BILL ANALYSIS �
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THIRD READING
Bill No: SB 1227
Author: Negrete McLeod (D)
Amended: As introduced
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMM. : 10-0, 3/27/12
AYES: Wright, Berryhill, Calderon, Cannella, Corbett, De
Le�n, Hernandez, Padilla, Wyland, Yee
NO VOTE RECORDED: Anderson, Evans, Walters
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/24/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
SUBJECT : Horse racing: parimutuel pool funds
SOURCE : California Authority of Racing Fairs
DIGEST : This bill deletes an existing requirement that
one percent of the total amount handled in daily
conventional and exotic parimutuel pools be distributed to
the Fair and Exposition (F&E) Fund, and instead requires
those funds to be equally distributed as commissions and
purses.
ANALYSIS : Article IV, Section 19(b) of the California
Constitution provides that the Legislature may provide for
the regulation of horse races and horse race meetings and
wagering on the results.
CONTINUED
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Existing law grants the California Horse Racing Board
(CHRB) the authority to regulate the various forms of horse
racing authorized in this state.
Existing law requires every association that conducts a
racing meeting to deduct 15 percent of the total amount
handled in conventional parimutuel pools and 16.75 percent
of the total amount handled in exotic parimutuel pools and
to distribute the monies to various interests within racing
(e.g., breeders' program, backstretch welfare, vanning and
stabling). After payments to fund the CHRB and the equine
drug testing program, the remainder is distributed 50
percent to the association as commissions, and 50 percent
to the horsemen as purses.
Existing law requires any fair racing association to deduct
an additional one percent from the total amount handled in
its daily conventional and exotic parimutuel pools, and
provides for the deposit of the monies 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.
Comments
This bill deletes 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 one percent 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 bill instead
requires that this one percent 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 is estimated that the one
percent deduction equates to approximately $400,000 to the
F&E Fund per year.
Prior to the passage and enactment of SB 16X2 (Ashburn,
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
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budget of the CHRB, supplemented the income of the state's
network of fairs. At that time, the law guaranteed the F&E
Fund receives $40 million annually from license fees. SB
16X2 eliminates 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 one percent
deducted from fair meets was not addressed in SB 16X2.
After eliminating horse racing's license fees, SB 16X2
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 16X2 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
bill eliminates 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 16X2 (Ashburn), Chapter 12, Statutes of 2009-10 Second
Extraordinary Session, among other things, eliminates 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 one percent assessed against fair meets,
it also eliminates the license fee on horse racing wagers
and provides 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, allowes a
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thoroughbred association or fair, subject to the approval
of the CHRB, to alter the amount deducted from horse racing
wagering. Also, allows 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,
reauthorizes 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, clarifies
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, reauthorizes
horse racing's Advance Deposit Wagering law, which was due
to "sunset" on January 1, 2008, as specified. In addition,
provides that a fair, combination of fairs, or an
association conducting racing at a fair, may, with CHRB
approval, deduct an additional one percent 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,
authorizes a Thoroughbred association or fair and the
horsemen's organization, subject to approval by CHRB, to
deduct an amount of not less than 10 percent nor more than
25 percent from the parimutuel pool for any type of wager.
AB 2164 (Plescia), Chapter 80, Statutes of 2004, extends
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, provides
that, notwithstanding any other provision of law, if the
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 conducts
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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, grants major license fee relief ($40 million
annually) and limits out-of-state full-card simulcasting.
Proposition 3 of 1933 . Legalizes 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.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee, there
will be a loss of revenue to the F&E Fund of approximately
$350,000 to $400,000 annually.
SUPPORT : (Verified 5/24/12)
California Authority of Racing Fairs (source)
Los Angeles County Fair Association
Sonoma County Fair
The Big Fresno Fair
Thoroughbred Owners of California
ARGUMENTS IN SUPPORT : According to the sponsor, the
California Authority of Racing Fairs (CARF), this bill
simply intends to carry on the license fee relief begun
under previous legislation (SB 16X2 �Ashburn], Chapter 12,
Statutes of 2009) which eliminates all but one of the
license fees paid by racing fairs and tracks to the CHRB.
The one percent paid by fairs was the only license fee on
horse racing that remained intact as a result of enactment
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of SB 16X2.
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 bill 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.
DLW:do 5/25/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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