Kentucky state Senator John Schickel introduced a measure to preserve historical horseracing operations—a vital revenue source for the state’s horseracing tracks and industry. The bill will be heard in the Senate Licensing and Occupations Committee, which Schickel chairs. Senate President Robert Stivers will co-sponsor the bill, Schickel said.
The bill aims to position historical horseracing on more solid legal ground, following last year’s state Supreme Court ruling that some forms of it are not parimutuel. The court recently rejected the request of a racing-group coalition to rehear the case. As a result, the industry is seeking legislative relief.
The Family Foundation, a conservative group responsible for taking the case to the state Supreme Court, has said the only way to legalize historical horseracing machines is by amending the state constitution. By going that route, the earliest the games could be legalized would be late 2022, following a statewide voter referendum. However, horse industry officials said without a quick legislative solution to keep the racinos open, a major Kentucky industry would experience huge job losses. Kentucky Thoroughbred Association President Braxton Lynch said, “Without HHR, we will see a mass exodus of horses from our racetracks and farms alike. It would mean empty barns, empty fields, empty jobs and less tax revenue. The existence of Turfway Park and winter racing in Kentucky would be at risk.”
In Lexington, Keeneland’s Red Mile historical horseracing venue already temporarily shut down “until there is more clarity surrounding the situation,” management said, and officials at Ellis Park in Henderson said that historical horseracing facility also may soon follow suit.
Schickel said his bill would address “maintaining the status quo.” It would ensure historical horseracing facilities “are able to continue operating, while employing Kentuckians, generating state tax revenue and strengthening our signature equine industry.”
Meanwhile, a coalition of 17 groups, led by the Kentucky Center for Economic Policy, said historical horseracing machines pay too little in taxes. The group said the machines currently are taxed at a rate much lower than regular slots in other states and other forms of legal gambling in Kentucky. As a result, the state is losing out on $91 million a year in tax revenue, according to coalition figures.
Currently the machines are “vastly under taxed” in Kentucky at 1.5 percent of the total handle wagered, or 18 percent of the gross commission after winnings are paid out, with 10 percent going back to the horseracing industry to support increased purses and 8 percent going to the state’s General Fund. Surrounding states tax gross commission on slots at 33 percent to 55 percent, the coalition noted. Officials said Kentucky’s tax rate on the total handle for live horseracing is more than double HHR at 3.5 percent, while 70% of gross commission from the Kentucky Lottery goes to the state’s budget; that’s nearly nine times higher than HHR machines’ 8 percent.
In a letter to lawmakers, coalition members said legalizing HHR “but failing to adequately tax it will continue to shortchange schools, health care, infrastructure and other vital services while giving the green light to further expand this rapidly growing form of gambling across the commonwealth.”
They noted last year, the total handle for historical horseracing in Kentucky was $2.2 billion, up 11 percent from 2019 and more than the state lottery and horseracing combined. However, the state collected only $33.8 million in taxes, of which the General Fund got $15.1 million; that’s because in 2014 the General Assembly established a much lower tax rate for historical horseracing than already was set for live races and simulcasting. In addition, under the law, much of the money collected from historical horseracing taxes go to purses and programs that benefit the horse industry, instead to the General Fund.
According to the coalition, if legislators expand the definition of parimutuel wagering but don’t increase the tax rate, they will be allowing “the continued proliferation and growth of casino-type gambling throughout the commonwealth without the associated benefit to Kentucky’s budget, while the associated social costs” of gambling increase. They pointed out since the machines operate like and look like slot machines, they should be taxed similarly.
