Task force recommends increased funding to regulate horse racing

By Janet Patton
jpatton1@herald-leader.com

FRANKFORT – A task force on the future of horse racing has recommended Gov. Steve Beshear increase funding to regulate the sport and pay for it through new and increased taxes on some bets and racetracks.

Although the group recommended increasing purses and other incentives, it did not outline any way to pay for that. Nor did it address how to fund the pursuit of an equine testing and research lab, another recommendation, which could cost $5 million to establish and $3.5 million a year to run.

The panel did not address expanded gambling because task force chairman Tracy Farmer said “that’s between the governor and the General Assembly and not an issue that we were instructed to look at now.” However, Farmer said it was obvious from looking at the data compiled that without casino gambling the industry cannot keep up with other states — either in policing racing or in recruiting horses.

“If we don’t have enhanced funding from some source, the people that have casinos at the tracks are going to have our horses,” Farmer said after the panel voted unanimously to endorse its report Monday. The full report is available online at www.khrc.ky.gov.

Instead, the task force recommended dedicating more revenue to the Kentucky Horse Racing Commission through increased fees and taxes, such as:

• Increasing “takeout” – the money retained from bettors – on exotic and win-place-show bets;

• Requiring the owners of the top three finishers in races with purses over $10,000 to help pay for drug testing;

• Increasing the pari-mutuel tax on racetracks with an average daily handle of $1 million or more – traditionally Keeneland and Churchill Downs;

• Licensing “tote” companies and advance-deposit wagering companies;

• And, if other sources of funding are not found, increasing the reimbursements from racetracks to pay racing commission employees and to continue to pay for drug testing.

The committee recommended the increased funding for the racing commission to pay for 10 new full-time staff members, and to put all Thoroughbred and Standardbred stewards on the state payroll as well, rather than having them be paid by the racetracks.

The commission currently has about a $3 million budget; it would need $5 million to pay for the additional staff, said task force member Ellen Hesen, Beshear’s general counsel.

Lisa Underwood, executive director of the racing commission, said that revenue coming from the general fund would need to increase from about $437,000 to about $600,000, on top of the additional fees and taxes proposed.

Even with the increased funding and staff, Kentucky would still be behind other major racing states like New York, Farmer said.

“This is what we feel like could do the job (with). We certainly won’t be spending what other states spend,” he said.

Task force member Robert Lawrence, a University of Louisville economist, said the state needs to consider putting the approximately $6 million generated in pari-mutuel taxes for the General Fund toward regulating and promoting racing instead.

State Sen. Damon Thayer, R-Georgetown, said he is working on legislation that would dedicate pari-mutuel tax revenue to racing. He said such language passed the Senate two years ago but that it would be “difficult” to pass now, with the state facing a $456.1 million budget shortfall.

“The economy of the state is tough and there some real issues and some real problems,” Lawrence said. “But there are some real issues and real problems in this industry now.”

Several racetrack representatives on the task force said conditions are becoming dire.

Keeneland president Nick Nicholson, who headed a subcommittee on the industry’s finances, said that “the more we dug, the worse it looked. More states are making an effort to reach out and grab what Kentucky has. … There is a 100 percent certainty that if we maintain the status quo our position … will deteriorate.”

With states like Indiana, New York and Pennsylvania pouring money from slots into purses and breeders’ incentives, Kentucky will find it impossible to keep up in coming years, the task force said.

Meanwhile, confidence in Kentucky’s racing product is eroding because the state has taken no steps to maintain betting security, said Edward Bonnie.

“If you don’t have integrity, you don’t have anything to market,” Bonnie said.

The task force recommended the state address deficiencies pointed out in a 2006 state audit by hiring personnel to police betting and submit a budget request for a wagering monitoring system as a capital project.

Filed Under: Featured • State Budget • State Government • Steve Beshear