Pennsylvania equine industry on alert as state budget deadline looms

Frostmourne led them home to win the 2017 Penn Mile. Photo by The Racing Biz.

by Linda Dougherty

The Pennsylvania breeding and racing industries are bracing for what has become an annual threat from lawmakers in Harrisburg to raid the Race Horse Development Fund, this time in order to help balance the $32 billion state spending plan for 2017-18.

The state legislature earlier passed a spending plan but has not yet fully devised a way to raise the revenue for the plan; the state Constitution requires a balanced budget, and published reports indicate the Legislature was about $2 billion short of achieving balance, with Monday midnight the deadline before non-essential government services would have to be shuttered temporarily.

The threat this year, however, could mean the complete elimination of the $250 million Fund, which has boosted purses and breeder incentives for more than a decade. The Fund was created as part of Act 71, which legalized slot machine gaming in Pennsylvania in 2004, with monies to the Fund generated by an assessment on casino slots revenues.

Brian Sanfratello, executive director of the Pennsylvania Horse Breeders Association, said he is working with other representatives of equine industry groups in Harrisburg to address the situation and make sure the Fund is untouched.

Since 2010, the General Assembly has diverted $212 million from the Fund for purposes of addressing state funding shortfalls, according to the Pennsylvania Equine Coalition, which represents the industry.

In a press release, the Pennsylvania Equine Coalition noted that horse racing and breeding are responsible for 20,000 jobs in the state. “If lawmakers raid funding for the industry, it will force many horse owners to relocate their horses to other states, resulting in major job losses for our fellow Pennsylvanians,” it notes.

Todd Mostoller, executive director of the Pennsylvania Horsemen’s Benevolent and Protective Association, which represents 3,500 horsemen at Penn National and Presque Isle Downs, said that the expansion of slot machine gaming was a partnership between the state, racetrack operators and the horsemen. “The primary legislative intent was to promote and protect the equine industry within the Commonwealth,” he said. “The second benefit was to create property tax relief for Pennsylvania homeowners.”

House Majority Leader Dave Reed (R-Indiana County), said last week that transferring money from the Fund is one of several “revenue enhancement ideas” under consideration.

“It’s just as feasible as anything else right now,” Reed said in a published report. “It’s one of the issues we’re going to work through.”

Many who are in favor of taking money from horse racing to plug the budget gap do not acknowledge that it was because of the sport that casinos were legalized. The right-leaning Commonwealth Foundation called for an elimination of what it called the sport’s ”$2.7 billion taxpayer-funded windfall” in a July 6 release.

“Ending these outrageous subsidies for horse racing should be the first step toward balancing the budget,” said Nathan Benefield, vice president and COO of the Commonwealth Foundation. “Before considering any sort of tax increase, lawmakers should make sure existing revenue is spent on legitimate priorities.”

A sampling of comments from a PennLive.com story about the proposed Fund raid indicates the public also has a misperception of how and why racing gets its revenue, and it has come to be seen as a misuse of public funds.

“They should cut the Race Horse Development Fund transfer by 50 percent. Put those dollars into the Property Tax relief fund as they should have been all along,” wrote the commentator “Edstem.” “If the racehorse industry cannot sustain itself without outside cash – let it go.”

In the wake of Act 71’s passage, new farms were built in Pennsylvania, purses increased, and the breeding industry expanded. Yet Harrisburg’s continued pillage of the Fund drove many of those farms, like Ghost Ridge, Dana Point and Penn Ridge, out of business, and the annual foal crop contracted, falling from a high of 1,540 in 2009 to just 669 in 2015, according to the Jockey Club.

Still, Pennsylvania remains one of the best states in which to race and breed. Purses at Parx Racing average more than $371,000 per day, while Penn National averages more than $160,000 and Presque Isle Downs $156,000, according to The Jockey Club. The breeding program offers more than $30 million annually in breeder awards, purses and owner bonuses, with more than 400 restricted races.

The uncertainty from Harrisburg, however, has left many breeders feeling skittish.

“One of the problems is that we don’t know what will happen,” said Dr. Jerry Kolybabiuk, who owns Freedom Acres in New Jersey but foals his mares in Pennsylvania due to the collapse of the Jersey breeding program. “We spend a lot of money to produce a foal and plan for three years down the road.”

“I’m a small breeder, with only three broodmares on 17 acres in Chester Springs, and the only reason I’m doing this is because of the breeder awards,” said Alix Coleman.

Mark Reid, who purchased Walnut Green in Kennett Square soon after Act 71 was passed, said that he’s now foaling only 12 to 15 mares in Pennsylvania as opposed to more than 80 mares five years ago.

“The situation with Harrisburg has sent mare owners to other states,” said Reid.