BILL ANALYSIS
Bill No: SB
766
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
SB 766 Author: Negrete McLeod
As Amended: April 2, 2009
Hearing Date: April 28, 2009
Consultant: Chris Lindstrom
SUBJECT
Horse racing.
DESCRIPTION
SB 766 adds a new section to the Horse Racing Law to
provide that, in the event there are at any time
uncommitted surplus funds in the horse racing Market
Promotion Fund or the horse racing Workers' Compensation
Fund, those unexpended funds may, at the request of the
organization governing those funds and with the approval of
the California Horse Racing Board (CHRB), be reallocated to
any other fund or account created pursuant to the Horse
Racing Law.
EXISTING LAW
Article IV, Section 19(b) of the Constitution of the State
of California provides that the Legislature may provide for
the regulation of horse races and horse race meetings and
wagering on the results.
Existing law authorizes that the California Horse Racing
Board (CHRB) to regulate the various forms of horse racing
authorized in this state.
Existing law authorizes, until January 1, 2011, racing
associations, fairs, and other related organizations to
form a private, statewide marketing organization to market
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Page 2
and promote thoroughbred and fair horse racing, and to
obtain, provide, or defray the cost of workers'
compensation coverage for stable employees and jockeys of
thoroughbred trainers.
Existing law requires a specified percentage of the amount
handled by each satellite wagering facility to be
distributed to that statewide marketing organization for
those purposes of promotion and defraying the cost of
workers' compensation coverage.
Existing law provides that any promotion funds not expended
in the year in which they are collected may be expended in
the following year.
Existing law provides, until January 1, 2014, every
thoroughbred association and fair that conducts a racing
meet shall deduct a percentage of the total amount handled
in exotic pari-mutuel pools of thoroughbred races, which
shall be distributed to an organization, as specified, to
defray costs of workers' compensation insurance in
connection with thoroughbred horses that race in this
state, as specified.
Existing law provides that any funds that are not used to
defray the cost of workers' compensation insurance shall
either be carried forward to the subsequent year or used to
reimburse racing associations for safety-related
expenditures, as specified.
BACKGROUND
Purpose of the bill. According to the author's office,
"there are two funds in horse racing that have surpluses,
the Marketing Promotion Fund and the Workers' Compensation
Fund. SB 766 would allow any surplus in the funds to be
transferred to accounts that are in deficit, such as the
Vanning and Stabling Fund."
Background. The Horse Racing Law establishes the amount
that may be deducted (the takeout) from the parimutuel
wagering pools of horse races in California. The takeout
is the amount deducted from wagers before winnings are paid
out to bettors. Currently, California's takeout rate on
Thoroughbred races is 15.43 percent for win, place, and
show wagers, and 20.18 percent for other types of wagers
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(Exacta, Trifecta, and Pick-6). The takeout may be used
for specific purposes, as defined by law, such as license
fees, enforcement fees, owners purses, racing association
commissions, marketing, workers' compensation, and vanning
and stabling, among others.
For more than a decade, horse racing has been a declining
industry. Some argue that the decline stems from increased
competition from expanded gaming in California to the
inability of the industry to attract new fans. Regardless
of the reasons, the closure and threatened closure of
racetracks are indicators that the sport of kings is in a
precarious position. Further exasperating the problem is
the downturn in the economy which has significantly
impacted the amount wagered (the handle).
As a result, programs that are funded from a percentage of
the handle are realizing deficits. For example, the
vanning and stabling fund - a fund that helps to defray the
cost of having to transport and stable race horses at
auxiliary training facilities, is experiencing a deficit.
To address the deficit in the vanning and stabling fund,
CHRB on November 18, 2008, approved an increase in the
amount of simulcast fees allowed to be deducted from the
off-track handle at California simulcast facilities from
1.06% to 1.25%, the maximum amount allowed by law.
Projections show, however, that the increase may not cover
the ongoing costs of vanning and stabling horses.
Additionally, over the years, legislation has been enacted
to redirect monies from the vanning and stabling fund for
such purposes as, to pay for capital projects, defray the
costs of workers' compensation coverage for stable
employees and jockeys of thoroughbred trainers, the
marketing and promotion of horse racing, and the
backstretch employee's welfare fund to provide various
services and benefits to backstretch employees.
SB 766 is intended to give CHRB the authority to approve
the transfer of monies from two specific funds that have
surpluses to accounts that have a negative fund condition.
Specifically, the bill authorizes the organizations that
administer the Marketing Promotion Fund and the Workers'
Compensation Fund to reallocate, upon the approval of CHRB,
any surplus monies in these two funds to any other account
created by the Horse Racing Law.
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Arguments in support. Proponents argue that the horse
racing industry has been going through a very difficult
time in this economy. Many horse racing funds are running
into deficits. SB 766 will provide the flexibility for
horse racing to help stabilize funds that are running into
deficits.
PRIOR/RELATED LEGISLATION
AB 813 (Portantino), Chapter 19, Statutes of 2008 .
Provides that, with respect to harness meetings, if there
are funds unexpended in the horse racing promotion account,
those funds may be expended for other purposes with the
consent of the horsemen and the racing association to
benefit the horsemen, or the racing association, or both,
pursuant to their agreement.
AB 2103 (Plescia), Chapter, Statutes of 2008 . 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.
SB 1805 (Florez), Chapter 883, Statutes of 2006 . Provides
that any funds not used to defray the costs of workers
compensation insurance as described, may also be used to
reimburse a racing association for actual costs of safety
improvements to racing and training surfaces, health and
safety programs, research or safety equipment.
AB 701 (Horton), Chapter 40, Statutes of 2004 . Provides a
framework for the deduction from parimutuel pools in order
to address increased costs in workers compensation
insurance in the horse racing industry. Requires
thoroughbred racing associations to deduct an additional
one-half percent of the total amount handled in exotic
pari-mutuel pools to be used to defray increasing workers'
compensation costs in the horse racing industry.
Authorizes quarter horse racing organizations to deduct an
additional one-half percent, 6 fairs to deduct an
additional one-half percent, and harness racing
organizations to deduct an additional one percent from
conventional pools to offset workers' compensation costs.
Sunsets the horse racing workers' compensation insurance
program on January 1, 2009.
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AB 2931 (Horton), Chapter 922, Statutes of 2002 .
Authorizes racing associations to use existing industry
funds (stabling and vanning and promotion funds) for use in
developing a program to offset workers' compensation rates
for horse trainers in the state.
SB 28 (Maddy), Chapter 516, Statutes of 1998 . Provides
that when satellite wagering is conducted on thoroughbred
races at associations or fairs in the central or southern
zone, an amount equal to 1.25% of the total amount handled
by all of those satellite wagering facilities must be
deducted from the take-out and distributed to the
organization representing the racing associations and
horsemen and women for the purpose of providing
reimbursement for off-site stabling and vanning at
board-approved auxiliary training facilities of licensed
racing associations. This is to compensate for the
additional stalls beyond the number of usable stalls the
association is required to provide under current law.
SB 1515 (Maddy), Chapter 53, Statutes of 1996 . Permits any
vanning and stabling reimbursement funds that are not
expended during an association or fair horse racing meeting
in which they are collected to be allocated to the
organization representing racing fairs to offset its costs
of maintaining the stalls contracted for by fairs.
AB 371 (Tucker), Chapter 826, Statutes of 1995 . Among
other things, provides that harness racing associations and
the horsemen participating in the horse racing meeting to
use one-half of one percent taken from the handle for
promotional purposes to support their racing program.
SB 1196 (Thompson), Chapter 80, Statutes of 1995 . Allows
fairs in the northern zone, subject to the availability of
funds, to provide for the vanning of racehorses from any
offsite stabling facility.
SB 14 (Maddy), Chapter 1273, Statutes of 1987 . Expanded
satellite wagering statewide. Satellite wagering was the
first major expansion of racing in this state since 1933.
Since then, full-card wagering on out-of-state races has
been authorized. Satellite wagering, in general, has been
successful and provided the fairs with additional revenue.
License fees from satellite wagering are deposited into the
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Satellite Wagering Account for the benefit of the fairs.
SB 1499 (Maddy), Chapter 1698, Statutes of 1984 .
Implemented satellite wagering in the central and southern
part of the state, and made conforming and technical
changes in the northern part of the state.
SUPPORT: As of April 24, 2009:
California Teamsters Public Affairs Council
Del Mar Thoroughbred Club
Jockey's Guild
Los Angeles County Fair Association (Fairplex)
Oak Tree Racing Association
OPPOSE: None on file as of April 24, 2009.
FISCAL COMMITTEE: Senate Appropriations Committee
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