HARRISBURG (AP) — Pennsylvania’s elected financial watchdog sounded a note of concern Wednesday about the financial viability of a public fund that pays to regulate the state’s horse racing industry.
Auditor General Eugene DePasquale said the State Racing Fund faces increasing challenges and steps should be taken to keep the racing industry from what he described as significant jeopardy.
A report by DePasquale’s agency (http://bit.ly/1jyXgkk) concluded the state Agriculture Department took $873,000 from the fund over three years to plug budget holes and spent about $5 million over four years for personnel costs that lacked appropriate documentation.
“Without proper documentation, we have no assurances that the amount charged to the State Racing Fund is accurate and appropriate,” he said at a Capitol news conference. “In my view it is unacceptable and must change.”
As one example, he said the department used $177,000 from the fund to pay for a special adviser to assist Gov. Tom Corbett on horse and harness racing issues, as well as to serve as the governor’s liaison on issues facing farmers and rural residents.
Agriculture Secretary responds
Agriculture Secretary George Greig responded by saying that regulating the industry has become increasingly expensive while track wagering has been on the decline.
“The regulatory obligations of the Department of Agriculture in fulfilling its duties under the Racing Act increased well in excess of 50 percent with the advent of slots and table games in Pennsylvania,” Greig wrote. “While the Gaming Act brought a virtual fountain of tax revenue to many stakeholders, the Department of Agriculture received nothing except three additional racetracks to license.”
Greig said it was not correct to claim his department uses the racing fund simply to balance its budget, a practice DePasquale said was an abuse of authority. Agriculture spokeswoman Samantha Elliott Krepps said the transfers from the fund have been legal.
Krepps said the fund needs to generate about $18 million to pay for related costs, but in recent years, that figure has been closer to $11 million. Its revenue comes from wagering, uncashed tickets and other sources.
The Race Horse Development Fund, a separate entity that draws revenue from the state’s casinos, has generated more than $185 million for the state’s general fund since 2010, DePasquale said.
DePasquale said the state currently has about 550 horse breeders in 40 counties and is home to six tracks. His report recommended the state update licensing fees, find new sources of revenue and prohibit the Agriculture Department from using money from the State Racing Fund to plug budget holes or to pay for personnel not directly related to the horse racing industry.
Equine Coalition applauds report
The Pennsylvania Equine Coalition, a statewide group representing more than 10,000 horse owners, trainers, and breeders that make up the horse racing industry in the state, applauded the release of the report.
“This report confirms what the Pennsylvania racing industry has been saying for a number of years: that money intended for the operation of the state’s racing commissions and for breeders incentives was improperly diverted for other purposes,” Pete Peterson, spokesperson for the Pennsylvania Equine Coalition, said in a news release.
“We greatly appreciate the efforts of Auditor General DePasquale in taking a closer look at this issue. These diversions resulted in less money being available for oversight of the industry and shortfalls in the operating budget of the commissions,” Peterson said.
Problem worse than was thought
Peterson noted that last year, Pennsylvania horsemen and breeders urged the legislature to transfer funds intended for purses and breeders awards to address shortfalls in available funding from the State Racing Fund keep the racing commissions up and running. But in reality, DePasquale’s report shows that money from the Racing Fund was paying for far more than its intended purpose of covering racing commission operations, he said.
Peterson also noted that the report highlights how – since 2010 — an additional $212 million was diverted from the Race Horse Development Fund, which provides money for purses and breeders incentives. The RHDF was created as part of Act 71, which legalized slot machine gaming in Pennsylvania. Monies to RHDF are generated by an assessment on casino slots revenues.
“Economic data from the Pennsylvania Department of Agriculture, released in 2010, shows that the live racing industry generates $1.6 billion in annual economic activity and supports 23,028 jobs in Pennsylvania,” Peterson said. “Every time that money intended for the industry is diverted, it creates uncertainty within the industry.”
Coalition: funding uncertainty hurts economy
Peterson said that when the amount of money available for purses and breeders incentives is in constant question, it discourages owners from making capital investments in their farms, it impacts the amount of money a buyer may pay for a Pennsylvania-bred horse and how many horses are bred in the state.
“Uncertainty results in less dollars invested in Pennsylvania, directly impacting more than 20,000 hard-working Pennsylvanians who rely on the industry for their jobs, including blacksmiths, stable hands, track workers, horse trainers, jockeys and drivers, veterinarians, and farmers who produce feed,” Peterson said.
Peterson noted that the industry has urged lawmakers to establish independent thoroughbred and harness racing commissions, which would prevent funds intended for the oversight of racing from being diverted for other purposes.
Times Leader Staff Writer Steve Mocarsky contributed to this report.