Horseracing bill comes as probe underway

A state senate bill introduced yesterday that would expand oversight of Pennsylvania's multi-billion dollar horse racing industry and pave the way for internet wagering comes as word has spread of a federal investigation into the sport.

Two sources familiar with the investigation - a state official and a horsemen's board member - said the probe focuses on race fixing in Pennsylvania but that the scope was not clear: if investigators are looking at one race or many races, or one track or multiple tracks.

A spokeswoman for the FBI would neither confirm nor deny an investigation. But a member of the board of directors of the Horsemen's Benevolent and Protective Association at Penn National Racetrack confirmed he had been directly interviewed by FBI agents as part of an investigation.

The new legislation, introduced by four senior Republicans, would create a Bureau of Horse Racing to oversee all day-to-day operations of racing statewide. The new bureau would enforce stringent drug testing, increase fines, and crack down on the exchange of "gifts" from breeders, trainers and owners to track personnel and their relatives.

The bureau would be run by the state's Gaming Control Board. Currently, an underfunded and understaffed Racing Commission reports to the Pa. Dept. of Agriculture. The Racing Commission is expected to run out of money before the fiscal year ends in June. The cost to regulate the industry is $21 million a year.

Under the proposed law, the Gaming Board would be able to grant licenses to casinos for Internet wagering systems that would take bets online for horse racing only. The money wagered via the Internet would be folded into the pari-mutuel handle with any new tax revenue it generates paying for the new regulatory oversight. There was no estimate on how much money would be generated.

The four sponsors of the bill are among the largest recipients of racing industry money.

During the 2012 election cycle, State Senate Majority Leader Dominic Pileggi (R-Delaware) accepted $65,000 from state horsemen's groups, according to campaign contribution filings. The three other sponsors in the state senate took lesser sums: Robert Tomlinson (R- Bucks), $8,500; Elder Vogel (R-Allegheny), $7,000; and Joseph Scarnati (R-Jefferson), $5,000.

A spokesman for Pileggi said the bill puts the reins of regulation into appropriate hands.

"He believes that Pennsylvania has a large, well-staffed and highly skilled Gaming Control Board which already regulates billions of dollars worth of gaming activity in the Commonwealth," said Pileggi's spokesman Erik Arneson. "It's entirely appropriate for the Gaming Control Board to take over the role of regulating standardbred and thoroughbred racing, along with pari-mutuel wagering, as part of their duties."

One industry source, who asked not to be named for fear of retribution, criticized the new bill as a way of preemptively taking the sting out of the federal probe and allowing the bill's sponsors to establish some distance from the powerful horsemen's associations.

The last bill to have a major impact on the horse racing industry came in 2004 when the state legislature voted to allow casino gambling. In that bill, legislators created a fund to help keep the racing industry solvent. The fund is subsidized by a tax on Pennsylvania's slot machines, which have poured hundreds of millions of dollars into the industry, thus helping it stave off collapse.

More than $1.3 billion in slots revenues have gone to fuel oversized purses, horse breeders' funds and benefits for horsemen since Pennsylvania legislators legalized casino gambling. Last year, more than $250 million was split among the state's six race tracks.

The cash-infusion was successful in stopping Pennsylvania racing from going into freefall. The number of foals born each year in the state rose from 984 in 2004 to 1,526 in 2010 before falling back to pre-slots levels last year. Despite the temporary surge, money to regulate the industry stayed flat.

"It's been completely unsustainable," said Michael Rader, executive director of the senate agriculture and rural affairs committee. The bill, Rader said, is intended to cut costs, increase revenues, and provide for continued integrity of the sport.