BILL ANALYSIS
SB 766
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Date of Hearing: August 19, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 766 (Negrete McLeod) - As Amended: April 2, 2009
Policy Committee: Governmental
Organization Vote: 17 - 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill allows uncommitted surplus funds in the horseracing
Marketing Promotion Fund and the horseracing Workers
Compensation Fund, to be reallocated to any other fund or
account created pursuant to horseracing law if the reallocation
is requested by the racing organization governing those fund and
if the California Horse Racing Board (CHRB) approves the
request.
FISCAL EFFECT
CHRB does not have the statutory authority to collect financial
data and maintain records on the balances of various horseracing
funds. Primarily, this is because all revenue derived from
horseracing goes directly from the tracks and into the funds,
without allowing CHRB to approve or oversee the use of the
funds. Therefore, it is unknown exactly what the surpluses and
deficits are in the various funds and how the funds are
currently being expended.
In 2006, an audit showed that the workers compensation fund had
a balance of $3.2 million. In 2008,unaudited data shows that $2
million remained unused in the Marketing Promotion Fund. If
those unused balances remain, this bill would allow those funds,
in excess of $5 million, to be transferred for another use.
COMMENTS
1)Purpose . 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
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any surplus in the funds to be transferred to accounts that
are in deficit, such as the Vanning and Stabling Fund.
2)Background . The horse racing takeout amount is a percentage
deducted from all of the wagers before the winnings are paid
out to bettors. These takeout rates vary among states.
California's current rate is 15.43% for conventional wagers
(win, place, and show wagers) and 20.68% for exotic wagers
(Exacta, Trifecta, and Pick-6), resulting in a total takeout
of 19.9%. The money from the takeouts is used for such things
as owner purses, racing association commissions, and breeding
incentive programs. In addition, germane to this bill, various
funds receive money from the takeout to meet specific needs of
the industry. For example, funds have been set up for offsite
stabling and transporting horses on race day, to offset the
costs of workers compensation, to establish pension plans and
provide a welfare fund for backstretch personnel, and to fund
the California Marketing Committee, which promotes
horseracing.
For more than a decade, horseracing 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 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, which helps defray
the cost of transporting and stabling 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
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workers' compensation coverage for stable employees and
jockeys of thoroughbred trainers, the marketing and promotion
of horseracing, and the backstretch employee's welfare fund to
provide various services and benefits to backstretch
employees.
3)Committee Concern . Over the last 20 years, a concerted effort
has been made to deregulate the horseracing industry in
California. As a result, CHRB lacks the authority to provide
appropriate fiscal oversight over the industry. As a result
the Legislature is forced to develop fiscal policies in a
vacuum, without adequate information about the way in which
the industry spends its resources.
Given the lack of fiscal information available for the
administration and the Legislature, and the mission of the
CHRB to provide oversight over the horseracing industry in
California, the committee may wish to consider whether
providing CHRB with the authority to oversee the expenditure
of revenue in the industry might be prudent.
4)Related Legislation . In this session, SB 517 (Florez) would
allow a thoroughbred association or fair, subject to the
approval of the California Horse Racing Board (CHRB), to alter
the amount deducted from horse racing wagering. In addition,
it allows the distribution of funds from the amount deducted
to be modified or redirected, subject to the approval of CHRB.
Sb 517 is pending before this committee.
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.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081