bill. In its
brief time, the CHSA has produced the following results:
Worker's compensation expenses have been reduced by as
much as 70 percent;
The exodus of trainers and owners has stopped and new
trainers and owners are bringing horses to California in
large numbers;
CHSA has established industry safety training programs,
treatment oversight programs, return to work programs, and
safety equipment research programs, which have drastically
reduced the number of accidents and the cost of resulting
claims.
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Premiums have been seen dramatic reductions and claims
costs have plummeted: in the first six-month policy
period, there were 123 insured participants with total
premiums of $2,929,585 and claims paid of $2,617,716. In
contrast, for the policy period July 2006 to June 2007,
there were 399 insured participants with premiums of
$8,757,818 but claims paid were only $2,830,121.
According to the author, the sunset must be extended to maintain
the CHSA's benefits and solidify its status as a non-profit
entity.
The industry further adds that in no way should this bill be
viewed as a piecemeal approach to the overall workers'
compensation problem the state is facing. Even with the recent
comprehensive workers' compensation package, the California
horse racing industry is still faced with rates, which are
excessive compared to other industries, and other states, which
conduct live horse racing.
Prior legislation . 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.
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.
Double referral . This bill has been double referred to Assembly
Committee on Insurance.
REGISTERED SUPPORT / OPPOSITION :
Support
California Authority of Racing Fairs
California Thoroughbred Trainers
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Thoroughbred Owners of California
Opposition
None on file.
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531