It’s that time of year in Kentucky when the problems faced by horse racing get lost in the excitement and success of the spring meet at Keeneland and Kentucky Derby week at Churchill Downs.
Keeneland opens April 3, but not before Turfway Park ends its long winter meet the afternoon before. Financially, it has been a brutal winter in the Bluegrass State. Horsemen have raced for the lowest purses in about 15 years, and when the final results are tallied, field size will be down and business most likely will be off about 20% at the Northern Kentucky track.
For the first time in recent memory, Turfway was able to fill a two-mile race, the first race on closing day. Is it an omen the marathon fight for relief for the racing and breeding industry is nowhere near over in Kentucky?
When the Derby is over and reality settles in at Churchill, the problems will remain. The first condition book at neighboring Indiana Downs, which has purses boosted by slot machines, appears as though it will give Churchill a run for the money for crucial mid-level horses needed to fill programs with good-sized fields. Never mind the tracks in Pennsylvania and West Virginia that race year-round.
And what of Ellis Park, which opens in early July? The track’s owner already has said he expects to cut dates this year to maintain a competitive program. Next year's meet is up in the air.
Legislation to authorize video lottery terminals at racetracks didn’t make it to floor of the House of Representatives this winter, but the gaming plan made much more progress than its predecessors over the past 15 years. Officials have been quietly confident—or perhaps hopeful—the issue will be part of a not-yet-called special legislative session in Kentucky later this spring or summer.
Democratic Kentucky Gov. Steve Beshear, who made a public vote on casino gambling part of his campaign to win election in 2007, hasn’t committed to a special session and hasn’t publicly endorsed the racetrack VLT legislation. Beshear responded to questions submitted by The Blood-Horse in March on the topic of horse racing and breeding, racetrack gaming, and the legislative process in Kentucky.
The Blood-Horse: How would you assess the state of the horse racing and breeding industry in Kentucky?
Beshear: “I formed a Task Force on the Future of Horse Racing in Kentucky last year to study several issues, one of which was the question you have posed. Regarding the breeding industry, Kentucky’s Thoroughbred is the most sought after “brand” in the equine world. Kentucky annually produces more registered foals than any other state; however other states' foal crops are growing.
“Other states have been striving to lure away Kentucky’s top stallions and breeding stock by offering rich incentives to owners and breeders. Other states’ breed development funds are growing. With other states growing their purse accounts and their breeder incentive programs, Kentucky cannot remain status quo. We must increase the money flowing into the industry for Kentucky to remain the horse capital of the world.
“Both Kentucky’s racing and breeding industries are facing severe pressure from competing jurisdictions. The task force reported that virtually all growth in purses nationwide from 2000-07 has occurred at racetracks with alternative gaming revenue. Fifteen of the nation’s top 20 racetracks ranked by 2007 total purses are currently, or will shortly be, subsidizing their purses with alternative gaming revenue.
“Among racetracks with legalized alternative gaming as of November 2008, combined annual purses are forecast to increase by 45.5% by 2013, while combined annual purses at racetracks without legalized alternative gaming are expected to decline by 11.9% by 2013.”
TBH: Does the industry need legislative assistance in your opinion?
Beshear: “I think we always need to be vigilant to do whatever is necessary to protect what is clearly one of Kentucky’s signature industries. Involvement from the executive and legislative branches is clearly one important avenue to ensure that protection. As part of that, we have to continually look for ways to make sure that the industry has all the financial tools necessary to remain in the forefront nationally.”
TBH: There is talk of holding a special legislative session this year. Is this something you believe is needed, and if so, will racetrack gaming be part of the discussion?
Beshear: “It is a bit early to determine whether a special session will occur. In the next few weeks, we will have an internal projection from our budget office about the size of next year’s budgetary challenges. Virtually every expert predicts that next year’s challenges could be even greater than this year.
“Depending upon the size of a looming deficit, we may need to call in the independent Consensus Forecasting Group for a projection and official forecast. With that, we will start working with legislative leaders—as we did this past year—on the best way to move forward to address the challenge, whether that’s a special session or not.
“Clearly, I have been an advocate of gaming for two reasons: 1) It would help one of Kentucky’s signature industries retain its prominence and position; 2) It could provide needed revenues for areas such as education and health care at a time when we are searching for strategic ways that we can continue moving forward in those vital areas. I continue to support expanded gaming for those reasons.
“But it’s important that we work through this process over the next few months in a thoughtful manner and to ensure that we continue to work in a bipartisan and collaborative fashion with legislators. That approach, in my judgment, led to an outstanding legislative session this year, and my hope is that it will be the model for progress moving forward.”
TBH: Some of your supporters in the racing and breeding industry believe you should be proactive given your early support for casino gambling. Do you intend to push for racetrack gaming along with Democratic House Speaker Greg Stumbo?
Beshear: “I have been proactive in my support for expanded gaming to help the industry and our state as it grapples with significant budgetary challenges. The continued tough economy may further underscore that effort, but the key will be working with legislators in a bipartisan and cooperative fashion. That means building coalitions and building trust. The speaker has been a terrific partner in that process thus far, and I think we are in agreement that such an approach has to be our model moving forward on this issue and others confronting our Commonwealth.”
TBH: The Kentucky Horse Racing Commission is in financial crisis. How can this agency get long-term, stable funding, and if racetrack VLT legislation moves through the legislative process, can that measure offer a revenue stream for the commission?
Beshear: “Yes, the Kentucky Horse Racing Commission is confronting significant financial challenges, just as the state is and families are across the Commonwealth. The commission staff asked the racetracks to indicate whether they will be asking for fewer days in 2010. Ellis Park indicated it may close or substantially reduce its race days if it doesn’t receive help with purses. Kentucky Downs and Turfway Park have also indicated they may be required to reduce race days if they aren’t able to offer larger purses.
“The task force report illustrated the severity of the underfunding and understaffing of the commission in relation to other racing jurisdictions. Kentucky operates on a $2.7-million budget. In comparison, New Jersey has a $9.8-million budget and Florida operates on a $9.1-million budget. We will need long-term strategies to solve this problem and develop a dedicated funding source that will allow the regulator of our signature industry to be properly funded.”
TBH: Without gaming revenue, and given the current economic situation in Kentucky, what are the options for the horse racing and breeding industry?
Beshear: “Clearly, that’s one of the challenges we need to, ultimately, address. Your questions underscore the financial distress the industry is in and its importance to the state. Gaming continues to be an important and, in my view, viable option to help the industry.”
TBH: Is Kentucky in danger of losing—or severely damaging—what it calls its “signature industry”?
“Kentucky is in danger of the signature industry not remaining at the forefront in the country. Horses are running in other states that offer higher purses. Stallions have been moving to other states with more lucrative breeders incentive funds. We need to take action to stem the tide and ensure that Kentucky retains its position as the world leader for the long term.”