BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
766 (Negrete McLeod)
Hearing Date: 5/11/2009 Amended: 4/2/2009
Consultant: Maureen Ortiz Policy Vote: GO 11-0
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BILL SUMMARY: SB 766 allows uncommitted surplus funds in the
horse racing Market Promotion Fund or the horse racing Workers'
Compensation Fund, to be reallocated to any other fund or
account created pursuant to the Horse Racing Law.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Redirection of funds ------potentially $1,000 -
$2,000--------- Private
Admin expenses ----------minor,
absorbable----------- General
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STAFF COMMENTS:
There are no new state costs associated with SB 766 since it
will allow existing horse racing industry uncommitted surplus
funds that are currently in the Marketing Promotion Fund and the
Workers' Compensation Fund to be transferred to accounts that
are in deficit such as the Vanning and Stabling Fund, with
approval of the California Horse Racing Board.
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 and is used for specific
purchases such as license fees, enforcement fees, owners purses,
racing association commissions, marketing, workers'
compensation, and vanning and stabling. The takeout is set in
statute and is a percent from each dollar wagered. The takeout
on conventional wagering (win, place, and show pools) is 15.75%
for thoroughbred race meets, 16.06% for quarter-horse meets,
17.45% for harness meets, and 16.50% for fair meets. The
takeout on exotic wagering pools (all pools that are not win,
place or show) is 21.17% for thoroughbred meets, 21.45% for
quarter horse meets, 22.09% for fair meets, and 23.79% for
harness meets. Due to a decline in the horse racing industry
over the last decade, some of the programs that are funded from
a percentage of the handle are realizing deficits. The Vanning
and Stabling Fund helps to defray the cost of having to
transport and stable race horses at auxiliary training
facilities and has been experiencing a deficit since 2007. To
address the deficit, the CHRB in November 2008 increased the
amount of simulcast fees allowed to be deducted from the
off-track handle at California simulcast facilities from 1.15%
to 1.25%, the maximum allowed by law. Projections show,
however, that this increase may not cover the ongoing costs of
vanning and stabling horses. The stabling and vanning fund has
incurred continuous operating losses driven by a marked decline
in satellite-based handle and simultaneous
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SB 766 (Negrete McLeod)
increases in offsite stabling costs such as labor, materials,
fuels, utilities, as well as higher fuel costs associated with
vanning expenses.
The organization that administers the northern zone stabling and
vanning fund is the Northern California Off-Track Wagering, Inc.
(NCOTWINC). That fund is projected to have a deficit of
approximately $500,000. The organization that administers the
central or southern zones stabling and vanning fund is the
Southern California Off-Track Wagering, Inc. (SCOTWINC) and will
have a projected deficit of over $700,000 by the end of this
year.
In 2002, the California Horsemen's Safety Alliance (CHSA) was
created to assist with the workers' compensation crisis that was
facing the thoroughbred industry. Skyrocketing rates were
causing trainers to leave the state and owners to leave the
industry. CHSA organized an effort to create a program that
would lower rates, reduce injuries, and monitor treatment for
those who were injured. The program has been tremendously
successful. In 3 years, California trainers have gone from
paying the highest workers' compensation rates in the country to
paying the lowest rates in the country. According to CHSA, it
has established loss control programs and injury reduction
programs that will create additional savings in the future.
Consequently, it is estimated that the workers' compensation
fund will have a surplus of approximately $2 million. SB 766
will enable a portion of that surplus to be reallocated to the
stabling and vanning fund upon the approval of CHRB.
SB 766 authorizes the organization governing those funds, and
with the approval of the California Horse Racing Board (CHRB),
to reallocate the money to any other fund or account dedicated
for the purpose of horse racing activities.