Funds for KHRA, Drug Testing Hang in the Balance

The Kentucky horse racing industry and some state lawmakers are rallying around legislation that would spare racetracks the cost of drug testing and provide millions of dollars a year to fund the Kentucky Horse Racing Authority.

The bill is expected to be discussed in “free” conference committee--that means changes can be made to the document--March 26 or March 27, the last two days of the Kentucky General Assembly session for 2007. Since it was first offered in January, the bill has been subject to much negotiation and amendment.

The bill, introduced in the House of Representatives because it deals with budgetary issues, would provide about $5 million a year in a revolving fund to support the KHRA, which in a recent state audit was said to be under-funded. The money would come from the pari-mutuel excise tax after statutory deductions for the Kentucky Thoroughbred Development Fund, Kentucky Equine Drug Research Council, and the University of Louisville equine business program are made.

An alternative also being discussed would suspend racetrack license assessments for another year to raise about $1.2 million for the KHRA. A similar plan was enacted in 2006 but only for one year. Thoroughbred tracks pay $3,500 and Standardbred tracks $1,750 per live racing day.

Republican Sen. Damon Thayer, an advocate for using the about $5 million from the pari-mutuel tax to support the KHRA, said the proposal stems from the state audit that suggested the authority needs more money and personnel to properly perform its duties. The audit found deficiencies in several areas.

Thayer noted the General Assembly requested the audit. “It lays out a path for us to make the racing authority one of the most respected regulatory bodies in the country,” he said. “It’s the same concept we used to fund breeder incentive programs. We used the industry’s sales tax money. What better way is there to use this money than to protect horse racing?”

Turfway Park president Bob Elliston, who has been involved in the racing industry’s legislative endeavors in the past, said Turfway would save about $800,000 a year in drug-testing costs and licensing assessments. But he said the “most important aspect” of the bill is proper funding for the KHRA.

The audit showed that for 2006, the KHRA had total operating expenditures of $2.7 million, well below the average of $6 million for 11 major racing states. Based on 10-month totals for 2006, less than 10,000 equine drug tests were performed compared with an average of 20,800 for the 11 states. The average regulatory staff was numbered at 68; Kentucky had 31 employees.

The lack of funding for the KHRA has become a sore point in the industry in light of the audit and the fact the state touts itself the "horse capital of the world.” In addition, Gov. Ernie Fletcher when he took office bagged the old Kentucky Racing Commission and formed the KHRA in part to improve the regulatory aspects of the industry.

“Kentucky has been out of step with other states,” Elliston said. “We certainly are interested in being competitive with other states with gaming, but it’s just as important to get enough resources for the racing authority to do its job. This is a small effort to remain competitive in Kentucky (absent funds from alternative gaming).”

The legislation, which has the support of all industry stakeholders regardless of breed, officials said, would provide up to $500,000 a year to increase Standardbred purses and not more than $50,000 for Quarter Horse purses. Currently, the provision would pertain only to The Red Mile, the Lexington track that races at least 30 harness dates and holds the only live Quarter Horse meet in the state.

“All the Thoroughbred tracks have signed off on this,” Thayer said.

Joe Costa, president of The Red Mile, said he’s hopeful the legislation passes, and if so, officials would meet to discuss how to fund purses. He indicated it is crunch time for the track, which last year was short on horses and continues to face competition from tracks with gaming-fueled purses.

“Basically, we would use this as an attempt to buffer competition, particularly from tracks in the Northeast,” Costa said. “I have no illusions about $500,000 for our entire meet--Yonkers Raceway in New York is putting $542,000 a week into purses. The harness business is facing an economic tsunami from the Northeast.”

A long-range goal of The Red Mile is to bring harness racing’s championship, the Breeders Crown, to Lexington in 2010, the year the Kentucky Horse Park hosts the World Equestrian Games. Costa said it’s premature to discuss the plan, but a half-million dollars would go a long way toward making a bid for the event.

“I’m fearful if we’ll have any horses here, period, and if it’s not rectified soon, the Grand Circuit (championship meet) could come under siege,” Costa said. “It’s a frightening environment for Standardbred racetracks without slots. If you think West Virginia has been an annoyance (for Thoroughbred tracks without slots), wait until Aqueduct and Belmont Park get them.”

Costa said The Red Mile, which races roughly 40 days, pays about $80,000 a year for drug testing. He said horse industry officials are united in the belief the KHRA should be better funded.

“I think most legislators understand the problem,” Costa said. “Hopefully, they can resolve the problem during the current session.”

The legislation also contains language that would spare the excise tax for one day at tracks whose handle is under a certain threshold and which offer total purses of $650,000 for one program. Ellis Park could use the tax break for this year’s Claiming Crown, while Turfway could use it for Kentucky Cup day or Lane’s End Stakes (gr. II) day.