ARCI analysis looks at impact of federal bill on state regulatory agencies

By: ARCI

Update: Oct. 8, 2020

The Association of Racing Commission has released its complete analysis of the federal Horseracing Integrity and Safety Act of 2020, which is available here.

Posted: Sept. 26, 2020

The newly proposed Horseracing Integrity and Safety Act of 2020 (Senate Bill 4547) may provide an incentive for states to defund existing anti-doping and medication rule enforcement programs according to an analysis being prepared for the Association of Racing Commissioners International so the group can help achieve a “smooth transition” should the measure be enacted.

“COVID-19 has economically devastated many state budgets and the additional resources just may not be there to improve upon the existing anti-doping and medication enforcement program infrastructure to comply with S.4547,” ARCI President Ed Martin said.

Martin said it’s not unreasonable to expect that a state Budget Director or Legislative Committee will look at this law and question why the state needs to continue paying for the existing program, any new unfunded mandates, and a new federal authority as well as it’s contracted enforcement agency. As the law allows the state to “off load” their current program and have the federally dictated system operate and pay for it, there will be an economic incentive to do that.

At that point racetracks, owners, trainers, breeders, and veterinarians may be assessed costs to replace the lost state investment and pay for the additional two entities envisioned by the bill. Depending on the state, the local racing industry will continue to pay all current state assessments and taxes and may discover that they now must pay newly levied assessments to pay for the now federally mandated privatized program.

According to the analysis and assuming that there will be no industry-specific state tax cut in these jurisdictions and existing revenue sources will remain, the racetracks, owners, trainers, breeders, and veterinarians in the following states—it’s a partial list—are potentially exposed to paying again should their state program be shifted to the newly created non-governmental organization (NGO):

  • Arizona
  • Colorado
  • Florida
  • Illinois
  • Indiana
  • Louisiana
  • Massachusetts
  • Michigan
  • Nebraska
  • New Mexico
  • Oregon
  • Virginia
  • Washington
  • Wyoming

Some states have the ability to directly bill racetracks for their program. These states may continue to operate their existing program and simply forward the newly enhanced bill for the current program, additional mandates and the two new entities directly to the racetracks which will then be required to pay the state. These jurisdictions include:

  • Delaware
  • Iowa
  • Kentucky
  • Maryland
  • Massachusetts
  • Minnesota
  • Nebraska
  • New Jersey
  • New York
  • Oklahoma
  • Texas
  • Virginia
  • West Virginia

In New York, state general fund monies are used to pay for the drug-testing enforcement program and shortfalls are recouped from a commission-determined industry assessment on racetracks and owners. Given New York’s post-virus severe financial needs going forward it would be possible for the state to cut funds for drug testing and allow the commission to impose fees on tracks and owners to pay for the shortfall and any additional costs imposed by the legislation.

If that were to happen or should the state hand off the program, the prospect for an industry-specific tax cut would be slim and the industry would be totally required to make up the loss of state investment.

In Maryland, only certain costs can be forwarded to the tracks, and additional mandates may require legislation in order to be passed through.

S.4547 envisions that racing commissions will pass the overhead costs for the new authority and its enforcement agency to industry participants based on the assessment bill received each year. The states do not have the authority to unilaterally impose and set such assessments with the possible exception of New York as indicated above.

The states have had to do the best job they could with the available funding. State budgets have always considered the ability of people to afford the assessments. This bill puts no limit on program funding, which is a luxury no state racing commission ever has had.