BILL ANALYSIS �
SB 1227
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Date of Hearing: June 28, 2012
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Isadore Hall, Chair
SB 1227 (Negrete McLeod) - As Introduced: February 23, 2012
SENATE VOTE : 38-0
SUBJECT : Horse racing: pari-mutuel pool funds.
SUMMARY : Diverts from deposit into the Fair and Exposition
Fund (F&E Fund) an existing one-percent deduction from all
wagers handled at fair racing meets and, instead divides it
equally between the fair that conducted the racing meeting and
to the horsemen and horsewomen who participated in the racing
meeting. Specifically, this bill :
1) Modifies a provision of Horse Racing Law which currently
provides for a 1% deduction from wagers at fair racing meets for
deposit into the 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 :
1) 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.
2) Grants the California Horse Racing Board (CHRB) the
authority to regulate the various forms of horse racing
authorized in this state.
3) Requires every association that conducts a racing meeting to
deduct 15% of the total amount handled in conventional
pari-mutuel pools and 16.75% of the total amount handled in
exotic pari-mutuel pools and to distribute the moneys 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% to the association as commissions, and 50% to
the horsemen as purses.
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4) Requires any fair racing association to deduct an additional
1% from the total amount handled in its daily conventional and
exotic pari-mutuel 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.
FISCAL EFFECT : Unknown.
COMMENTS :
Purpose of the bill: 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.
Background : Existing law provides that, above and beyond the
current takeout for conventional and exotic wagers at live
racing fair meets, an additional 1% is deducted from live fair
wagers and deposited into the F&E Fund. SB1227 would instead
require the 1% takeout be redistributed to the fair conducting
the live race meeting and be split evenly between the fair (as
commissions) and the horsemen and horsewomen (as purses). It is
estimated that the 1% deduction equates to approximately
$550,000 to the F&E Fund per year.
Prior to the passage and enactment of SB 16xx (Ashburn) 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
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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 deleted the $40 million
"guarantee" from law. This amount is, instead, distributed to
the racing associations and horsemen and horsewomen. The bill
also provided that the state funding for the network of
California fairs shall be a continuous appropriation of $32
million annually from the General Fund.
The $32 million General Fund support for the network of
California fairs was eliminated in the 2011-2012 Budget due to
the state's growing fiscal problems. In addition, the 2012-2013
Budget Act does not contain an appropriation into the F & E Fund
to fund the network of California fairs.
Policy consideration : This bill would delete the only remaining
revenue stream deducted from horse racing wagers that is
deposited into the F&E Fund. This change could impact
non-racing fairs in California who receive financial support
from the Fund and the budget of the Department of Food and
Agriculture who is required to provide regulatory oversight for
each California fair.
Prior 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 was 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. The bill
eliminated the license fee on horse racing wagers and 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 pari-mutuel pools of races for any breed,
other than races solely for thoroughbreds, to defray workers'
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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.
SB 1825 (Kelley) Chapter 342, Statutes of 2000. Provided 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 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.
REGISTERED SUPPORT / OPPOSITION :
Support
California Authority of Racing Fairs
Los Angeles County Fair Association
Opposition
None on file
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531
SB 1227
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