by Andrew Staub
Pennsylvania’s wilting horse-racing industry can no longer support the fund that pays to oversee the sport, a development that could lead to a shutdown by late November.
Yet the races could go on, through Thanksgiving and thereafter, if lawmakers push through a plan to subsidize the depleted State Racing Fund with money from another pot of cash set aside for horse racing.
A bill that has passed the state Senate and is pending in the House would draw an estimated $11.3 million from the Race Horse Development Fund — which provides money for track purses, breeder’s awards and benefits for horsemen — to pay for drug testing previously financed by the State Racing Fund. It would also restructure the bureaucracy overseeing the sport, revamp licensing fees and make other changes.
State Sen. Elder Vogel, the Beaver County Republican who introduced the bill, projects it would result in a surplus of more than $27 million for the State Racing Fund by 2019-20.
Such a move could salvage an industry, which, supporters say, pumps $1.6 billion into Pennsylvania’s economy. But it also raises the question of whether the state should further subsidize a struggling sport that’s suffered a precipitous 71 percent drop in wagers from 2001 to 2014.
Nathan Benefield, vice president of policy analysis at the free-market think tank, theCommonwealth Foundation, says no. The fact that decreased wagers have carved a huge hole in the State Racing Fund is evidence more corporate welfare for the industry is an unwise move, he said.
“It seems the market has said this is not something that many Pennsylvanians are interested in watching or wagering on,” Benefield said.
Yet, last week, Auditor General Eugene DePasquale, urged the House to “swiftly act on legislation that would rescue” the depleted State Racing Fund. He previously sounded warnings about the fund and said a shutdown would devastate Pennsylvania’s 500 horse breeders, as well as the 23,000 people the racing industry supports.
Susan Woods, a spokeswoman, said DePasquale doesn’t favor a particular piece of legislation but made note of Vogel’s bill. Mike Rader, a Vogel aide, said the bill isn’t a bailout but rather a mechanism for the horse-racing industry to continue funding its own oversight.
“There’s nothing in it that uses taxpayer dollars, and that’s what the bill is designed to do, is come up with an equitable way for the industry to provide the financing to be regulated,” Rader said.
In addition to the transfer for drug testing, the bill includes a backstop provision that would call for another infusion from the Race Horse Development Fund should the State Racing Fund prove insufficient to fund all costs.
Created in 2004, the Race Horse Development Fund has been criticized as a handout for the racing industry. It’s funded through slot machine revenue, a portion of which is used for property tax relief across Pennsylvania.
The fund gets about $250 million a year, and, Benefield said, there are better ways to use that money.
“For many years, we’ve said that is a source we should be using to help balance the budget rather than subsidizing one industry,” Benefield said.
Lawmakers have used the Race House Development Fund to fix the State Racing Fund before. Gov. Tom Wolf also proposed a $6.5 million transfer this year, but that’s been held up by a state budget impasse that will soon reach four months.
The State Racing Fund draws from six revenue sources: wagering taxes, uncashed tickets, license fees, breakage, admission taxes and miscellaneous revenue.
Declining wagering has led to a 65 percent decrease in related tax revenue. That the Department of Agriculture has over-billed the fund and charged it for personnel costs not directly related to services for the racing commissions hasn’t helped.
As the fund suffers, the state’s regulatory responsibilities have grown.
About 15 years ago, when Pennsylvania had four tracks, the State Racing Fund took in $31.8 million. The state has since added two tracks, but the fund took in only a little more than $11 million in 2014.
Now, the fund is in the red. Without a fix, a 30-day shutdown notice could come this week. But, for the moment, at least one racetrack isn’t panicking.
“We are optimistic that this will be solved without any interruption to racing,” said Fred Lipken, a spokesman for Penn National Race Course outside Harrisburg. “We are certainly hopeful about the situation.”