State Department of Agriculture's grab puts horse racing industry, its jobs at risk, auditor general warns

| Wednesday, June 18, 2014, 11:03 p.m.

HARRISBURG — Pennsylvania's horse racing industry is in danger of dying unless the state Department of Agriculture stops diverting money meant to regulate it, Auditor General Eugene DePasquale warned on Wednesday.

The department has put the industry and the 23,000 jobs it supports at risk, DePasquale said, arguing the industry would shut down without the money to operate racetracks safely. He cited the results of an audit of the State Racing Fund, a roughly $18-million-a-year fund established in 1981 to support horse racing operations.

“If significant steps aren't taken, the State Racing Fund in Pennsylvania is in significant jeopardy,” DePasquale said.

Most of the money in the fund goes toward equine drug testing to ensure horses' safety. Other expenditures fund the Horse Racing and Harness Racing commissions, which regulate the industry.

DePasquale's office concluded that during the audit period, from 2009 to 2013, the department took $5.2 million for personnel costs it could not appropriately document and overbilled the fund by more than $873,000 to cover revenue shortages.

The Department of Agriculture denies misusing the money.

“The fund is being used in accordance with the law,” said Samantha Krepps, a spokeswoman for the agency. “The department can charge the fund as it's executing its regulatory role.”

Krepps said personnel costs the report references did, in fact, support the industry. For example, the agency may set aside money from the State Racing Fund to pay legal or budgetary staff who don't work for the racing commissions directly but whose work supports the office, she said.

DePasquale said the law governing the collection and use of the money is outdated. Licensing fees that constitute one source of revenue for the fund — which trainers, jockeys, horse owners and others in the industry must renew every three years — are capped at $100.

He recommends raising the fees.

Krepps said the Agriculture Department depends on activity at racetracks for much of the money that supports horse racing. In addition to licensing fees, money for the State Racing Fund comes from taxes on admissions, gambling, uncashed winnings and breakages — money from rounding down players' winnings to multiples of 10 cents.

“Not as many people are going to the tracks,” Krepps said.

DePasquale said there are nearly 550 horse breeders in Pennsylvania. More than 3 million people attend racetracks in Pennsylvania, where they bet more than $1 billion a year.

Six horse tracks operate in the state, according to the Department of Agriculture. Another is in the works in Lawrence County.

Sen. Elder Vogel, R-Beaver County, has introduced a bill aimed at updating use of the State Racing Fund. Vogel's legislation, which is before the Senate Appropriations Committee, would raise the limit on licensing fees for horse racing professionals to $1,000.

Vogel, chairman of the Senate Agriculture and Rural Affairs Committee, introduced the bill with support from several powerful Republican senators, including Majority Leader Dominic Pileggi of Delaware County and President Pro Tempore Joe Scarnati of Jefferson County.

Mike Rader, executive director of the committee Vogel chairs, said Appropriations may vote on a proposed amendment to the measure as soon as next week.

Raising the cap on licensing alone probably would not bring much extra money to the fund, he said.

Rader said Vogel plans to introduce an amendment that would use the separate Horse Racing Development Fund, which comes from casino gaming, to pay for drug testing for horses. At about $8 million, drug testing is the fund's largest single expense, he said.

Another proposed amendment to the bill would provide money from the State Gaming Fund for marketing horse racing to generate revenue for the industry.

“The auditor general was correct in saying that reforming this law and the industry is critical so that racing can have proper regulation,” Rader said.

Gideon Bradshaw is Trib Total Media's state Capitol intern. Reach himat

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