The California Horse Racing Board Wednesday opened the door for tracks to pursue a workers' compensation insurance agreement that would bring relief to racing operations throughout the state.
By a 5-0 vote (with chairman Alan Landsburg and commissioner John Sperry absent), the board agreed to increase the percentage of off-track betting handle that can go the state's vanning and stabling fund. The additional money the move generates can be used to help ease the cost of workers insurance under legislation that still needs the approval of California Gov. Gray Davis.
The board increased the percentage of off-track handle from .70 to .87 of a point in Northern California and from .74 to .94 in Southern California. The increase will mean no additional pari-mutuel take-out to bettors, since the money will come from horsemen's purses and track commissions.
"We have gone over the numbers and we think that (increase) will result in sufficient funds to start the program," said Jack Liebau, director of racing for Magna Entertainment Corp.
Officials hope to have the workers' compensation program, which is being offered by major insurer American International Group, up and running by Nov. 1.
The agreement would cut the amount of money currently being paid for workers' compensation by as much as 30 percent in some cases.
AIG is seeking more than $7 million annually ($5.2 million for the first year's nine-month program) in refundable security to cover claims from the tracks and horsemen, who would split the cost equally.
Liebau told the board there were significant hurdles to overcome before the program is approved. He noted that a participation clause (requiring 95 percent of the state's 800 Thoroughbred trainers taking AIG policies) needs to be negotiated.
"We don't know if (the participation requirement) is cast in stone," Liebau said.
He expressed some reservations about the plan, but said he hoped the deal would be approved.
"We think we are there," Liebau said. "But things change very quickly. On Monday we had a meeting in San Francisco (with AIG) and by Tuesday morning the price tag had gone up $1.4 million. I just think we have to move ahead with this to save the industry."
Later, he added, "There's a chance this program could fall apart. I hope like hell that doesn't happen."
He cited one example of a trainer who operates in the midwest, where he pays $2,600 for workers' compensation insurance, and in California, where his comparable bill is $29,000.
Liebau said getting a workers' compensation program in place could help California's horse shortage as well by encouraging out-of-state operations to return.
Craig Fravel, vice president of the Del Mar Thoroughbred Club, noted that the program's goal is to eventually bring down the cost of the insurance through improved claims management and accurate payroll information. He said an experienced claim expert would oversee the program.
Eventually, California racing could have self-sufficient workers' compensation program so that the vanning and stabling funds would not be needed, Fravel said.
"The object is to create a profitable program so that profits can go back into the program and revenues exceed claims," he said.
Don Johnson, representing the Thoroughbred Owners of California, said horsemen strongly support the program.
The board's action is contingent on Davis' signature on the bill, AB 2931, which authorized up to $5 million from the vanning and stabling fund to go to help defray workers' compensation costs and backstretch welfare programs. It allows another $1 million from the state racing marketing committee for the same purpose.
Commissioner Marie Moretti said Davis must sign the bill – or veto it – by Monday. It was approved by both house of the legislature without opposition and is expected to gain final approval.
Ed Halpern, executive director of the California Thoroughbred Trainers, emphasized the need for action by the board.
"I can tell you that many, many trainers have told me they are just hanging on" for a resolution, he said.