June 2014 | Proposal Would Reshape Pennsylvania Racing
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Proposal Would Reshape Pennsylvania Racing

June 2014 - Suzanne Bush

The integrity of the horseracing industry is at the core of its economic well-being. Besides the glamor races—the Kentucky Derby, the Preakness and the Belmont Stakes—that generate exhaustive media coverage glorifying the sport’s history and all its attendant celebrity, the sport relies on thousands of races at tracks throughout the country. These less-celebrated races are the engines of a diverse, far-flung enterprise that employs hundreds of thousands of people. Veterinarians, breeders, trainers, jockeys, grooms, blacksmiths, track stewards, truck drivers, feed and hay dealers, manure haulers—all are on the front lines of the sport.

And there are the horses. Athletes with breathtaking speed, grace and power, they are frequently victimized by the people responsible for their well-being. Injected with drugs, force-fed concoctions of fluids, shocked with devices hidden in whips—all with the goal of improving performance—horses are unable to speak for themselves. It almost seems that there’s a pharmaceutical arms race among those seeking to give their horses a competitive boost and the regulators who are trying to keep the playing field level.

While most trainers and track workers play by the rules, several incidents have put the industry in an uncomfortable spotlight here in Pennsylvania and elsewhere. Recently in Pennsylvania, three trainers and a clocker at a racetrack were arrested on charges ranging from illegally drugging horses to false reporting of workout times for individual horses.

Testing for Thousands of Substances
Government interest in finding and punishing the bad actors in horseracing—at the national and the state level—is driving reform. Drug testing has become a sophisticated process, using state-of-the-art technology that is constantly evolving. Pennsylvania is among several Mid-Atlantic states where the racing industry has adopted a set of reforms that impose new testing for banned drugs and more penalties for those who violate the standards. The reforms became effective January 1, 2014.

According to the New Castle, PA News, Deputy Secretary of Agriculture Matthew Meals says that Pennsylvania’s protocol tests for 2500 different chemicals. But nothing is static. As anti-doping agencies learned through efforts to combat drugs in competitive cycling, there is a thriving industry of entrepreneurs constantly developing new combinations of chemicals meant to elude current tests.

Meals also said that 18,500 drug tests were performed in 2013, but just 79 horses tested positive for banned drugs. It’s hard to know what to make of that statistic. Could the tests have been flawed? Is there a pervasive drug problem in Pennsylvania racing? Or did they not test enough horses to get meaningful data? Until every horse is tested, reliable data will likely be elusive.

Duplication of Regulation?
Pennsylvania’s racing industry is currently regulated by two commissions within the Department of Agriculture—one overseeing harness racing, the other overseeing Thoroughbred racing. And overall gaming in the state is regulated by the State Gaming Control Board, which was established in 2004 when the state legalized slot machines and casinos.

Both of the racing commissions have been struggling financially; regulation of the state’s horseracing industry has reportedly become more expensive, as the cost of testing horses for banned drugs has risen. The regulatory expenses of the racing commissions are partially covered by the so-called “taxable handle,” which is the portion of the total handle—the amount wagered on live races held in Pennsylvania and the amount wagered on races run in other states that are simulcast in Pennsylvania—that is taxable. According to the Gaming Control Board, the taxable handle in 2013 was $480,577,093, which was eight percent less than in 2012.

Senator Elder Vogel (R., Beaver, Butler, Lawrence Counties), who chairs the Senate’s Agriculture and Rural Affairs Committee, approved emergency funding last fall to rescue the two racing commissions. Vogel has other plans for the commissions, and this emergency funding plan is a Band-Aid—not a real solution for the commissions’ funding woes. He has proposed legislation that would eliminate these commissions, a move that would pave the way for other reforms he has in mind for the state’s horse racing industry.

He wants to consolidate the operations of the two racing commissions and make the State Gaming Control Board responsible for their functions. He also wants more comprehensive drug testing of horses. His proposed legislation would shift the cost of drug-testing from the state to the horse owners. And all horses would be tested, instead of the current policy of testing only winning horses and a random sample of also-rans.

Without clear explanations from the Department of Agriculture or Senator Vogel’s office, it’s hard to understand how the two racing commissions could be having so much trouble making ends meet. Several calls to Senator Vogel’s office and to the Department of Agriculture produced no response.

Horse Owners Seeking Compromise
There are a lot of stakeholders in Pennsylvania’s racing industry, though, and Vogel’s proposal has not received unqualified applause. Pete Peterson, spokesman for the Pennsylvania Equine Coalition, says that his group is not opposed to universal testing, but that the horse owners individually should not bear the cost. “We’re in favor of additional testing because, from our perspective, we want a level playing field. However if you start to charge individuals $150 to $200 to race a horse, it could discourage people from outside the state from shipping horses in to race.”

Peterson’s organization represents more than 10,000 owners and trainers involved in the state’s horseracing industry. He says that his group has proposed that the cost of drug testing should come out of the Race Horse Development Fund. “There would be less money available for purses in the long run, but we don’t think it should be assessed on individual horsemen.”

According to the Pennsylvania Gaming Control Board’s annual report, in 2013 the amount of tax revenue generated for the Pennsylvania Race Horse Development Fund was $254,371,773, or seven percent less than the previous year. This reflected a decrease in gross terminal revenue from the casinos where horseracing is held in the state. Gross terminal revenue is the total amount of taxable slot machine revenue generated by the casinos. It does not include every dollar wagered in the slot machines; it is the total amount wagered minus the payouts.

The Race Horse Development Fund was established when the legislature approved slot machines in Pennsylvania. Each dollar generated from the slot machines is divided among several constituencies: the casinos retain 46 cents; 34 cents support property tax reduction; the Race Horse Development Fund receives 11 cents; five cents go to promoting economic development and tourism; four cents go to the municipality in which the casino is located. The 11 percent piece the Race Horse Development Fund receives is divided among purses, health insurance and pension benefits, and breeders’ funds.

Peterson says that the issue is complicated, and that the long term health of the industry needs to be protected. “We have serious concerns about dissolving the commissions.” He says that Vogel’s plan to eliminate the two racing commissions requires more scrutiny. “It was initially presented as a way to save money, but now all the staff will be preserved,” he says. “The cost savings are not there at this point.”

A Place at the Table
Peterson believes that there are a lot of misperceptions about the racing industry, and Vogel’s plan to remove the racing commissions from the Department of Agriculture will not protect the industry. “They (the commissions) understand the relationship between racing and farming. We’re talking about live animals,” he says. “The Department of Agriculture understands the farm industry. We have concerns about ensuring diverse views on the boards.”

And there is the issue that goes directly to the heart of the state’s breeding and racing industries. "If you look at other states that abolished their racing commissions,” he says, you can understand why the Pennsylvania Equine Coalition is concerned. “Michigan put them under the gaming control boards. There was a 70 percent reduction in live race days.” Fewer race days would ultimately lead to fewer breeders interested in keeping their farms and their horses in Pennsylvania.

Success is Not Guaranteed
While Pennsylvania has enjoyed the fruits of the casino and horseracing industry, there are no guarantees for the future. Like any industry, horseracing needs to protect its reputation, preserve its assets, and find ways to attract new customers and partners. Ensuring the integrity of the sport through vigorous enforcement of rules, zero tolerance of practices that endanger or injure horses and testing more horses for banned substances will be costly and ultimately beneficial.

There are constant pressures bearing down on the horseracing industry, from electronic gambling to competition from other states. Pennsylvania’s legislators have tried several times to use the money earmarked for supporting the industry for other projects. The various stakeholders in the industry united several years ago to form the Equine Coalition. They’ve pointed out that the Racehorse Development Fund is very much like the goose that laid the golden egg.

It’s not too difficult to move a horse breeding operation to another state, leaving Pennsylvania’s racetracks with less stellar horses to run and, ultimately, a less robust racing industry. In 2009, there were 545 Thoroughbred breeding operations in Pennsylvania. In 2013, there were 619. These breeding farms employ workers, buy feed, and pay for the services of veterinarians, blacksmiths, and other providers. A lot is riding on the backs of the horses in Pennsylvania’s racing industry. It’s up to the legislators and industry leaders to find a way to solve regulatory issues without undermining the business.