BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
662 (Yee)
Hearing Date: 5/11/2009 Amended: 4/13/2009
Consultant: Maureen Ortiz Policy Vote: GO 11-0
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BILL SUMMARY: SB 662 requires any racing association or fair
that conducts a horse racing meeting to pay a license fee to the
state to fund real time transactional monitoring of all
parimutuel wagering.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
"Real-time" monitoring system --potentially $1,000 - $2,000
Special*
offset
by license fee revenue
*Fairs and Exposition Fund
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STAFF COMMENTS: The California Horse Racing Board (CHRB) is in
the process of obtaining estimates from a variety of vendors of
real time monitoring systems. Preliminary estimates are
currently in the $1 million to $2 million range. CHRB
anticipates contracting out for the system and all
administrative expenses will be included in the total cost. As
provided in SB 662, this system will be funded from an increase
in industry fees.
SB 662 provides that the base-line funding for the board, real
time transactional monitoring system, and equine drug testing
program shall be the amount approved in the 2008-09 Budget Act.
However, staff notes that there was no funding for real time
monitoring in the 2008-09 Budget Act, therefore, a baseline is
not available. Staff recommends an amendment to delete the
language "real time transactional monitoring of all parimutuel
wagering on California horse races," from page 3, lines 28 and
29; and, to add a comma after the word "board" on line 36.
In past years, and until July 2009, any association or fair that
conducts a racing meeting pays a license fee to the state which
is allocated to fund the California Horse Racing Board, support
the network of California fairs, and to provide funding for the
Kenneth L. Maddy Equine Research Laboratory at UC Davis.
However, SB 16xx (Chapter 12, Statutes of 2009-10 Second
Extraordinary Session), among other things, effective July 1,
2009 provides for a $32 million annual General Fund
appropriation to support the fair network. Consequently, horse
racing associations and fairs will pay a license fee to only
support the administration of the CHRB (approximately $11.5
million) and the Maddy Equine Lab (approximately $1.3 million).
Any reduction in license fees that occur as a result of SB 16xx
will be distributed to the association that conducts the meet
and the horsemen participating in the meet as follows: 3% to the
thoroughbred association, 2.5% to the quarter horse association,
and 6% to the harness association - all of which will be used to
fund items such as deferred maintenance projects, ADA compliance
projects, etc. Of the remaining funds available, 50% will be
distributed to
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SB 662 (Yee)
the association as commissions, and 50% to the horsemen as
purses. SB 662 will require fees to support the real time
monitoring program be paid along with the funding for the CHRB
and the Maddy Lab before the redistribution of the remaining
funds.
An audit that was issued after an incident in the 2008 Kentucky
Derby discovered a deviation on the "quick pick" wager machines.
Those machines have since been withdrawn and the tote company
was ordered to pay restitution. More recently, another problem
was discovered which affected wagering pools in five states.
Both of these incidents would appear to warrant that
independent, real time oversight of all parimutuel wagering is
necessary in California.
The Consolidated Horse Racing Information Management System
(CHRIMS) is a database system developed in 1989 that keeps track
of wagers and the flow of money in horse racings that is
currently in use. It provides end-users access to information
by selected data ranges and a variety of data-sorting options.
Using CHRIMS, end-users can see what has actually taken place on
the prior day, in terms of handle, takeout, total amount payable
to the public, distributions, etc. This information can also be
sorted by location groups or by various date ranges, breeds and
a variety of other options. However, CHRIMS does not provide
real time information.
Since the implementation of advance deposit wagering (ADW) which
allows a bettor to deposit funds into an account in order to
wager online and over the telephone, it has become increasingly
necessary for the Horse Racing Board to provide stronger
oversight. The CHRB, which has responsibility for protecting
the betting public, currently depends on CHRIMS for its data.
CHRB does not have an independent monitoring system that in
"real time" can discover glitches in the tote system or detect
money laundering schemes. SB 662 will authorize CHRB to utilize
an independent real time monitoring system.
There are some concerns in the industry that perhaps the real
time system should be done on a nationwide, or even
international basis, and that with some funds experiencing
deficits, this may not be the appropriate time for a new
program.