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Pennsylvania Deadline Extended

Published: October 30, 2015 7:12 pm ET

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After a week of daily discussions between state officials and representatives of Pennsylvania’s horse and harness racing industries and its racetracks, Agriculture Secretary Russell Redding expressed optimism today (Friday, Oct. 30) that a long-term solution to the structural deficit in the State Racing Fund is within reach.

“This has not been an easy process, but it has been an incredibly productive process,” said Redding. “We have come a long way since last Friday when the future of racing in Pennsylvania was very much in doubt, but today, thanks to the tremendous work of a lot of people around the table, we find ourselves in a very much improved position. Everyone seems genuinely committed to finding a long-term, sustainable solution that will keep racing alive and well in Pennsylvania for years to come.

“I want to thank everyone for their diligence and their willingness to return to the table day-after-day and talk through these issues,” Redding added. “That goes for members of the General Assembly, the horsemen and the track operators. While we don’t yet have a comprehensive agreement, we do agree on many of the major points. Those areas where differences remain are not insurmountable. Our goal has always been to reach a consensus among all of the stakeholders that promotes the future of racing in Pennsylvania. We believe that within another week, we can get there.”

Given the progress in conversations over the past week, Redding said the state was delaying any decision on whether it had to initiate the suspension of live racing in the state for one-week.

The chairs of the State Horse and Harness Racing Commissions echoed Redding’s optimism and appreciation for the ongoing dialogue with the industry and its stakeholders.

“We are optimistic that this next week will get everyone where we need to be so that racing is not suspended,” said Harness Racing Chairman Johnathan Newman. “The Harness Racing Commission appreciates all efforts extended by the various partner groups to get us to this point. We remain confident that we’re on strong footing and are close to coming to an agreement.”

Similarly, Alan Novak, chairman of the State Horse Racing Commission, said, “Significant progress has been made. Whenever you bring together a group representing diverse interests, there has to be time given to allow them to come to a compromise. We know that everyone involved is working in a cooperative spirit and my hope is that an agreement is reached soon.”

The questions over the future of equine racing in the commonwealth were brought to the forefront last week when the department announced a deficit State Racing Fund, leaving the state without the resources to maintain the financial integrity of the industry and to protect the wagering public.

Pari-mutuel tax revenues from total handle – or the total amount wagered on racing – has declined tremendously over at least the past 15 years. In 2001, more than $1.46 billion was wagered on races in the state. In 2014, that number had declined to $427.5 million – a 71 percent decrease. Similarly, the state’s share of tax revenues on those wagers decreased 65 percent over the same period, from $31.8 million in 2001 to a little more than $11 million in 2014. It costs between $18 million and $20 million to regulate racing in the commonwealth.

In recent years, the Racing Fund’s deficit has been filled using transfers from the Race Horse Development Fund, which is supported by a percentage of tax revenues from slot machine gaming. A transfer of $4.2 million, spread over fiscal years 2013-14 and 2014-15, allowed the Racing Fund to remain solvent. Governor Tom Wolf’s budget proposed a $6.5 million transfer for fiscal year 2015-16.

While the Race Horse Development Fund has helped to keep the Racing Fund afloat, the law that created it contributed to the present dilemma. Act 71 of 2004, or the Race Horse Development and Gaming Act, increased the regulatory oversight responsibilities of the state racing commissions by 50 percent, adding two new racetracks to the four that existed at the time, but the act did not dedicate any of the approximately $2 billion in slot revenues that have been generated to date for the Race Horse Development Fund to meet that increased workload.

The present deficit is also complicated by another factor. In 2013, the General Assembly enacted Act 52, a provision which imposed a 10 percent advanced deposit wagering tax on horse racing bets placed with companies other than the six licensed Pennsylvania racetracks via the Internet from a Pennsylvania-based IP address. As a result of litigation challenging the constitutionality of this provision, a $1.9 million tax refund must be paid from the Racing Fund.

Chairman Newman also reiterated that the Standardbred Sale currently slated to kick-off Monday, November 2 at the Farm Show Complex & Expo Center in Harrisburg will move forward as planned.

(Pennsylvania Department of Agriculture)

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