BILL ANALYSIS
SB 766
Page 1
SENATE THIRD READING
SB 766 (Negrete McLeod)
As Amended August 31, 2009
Majority vote
SENATE VOTE :36-0
GOVENRMENTAL ORGANIZATION 17-0 APPROPRIATIONS 17-0
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|Ayes:|Coto, Anderson, Cook, De |Ayes:|De Leon, Conway, Ammiano, |
| |Leon, Galgiani, Hall, | | |
| |Hill, Jeffries, Lieu, | |Charles Calderon, Coto, |
| |Mendoza, Nestande, | |Davis, Fuentes, Hall, |
| |V. Manuel Perez, | |Harkey, Miller, Nielsen, |
| |Portantino, Silva, | |John A. Perez, Skinner, |
| |Torres, Torrico, Tran | |Solorio, Audra |
| | | |Strickland, Torlakson, |
| | | |Hill |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Allows uncommitted surplus funds in the horse racing
Marketing 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. Specifically, this bill :
1)Provides that, in the event there are at any time uncommitted
surplus funds in accounts created pursuant to existing law
(marketing fund and 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.
2)Provides that a request to the CHRB to reallocate funds shall be
accompanied by a report detailing all receipts and expenditures
over the two prior fiscal years of the funds affected by the
request.
3)Provides that the initial approval of a request to reallocate
funds, as described, shall be limited to a one-year period. An
approval may be extended for the subsequent year contingent upon
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receipt of a financial report and a determination by the CHRB
that the extension is in the economic interest of thoroughbred
racing.
4)States that the organization whose written notice for a
percentage deduction which was approved by the CHRB shall
provide subsequent quarterly reports of receipts and
expenditures of the affected funds if requested by the CHRB.
5)Provides that a fiscal report must be provided to the CHRB and
the respective fiscal committees and Committees on Governmental
Organization of the Senate and the Assembly, which accounts for
all receipts and expenditures in any of the affected funds, as
specified.
EXISTING LAW :
1)Provides, under existing law, Article IV, Section 19(b) of the
Constitution of the State of California, that the Legislature
may provide for the regulation of horse races and horse race
meetings and wagering on the results.
2)Authorizes the CHRB to regulate the various forms of horse
racing authorized in this state.
3)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.
4)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.
5)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
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for safety-related expenditures, as specified.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, a 2006 audit showed 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 :
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 pari-mutuel 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% for other types of
wagers (i.e., 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
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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.
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 legislation : AB 813 (Portantino), Chapter 19, Statutes of
2008, provided 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, extended the sunset
date, from January 1, 2009, to January 1, 2014, on a deduction
from pari-mutuel 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, provided that any
funds not used to defray the costs of workers compensation
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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, provided a
framework for the deduction from pari-mutuel pools in order to
address increased costs in workers compensation insurance in the
horse racing industry. Required 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.
AB 2931 (Horton), Chapter 922, Statutes of 2002, authorized 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.
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531
FN: 0002652