California Governor Considers Racing Bill

California Gov. Gray Davis is a pro-labor Democrat who has spoken out in opposition to the expansion of gambling in his state. That's why a bill passed in the waning hours of the 2000 California legislative session poses something of a dilemma to the first-term governor.

Part of Assembly Bill 2760 appeals to Davis because it will reform both the working and living conditions of the estimated 3,500 backstretch employees at California racetracks by opening the doors to labor unions and establishing housing standards. But Davis may not favor the other major component of the bill, which permits telephone or account betting on horse racing through a system called "advance deposit wagering." No one seems certain whether or not the governor will sign AB2760 into law.

The bill, sponsored by Democrat Herb Wesson of Los Angeles and approved by the state Assembly 56-6 on Aug. 31 after clearing the Senate 38-1 the previous day, evolved from two separate pieces of legislation. The original AB2760 dealt only with backstretch reform and was vehemently opposed by trainers who, if unions were established among stable workers, would have had to negotiate through a single collective bargaining unit, the California Thoroughbred Trainers organization. A second bill, AB1405, legalized advance deposit wagering. The decision to combine the two bills resulted from compromise talks involving legislators, owners, breeders, trainers, and representatives of California racetracks. There was no Thoroughbred industry opposition to the new AB2760, although the official position of the trainers' association was neutral.

The bill has been sent to Davis, who has 30 days to sign, veto, or allow it to become law without his signature. If not vetoed, AB2760 would go into effect Jan. 1, 2001.

Legislators became sensitive to backstretch issues following a series of articles in the Los Angeles Times that depicted deplorable living conditions and labor law violations at California racetracks. AB2760 requires the California Horse Racing Board to establish and enforce standards for living conditions at all tracks, though tracks which race 43 days or less will be held to lower standards. That would include government-owned county fairs and Del Mar racetrack, whose stable area is considered one of the worst in the state. Emergency housing standards are to be established within 120 days of the bill becoming law, with permanent regulations in place within 18 months. Tracks will have until Jan. 1, 2003, to be in full compliance of housing standards.

The CHRB also will be responsible for establishing procedures governing possible unionization of backstretch employees. Union representatives will be given names of backstretch workers and granted access to stable areas in an attempt to collect signed cards from a majority of workers in a defined unit. Unions (with CHRB approval) are permitted to define each unit, which can be categorized by breed, location, occupation, track, or other category. If a majority of a trainer's employees agrees to be represented by a union, the trainer has a choice of negotiating individually with the union or participating in collective bargaining with other trainers through a representative. The representative will be elected by trainers, who get one vote for each employee.

Trainers will be prohibited from discriminating against or firing employees who attempt to organize a labor union.

In addition, payrolls of trainers will be subject to annual audit, and each trainer will be required to file an annual certified declaration that he or she has complied with labor laws. Trainers with union contracts will be exempt from these requirements.

The advance deposit wagering portion of AB2760 goes beyond mere legalization of account wagering. It sets source market fees to protect California from out-of-state account wagering operators, allows out-of-state residents to bet through California account wagering systems, and permits multi-jurisdictional betting hubs, similar to the hub in Oregon used by the TV Games Network. The bill also permits tracks or simulcasting facilities to take on-site wagers on any race that is offered to a California resident through advance deposit wagering.

The CHRB will have broad powers to approve advance deposit wagering operations.

There will be no state tax on advance deposit wagers, but the following will be deducted: .0011% for the Kenneth L. Maddy Fund for equine research at the University of California-Davis; .0033% to cover the cost of audits of trainers' payrolls (with the unspent portion going to augment compulsive gambling programs); .00165% to be divided equally between existing pension plans for backstretch workers and a welfare fund to benefit horsemen. (Additional revenue for pension and welfare funds could come from another provision of the bill which mandates an increase from 20% to 50% of revenue from charity racing days be earmarked for racing-related charities. That could mean an increase from $200,000 per year to $500,000.)In addition, satellite wagering facilities will receive 2% of the amount handled on California races through advance deposit wagers as a payback for potential loss of business (the amount varies according to total amount wagered).

Account wagering operators -- both within California and out of state--will be limited to a 6.5% share of the amount handled on races run in California. The operator's cut when a California resident bets on an out-of-state race cannot exceed 10%. The bill's supporters say that component will deal effectively with bet "poaching" from out of state account wagering systems that has taken an estimated $250 million in wagers out of California for each of the past several years. In keeping with the bill's pro-union stance, AB2760 requires in-state wagering systems to negotiate collective bargaining contracts if work is similar to that performed by union employees at tracks or simulcasting sites.

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