By Beth Musgrave and Jack Brammer
FRANKFORT — Expanding instant racing to more Kentucky horse racetracks could provide additional tax money to help fund the state’s ailing pension system, House Speaker Greg Stumbo said Friday.
Wagering on instant racing machines — devices similar to slot machines that utilize previously run horse races — at two Kentucky tracks has generated $3.7 million in pari-mutuel taxes since Sept. 2011.
By expanding instant racing to other Kentucky tracks, as Keeneland has proposed doing at a yet-to-be-built Quarter Horse track in Corbin and possibly at the Red Mile in Lexington, the state could generate between $25 million and $30 million in additional tax revenue that could be earmarked for the pension system, Stumbo said.
Senate Republicans were cool Friday to the idea of using taxes generated from instant racing to fund state-worker pensions.
“It seems as if the speaker is kind of like throwing anything up to see what sticks because yesterday he was all for a cigarette tax,” said Senate President Robert Stivers. “Now he has changed to racing, so I would like to see what he will be for Tuesday when we return. Depending on how the wind blows, it seems the speaker blows.”
Historical wagering was approved by the Kentucky Horse Racing Commission in July 2010, and a Franklin Circuit Court judge ruled it was legal under existing pari-mutuel betting laws. The Family Foundation, a conservative advocacy group that opposes any expansion of gambling, has appealed the case, which is now before the Kentucky Supreme Court.
Sen. Johnny Ray Turner, D-Prestonsburg, filed legislation Friday that would remove any doubt about the legality of instant racing, making the court case moot if the bill becomes law.
Turner said he filed Senate Bill 204 in light of Keeneland’s decision to buy the Thunder Ridge harness track in Prestonsburg and reinvent it as a Quarter Horse racetrack in the Corbin area.
Stivers said typically the legislature does not interfere with ongoing litigation.
“We have been pretty consistent over here in my 16 or 17 years that while things are in litigation, the legislature shouldn’t involve themselves because you don’t know what the courts are going to rule,” Stivers said. “If you attempt to do that, you are influencing the courts.”
“The racing commission and lower courts already have ruled it legal. I think it most likely will be upheld, so we should go ahead and deal with it in the legislature,” Turner said. “This state, our counties and the horse industry definitely need more revenue.”
Martin Cothran, a spokesperson for the Family Foundation, said that Turner’s bill seems to bolster the group’s court case claiming that instant racing is not legal in Kentucky.
“For over two years, they’ve been telling the courts that Instant Racing is already legal and now they’re telling the General Assembly that they need a law to make it legal,” said Cothran.
“If instant racing is legal, a bill legalizing it wouldn’t be necessary would it?” Cothran asked.
Earmarking a portion of instant racing proceeds for the state’s pension system would require major changes to how the state currently taxes the game, Stumbo said. That would probably mean less money for racetracks and industry support programs.
Although instant racing has generated $3.7 million in pari-mutuel taxes since September 2011, only $864,723 of that amount has gone to the state General Fund. The remaining $2.8 million in tax money was distributed to industry support programs through a formula set by state law.
Of the $247 million wagered on instant racing in Kentucky, $226.7 million was returned to the public. The two tracks offering instant racing — Kentucky Downs in Franklin and Ellis Park in Henderson — have kept about $14 million. Another $2.3 million was contributed to race purses and $164,341 went to the Breeder’s Incentive Fund.
Stumbo cautioned Friday that the expansion of instant racing is only one of many options House Democrats are considering as a possible funding fix for the pension system. A second option includes raising the cigarette tax by 40 cents to $1 a pack, which would generate the additional $110 million in General Fund dollars the state needs for the pension system next fiscal year.
Stumbo declined Friday to name other options under consideration. House Democrats will hear those options at a meeting sometime early next week, Stumbo said. House members have told leadership that they would like to see several funding options, he added.
A fix to the pension system is the top priority in the 30-day legislative session, which is nearly half over. The system has roughly half the money it needs to fund all current and future retirees.
The Republican-led Senate has already passed a pension overhaul bill that would move new state employees to a 401(K)-style hybrid plan and would also do away with cost-of-living increases for current retirees. The Senate did not specify where the state should find money to make extra payments into the pension system starting July 1, 2014.
House Democrats have said additional revenues should be added to any pension fix this session. Senate Republicans have countered that additional revenues can wait until the 2014 legislative session, when the legislature tackles the state’s two-year budget.
Any measure that would generate additional revenue has to be passed by a super majority in both chambers during a 30-day session.