BILL ANALYSIS �
Bill No: SB
1227
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Staff Analysis
SB 1227 Author: Negrete McLeod
As Introduced: February 23, 2012
Hearing Date: March 27, 2012
Consultant: Art Terzakis
SUBJECT
Horse Racing: parimutuel pool funds
DESCRIPTION
SB 1227 modifies a provision of Horse Racing Law which
currently provides for a 1% deduction from wagers at fair
racing meets for deposit into the Fair and Exposition Fund
(F&E Fund) for specified purposes and instead diverts the
distribution of the 1% license fee equally between the fair
that conducted the racing meet (as commissions) and to the
horsemen and horsewomen who participated in the racing meet
(as purses).
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 grants the California Horse Racing Board
(CHRB) the authority to regulate the various forms of horse
racing authorized in this state. �Business and Professions
Code 19420, et al]
Existing law requires every association that conducts a
racing meeting to deduct 15% of the total amount handled in
conventional parimutuel pools and 16.75% of the total
amount handled in exotic parimutuel pools and to distribute
the moneys to various interests within racing (e.g.,
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breeders' program, backstretch welfare, vanning and
stabling). After payments to fund the CHRB and the equine
drug testing program, the remainder is distributed 50% to
the association as commissions, and 50% to the horsemen as
purses.
Existing law requires any fair racing association to deduct
an additional 1% from the total amount handled in its daily
conventional and exotic parimutuel pools, and provides for
the deposit of the moneys in the F&E Fund for expenditure
for the construction or operation of recreational and
cultural facilities of general public interest at fairs
throughout the state.
BACKGROUND
Purpose of SB 1227: According to the sponsor, the
California Authority of Racing Fairs (CARF), this measure
is simply intended to carry on the license fee relief begun
under previous legislation �SB 16xx (Ashburn), Chapter 12,
Statutes of 2009] which eliminated all but one of the
license fees paid by racing fairs and tracks to the CHRB.
The 1% paid by fairs was the only license fee on horse
racing that remained intact as a result of enactment of SB
16xx.
CARF states that racing fairs are in need of additional
license fee relief because of declining racing revenues and
the need to attract larger fields. CARF and proponents
emphasize that this measure will go a long way in helping
strengthen horse racing at fairs - fairs are reliant on
revenues generated by horse racing, particularly since fair
funding has been eliminated from the state budget.
Staff Comments: As noted above, this measure would delete
the only remaining license fee deducted from wagers that is
deposited into the F&E Fund. Existing law provides that,
above and beyond the current take-out for exotic and
conventional wagers at fair racing meets, an additional 1%
is deducted from the wager and deposited into the F&E Fund
for the purpose of funding the construction or operation of
recreational and cultural facilities of general public
interest. This measure would instead require that this 1%
take-out be redistributed to the fair conducting the
meeting and split evenly between it (as commissions) and
the horsemen and horsewomen participating (as purses). It
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is estimated that the 1% deduction equates to approximately
$400,000 to the F&E Fund per year.
Prior to the passage and enactment of SB 16xx of 2009,
license fees assessed from the wagers made on horse racing
were deposited to the credit of the F&E Fund which, in
addition to providing general support for the annual budget
of the CHRB, supplemented the income of the State's network
of fairs. At that time, the law guaranteed the F&E Fund
would receive $40 million annually from license fees. SB
16xx eliminated the license fee on wagers as a means of
helping the struggling horse racing industry. In addition,
it struck the $40 million "guarantee" from law. This amount
is, instead, distributed to the racing associations and
horsemen and horsewomen. The extra 1% deducted from fair
meets was not addressed in SB 16xx.
After eliminating horse racing's license fees, SB 16xx
provided that the state funding for fairs shall be a direct
continuous appropriation of $32 million annually from the
General Fund. Because of the decline in the industry,
license fee revenue had fallen below the $40 million
threshold for the prior three years to around $32 million.
SB 16xx was intended to prevent that amount from continuing
to decline and switching the funding mechanism to the
General Fund meant that racing would operate like any other
business.
The $32 million General Fund continuous appropriation to
the fairs was eventually eliminated in the following budget
cycle due to the state's growing fiscal problems. This
measure would eliminate the final contribution that racing
provides to the F&E Fund which could have an impact on
those fairs that do not conduct racing.
PRIOR/RELATED LEGISLATION
SB 16xx (Ashburn), Chapter 12, Statutes of 2009-10 Second
Extraordinary Session . Among other things, eliminated the
$40 million floor on the amount the horse racing industry
is required to pay annually for support of the network of
California fairs, the CHRB, and the Kenneth L. Maddy Equine
Analytical Chemistry Laboratory at UC Davis. Other than
the supplemental 1% assessed against fair meets, it also
eliminated the license fee on horse racing wagers and
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provided that beginning on July 1, 2009, and annually
thereafter, $32 million shall be appropriated from the
state's General Fund and paid into the F&E Fund for the
financial support of the State's network of fairs.
SB 517 (Florez) Chapter 636, Statutes of 2009. Allowed a
thoroughbred association or fair, subject to the approval
of the CHRB, to alter the amount deducted from horse racing
wagering. Also, allowed the distribution of funds from the
amount deducted to be modified or redirected, subject to
the approval of CHRB.
AB 1499 (Evans) Chapter 151, Statutes of 2009.
Reauthorized a fair to deduct an additional 0.5 percent of
the total amount handled in exotic parimutuel pools of
races for any breed, other than races solely for
thoroughbreds, to defray workers' compensation insurance
costs for trainers and owners who race at an applicable
fair.
AB 2258 (Evans, Chapter 453, Statutes of 2008). Clarified
that the $40 million guarantee is based on the total amount
paid to the state as license fees.
AB 765 (Evans) Chapter 613, Statutes of 2007.
Reauthorized horse racing's Advance Deposit Wagering law,
which was due to "sunset" on January 1, 2008, as specified.
In addition, provided that a fair, combination of fairs,
or an association conducting racing at a fair, may, with
CHRB approval, deduct an additional 1% from its handle, to
be used for maintenance and improvements at a fair's
racetrack inclosure, as specified.
AB 1308 (Torrico) Chapter 410, Statutes of 2007.
Authorized a Thoroughbred association or fair and the
horsemen's organization, subject to approval by CHRB, to
deduct an amount of not less than 10% nor more than 25%
from the parimutuel pool for any type of wager.
AB 2164 (Plescia) Chapter 80, Statutes of 2004. Extended
the sunset on provisions to enable racing associations and
fairs to fund taking part in the statewide horse racing
marketing program to 2006.
SB 1825 (Kelley) Chapter 342, Statutes of 2000. Provided
that, notwithstanding any other provision of law, if the
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total amount paid to the state by racing associations and
fairs pursuant to the Horse Racing Law is less than $40
million in any calendar year, beginning January 1, 2001,
and thereafter, all associations and fairs that conducted
live racing during the year of shortfall shall remit to the
state, on a pro rata basis according to the amount handled
in-state by each association or fair, the amount necessary
to bring the total amount paid to the state to $40 million.
SB 27 (Maddy), Chapter 335, Statutes of 1998. Among other
things, granted major license fee relief ($40 million
annually) and limited out-of-state full-card simulcasting.
Proposition 3 of 1933. Legalized parimutuel wagering on
horse racing in California. With the passage of Proposition
3, the stated purpose of the new law was for the
"encouragement of agriculture and breeding of horses."
Furthermore, Proposition 3 included a "commitment for the
continuous funding of the fairs of California with an
annual allotment of racing revenues to be used for health,
safety and maintenance projects." Revenue from horse
racing license fees is deposited into the F&E Fund, which
supplements the income of fairs throughout California.
SUPPORT: As of March 23, 2012:
California Authority of Racing Fairs (sponsor)
Los Angeles County Fair: Fairplex
The Big Fresno Fair
OPPOSE: None on file as of March 23, 2012.
FISCAL COMMITTEE: Senate Appropriations Committee
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