BILL ANALYSIS
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THIRD READING
Bill No: SB 766
Author: Negrete McLeod (D)
Amended: 4/2/09
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE : 11-0, 4/28/09
AYES: Wright, Harman, Benoit, Calderon, Denham, Florez,
Negrete McLeod, Oropeza, Wiggins, Wyland, Yee
NO VOTE RECORDED: Padilla, Vacancy
SENATE APPROPRIATIONS COMMITTEE : 13-0, 5/11/09
AYES: Kehoe, Cox, Corbett, Denham, DeSaulnier, Hancock,
Leno, Oropeza, Runner, Walters, Wolk, Wyland, Yee
SUBJECT : Horse racing
SOURCE : Author
DIGEST : This bill 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.
ANALYSIS : Under 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
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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
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
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. This bill allows
any surplus in the funds to be transferred to accounts that
are in deficit, such as the Vanning and Stabling Fund."
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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
(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 percent to 1.25 percent, 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.
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This bill intends 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
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
SUPPORT : (Verified 5/12/09)
California Teamsters Public Affairs Council
Del Mar Thoroughbred Club
Jockey's Guild
Los Angeles County Fair Association (Fairplex)
Oak Tree Racing Association
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. This bill provides the flexibility for
horse racing to help stabilize funds that are running into
deficits.
TSM:do 5/12/09 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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