BILL ANALYSIS
Bill No: AB
2103
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Dean Florez, Chair
2007-2008 Regular Session
Staff Analysis
AB 2103 Author: Plescia
As Amended: April 23, 2008
Hearing Date: June 24, 2008
Consultant: Chris Lindstrom
SUBJECT
Horse racing: thoroughbred racing: workers' compensation.
DESCRIPTION
AB 2103 extends the sunset date, from January 1, 2009 to
January 1, 2014, on a deduction from parimutuel wagering on
thoroughbred horse racing in order to defray the costs of
pay or workers' compensation insurance. Specifically, this
bill:
1)Extends until January 1, 2015, a requirement of
thoroughbred associations and fairs to deduct 0.5% of the
amount of exotic parimutuel wagering on thoroughbred
races to defray the costs of workers' compensation
insurance.
2)Extends until January 1, 2015, the requirement of 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.
EXISTING LAW
Existing law authorizes that the California Horse Racing
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Board (CHRB) to regulate the various forms of horse racing
authorized in this state.
Existing law requires thoroughbred associations and fairs
to deduct 0.5% of the total amount handled in exotic
parimutuel pools of thoroughbred races in order to defray
the costs of workers' compensation insurance.
Existing law 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.
Existing law 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.
Existing law requires that the deductions be managed by an
organization formed by the thoroughbred racing association
and the owners of thoroughbred horses.
Existing law 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.
Existing law requires the organization, between September
25, 2005 and March 25, 2006, to commission an independent
evaluation of the effectiveness of horse racing workers'
compensation insurance program 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.
Existing law sunsets the horse racing workers' compensation
insurance program on January 1, 2009.
BACKGROUND
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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.
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% 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 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.
Impact of AB 701 (J. Horton, Chapter 40, Statutes of 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:
1)Workers' compensation costs have been reduced as much as
70%;
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2)The exodus of trainers and owners stopped and new
trainers and owners are bringing horses to California in
large numbers;
3)The CHSA established industry safety training programs,
treatment oversight programs, return to work programs,
and safety equipment research programs which reduced the
number of accidents and cost of resulting claims; and
4)Major reductions of premiums and claim costs have
occurred. In a six month period (12/02 -7/03) prior to
the law, there were 123 insured participants with total
premiums of $2,929,585 and claims paid of $2,617,716. In
contrast, in the 12-month policy period between July 2006
to June 2007, there were 399 insured participants with
premiums of $8,757,818 and claims paid of $2,830,121.
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/RELATED LEGISLATION
AB 701 (J. Horton), Chapter 40, Statutes of 2004 . Provides
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.
SUPPORT : (As of June 20, 2008)
California Authority of Racing Fairs
California Thoroughbred Trainers
Thoroughbred Owners of California
OPPOSE : (As of June 20, 2008)
None on file.
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FISCAL COMMITTEE: Senate Appropriations Committee
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