Pennsylvania Budget Rift Threatens Racing

Pennsylvania racing industry stakeholders and government officials began hastily convened negotiations Friday in an attempt to avert a shutdown of the six Thoroughbred and Standardbred tracks in the state, which could come as soon as Oct. 30.

The state has run out of money to fund the Pennsylvania Horse Racing Commission’s administrative and drug-testing costs, which run about $20 million annually.

The fact that the State Racing Fund budget–which is funded by a tax on pari-mutuel wagers–is being bled dry is not new in Pennsylvania. Such shortfalls have routinely occurred in the past, but have been rectified by transfers from the general fund or slots revenue that is otherwise earmarked for the Pennsylvania Race Horse Development Fund.

The new wrinkle is that Pennsylvania is in the midst of a four-month state budget gridlock between the new Democratic governor and the Republican-led legislature, and the PHRC is one of many state agencies whose 2016 funding is in limbo. In the case of the racing industry, the budget impasse is also preventing transfers of funds to get the PHRC through this year.

Gov. Tom Wolf’s administration fired the first racing-specific salvo Thursday when it warned that the state may have to suspend horse racing in Pennsylvania over the fracas.

Salvatore M. DeBunda, president of the Pennsylvania Thoroughbred Horsemen’s Association, was asked by the TDN Friday if he thought the threat of closing down racing was being used as a bargaining chip in a much larger budget war.

“Yes, my feeling is that [racing is being used as] a pawn,” DeBunda said. “Because the impact of shutting down would not only affect the races themselves, but all the support things that happen with the races–the employees who work at the facilities, the people who take care of the horses, the vets, the people who sell the grain, the exercise riders, the people who do transportation of the horses. It would have a tremendous affect on the economy.”

But Wolf’s press secretary, Jeff Sheridan, wrote in an email published by the Philadelphia Inquirer that the racing industry had better be prepared to shoulder millions of dollars in drug testing costs if it wants to remain operational.

“It wasn’t an ultimatum–it was a hard truth,” Sheridan wrote. “If there is not a solution by [Oct. 30]…we will be forced to shut down horse racing.”

According to the Inquirer story, Wolf’s proposed budget for this fiscal year continued the stopgap practice of transferring money to buttress costs, but that the needed $6.5 million to make up the 2015 shortfall is what’s frozen by the budget stalemate.

DeBunda, who was reached by phone late Friday afternoon, said he is currently in Florida and was not able to attend that day’s meeting, which he said included representatives from the PTHA, the state’s horse breeders, racetracks, and the Department of Agriculture.

“We recognize the fact that they’re having a shortfall,” DeBunda said. “But what we were surprised and disappointed by is that all of a sudden, we’re told that we have a week to resolve this. And if not, they’re going to give 30 days notice to shut down racing. I think it’s difficult to resolve it in a week. We’re going to try and resolve it in a week if we can, but if we can’t, I’m hoping that we’re far enough along [in coming up with a plan for the future] that they don’t take that step.”

Representatives from Parx and Penn National did not respond to requests for comment before deadline for this story. Nether did Walter Remmert, the acting executive secretary of the PHRC, nor anyone at Gov. Wolf’s office.

“The fact that we find ourselves here today should not come as a surprise to anyone,” agriculture secretary Russell Redding said in an emailed statement. “I have been sounding this alarm for months now. The system is broken, and it needs to be fixed.”

Redding continued, “This problem has persisted for years. There has been a 71% decline in wagers placed on live horse racing in the state since 2001. This means there has been less revenue for the oversight of the industry. There is a massive structural deficit in the State Racing Fund that has nothing to do with the current budget impasse. We can’t keep putting band aids on it in the form of one-time transfers from other funds, but this is a problem that is best addressed with surgery.”

Pennsylvania and Illinois are the only two states currently functioning without a budget.

Although it seems implausible that the Pennsylvania impasse could kill off the racing industry for good, there is precedent for it happening elsewhere.

In 2010, Rockingham Park called off its harness meet after New Hampshire failed to include funding for the racing commission in the state budget. The state essentially told Rockingham it had to pay the commission’s $500,000 in operations costs if it wanted to run a three-month meet. The track declined, and hasn’t run live racing since.

“There’s 23,000 horse racing jobs in Pennsylvania,” said DeBunda. “A lot of those would disappear within that time frame. And the problem is that even if it gets [eventually] resolved, some of the horsemen are likely to leave and not come back, and some of those employees are likely to leave and not come back because they don’t want to be under the cloud of this happening again.”