PA Ag Secretary Supports Raid on Incentive Fund

Pennsylvania's State Horse Racing Commission passed a resolution Feb. 25 rejecting Gov. Tom Wolf's proposal to divert $204 million from a trust fund that supports breeding and purse incentives to a program for college scholarships. During that meeting, Department of Agriculture Secretary Russell Redding told horse industry leaders they needed to tell their story about the horse community's economic impact, the 23,000 jobs, and the preservation of open space the industry delivers.

Three days earlier, however, Redding authored an editorial piece that questioned whether Pennsylvania is doing the right thing by allowing a portion of gaming revenue, about $250 million annually, to be dedicated to supporting the Thoroughbred and Standardbred racing industries. 

Redding, who is chairman of the State Horse Racing Commission, actually supports the governor's plan to redirect about 80% of the money from the Race Horse Development Fund, which is the dedicated source of all breeders' awards, stallion awards, and purse supplements for state-bred runners, to the Nellie Bly Scholarship program for the funding of an estimated 25,000 college scholarships.

"It is time to ask, where has this investment gotten us?" Redding wrote in his opinion piece. "Pennsylvania's racing industry is in a better position today than it was in 2015, thanks to the state's investment. It could not be clearer that the racing industry is important to Pennsylvania. And now, racing is being asked to support itself."

Redding ends his editorial with: "Is this the end of horse racing? It shouldn't be. But if it is, we've made a very poor public policy decision to—for 16-years—invest in it so heavily. These years should have been the yeast to build a self-sustaining industry."

The agriculture secretary's communications office provided further clarification on his position Feb. 27 to BloodHorse: "The governor's proposal does not leave horse racing cold, in that the funding for testing to maintain the integrity of the sport (in the amount of nearly $5.9 million) and marketing to bolster interest in the sport (in the amount of nearly $2.4 million) and $20 million for purses (the same amount as our neighbors in New Jersey provide to their industry for purses) are still funded in the governor's 20-21 budget for Pennsylvania. The support for the industry goes even further beyond their line item; and can be found in our $65 million investment in Penn Vet, the equine sales tax exemption, and preferential tax treatment through Clean and Green.

"Now, just as the commonwealth responded to the needs of horse racing, it's responding to the needs of our future workforce," the statement continued.

Redding's position has alarmed and stunned the horse racing community, which had, until the opinion piece was published, viewed Redding as an advocate.

"This runs counter to everything he has said in the past about the importance of the horse industry in Pennsylvania. It is a remarkable departure," said Pete Peterson, a spokesman for the Pennsylvania Equine Coalition, a statewide organization that represents owners, breeders, and trainers involved in Thoroughbred and Standardbred breeding and racing. 

Redding has opposed previous attempts to raid much smaller amounts from the Race Horse Development Fund. In a letter written in September 2017 regarding a legislative proposal to divert $27 million from the fund, Redding claimed such a move "would be devastating to the industry and the more than 20,000 jobs it supports."

"We'll be throwing the state's racing industry into chaos, undermining all the bipartisan work we did two years ago to bring some stability and certainty there," Redding wrote.

In 2016, when the state created one regulatory body to oversee Thoroughbred and Standardbred racing with legislation known as Act 7, Redding said during the new commission's first meeting:

"Act 7 and the Race Horse Development and Gaming Act make clear that horse and harness racing are important parts of our agricultural economy. Collectively, racing contributes an estimated $1.6 billion in economic activity for Pennsylvania, with many of those dollars going to support agricultural operations. The commonwealth has made two very intentional and clear statements—we value racing and what it does economically for this state. I look forward to the work the commission will do moving forward to grow this industry."

The Race Horse Development and Gaming Act created the Race Horse Development Fund because it was known that the expansion of casino gaming the law allowed would negatively affect pari-mutuel wagering at the racetracks and consequently reduce the revenue streams supporting the racing industry. To compensate for the projected losses, the law created the Race Horse Development Fund to bring stability to the racing and breeding industries that Redding referenced in his 2017 letter. About 10% of the state's slot machine revenue goes into the fund, which was $242 million in 2018, according to the Pennsylvania Gaming Control Board. From the fund, 80% goes to purses, 16% for breeder incentive funds, and 4% for health and pension benefits for members of the horsemen's organizations.

"That's why 'Race Horse Development' was included in the name of the legislation that expanded gaming," Peterson noted.

As further evidence of the Race Horse Development Fund's importance to supporting the racing industry, a provision titled "Protection of Funds" was included in the law. This section states: "Daily assessments collected or received by the Department under Section 1405 (related to the Pennsylvania Race Horse Development Fund) are not funds of the Commonwealth. … The Commonwealth shall not be rightfully entitled to any money described under this section and sections 1405 and 1406."

"We needed a level of certainty for the racing and breeding industries, which is why the language is written the way it is," Peterson said. "The expansion of gaming was going to reduce pari-mutuel wagering and impact purses. There was never any talk about the fund making the industry become self-sustaining."

Peterson said the governor's proposal and Redding's support is frustrating for multiple reasons. First, he noted, the money is not coming from taxpayers—it is a portion of gaming revenue that the racetracks agreed to contribute. Second, when Redding claims $20 million will be available for purses, Peterson said he is not sure where that money is coming from and if it is Redding's projection from the state's portion of pari-mutuel wagering, then that doesn't square with the economic reality that casino gaming is cutting into pari-mutuel wagering. Also, he said, Redding's argument that $20 million for purses is adequate because it equals what New Jersey provides for its racetracks is laughable when New Jersey has two tracks and Pennsylvania has six.

"The bottom line is that the law is clear," Peterson said. "If they try to take this money, it is grounds for a lawsuit."