Horse racing industry frets as states look to rein in casino subsidies propping up purses

Horse track operators and breeders are concerned the good times might be trotting to a close as some states move to rein in a lucrative subsidy that's helped prop up their long suffering-industry.

Twenty states divert a slice of casino and slots parlors revenue to help boost horse racing prize money, according to the American Gaming Association. Bigger purses, the thinking goes, will draw the top level horses and generate more track bets, helping revive the once-popular industry.

But facing budget deficits and out-of-state casino competition, some lawmakers are reassessing.

"Every local track and every local horsemen's group is always worried about that," says Christopher Scherf, executive vice president of the Maryland-based Thoroughbred Racing Associations. "Politicians see someone has money and they figure they can use it. That's what they do."

Generally, the racing subsidies call for diverting a percentage of table game and slot machine revenues to a state fund with strict guidelines for how the money is spent.

Massachusetts, for example, gives 75 percent of the money to the thoroughbred racing industry and the rest to harness racing. The two industries must then dedicate 80 percent to racing purses, 16 percent toward races reserved for Massachusetts-bred horses and 4 percent to health and retirement benefits for industry workers.

Such subsidies are a critical lifeline for racing, which has seen steady declines across a number of industry metrics, including the number of races held, the number of racing horses born and overall betting activity, according to data from the Jockey Club, a leading industry group.

Few tracks even keep attendance numbers anymore because the numbers of spectators has dropped off so dramatically, experts say. Nevertheless, there was over $1.1 billion in prize money available in 2014, thanks in large part to the racing subsidies, which generated over $400 million toward purses that year, according to the Thoroughbred Racing Associations.

Louis Raffetto, a longtime racing executive, says the subsidy is a small price to pay to preserve thousands of jobs at tracks and farms.

"It's minuscule, in the grand scheme of things. The economic benefit is well worth those short dollars," says Raffetto, who is helping coordinate three "festival" thoroughbred race days at Boston's Suffolk Downs, starting with a Saturday race card featuring over $500,000 in prize money made possible by the state's new race horse development fund.

But the move to curtail the subsidies is playing out in some of the earliest states to offer them.

In New Jersey in 2011, for example, Gov. Chris Christie ended a direct, $30 million subsidy to the racing industry from the Atlantic City casinos.

Lawmakers in West Virginia have also pared back the percentage of slot machine revenues diverted to the industry in recent years, leaving owners and breeders there anxious.

"We just don't know what they're going to do," says Karen Painter, who owns Blue Spruce Farm in Kearneysville with her husband. "We're dealing with people that don't always understand the contribution the equine industry as a whole has on the economy."

The debate also has played out in Iowa, Indiana, Delaware and elsewhere.

In Pennsylvania last year, state Rep. Todd Stephens proposed redirecting $250 million from the state's horse racing fund to public schools, noting that a Saudi prince and other wealthy foreign horse owners were among the beneficiaries of the inflated prize money.

"It's not government's job to pick winners and losers," Stephens said this week. "I generally oppose crony capitalism and corporate welfare-types of programs. Consumers should decide how they spend their money."

Animal welfare activists also dislike the subsidies, suggesting they encourage owners chasing high purses to keep running horses that are vulnerable to injury, a claim dismissed by the industry.

In Massachusetts, the subsidies have come to the fore because the owners of Suffolk Downs, New England's last thoroughbred track, want to redevelop the property. That would leave casinos setting aside money for an industry with no means to spend most of it.

Horse owners and breeders hope lawmakers allow them to use proceeds from the racing fund to build their vision of an equestrian center and racetrack.

"Massachusetts is an extreme case. You've got all this money coming in and really nowhere for it to go," says Kathy Guillermo, of People for the Ethical Treatment of Animals. "It begs the question: Why are we continuing to sink millions of dollars in an industry that's shrinking?"