What’s In A Trust? Hurdles Ahead For Gov. Wolf’s Plan To ‘Repurpose’ Horse Fund

Written By Kevin Shelly on February 29, 2020 - Last Updated on December 11, 2023
Gov Wolf has hurdles ahead to reverse horse trust fund provision

Without any fuss, Gov. Tom Wolf, a Democrat, signed the Pennsylvania Race Horse Development Trust Fund into law in Oct. 2017.

Now, Wolf wants to take $204 million annually from the fund to create a scholarship program which he says will benefit as many as 25,000 students in 14 state universities. He made the announcement during his Feb. 4 budget address and has been touring to drum up support since.

Wolf approved the creation of the trust fund

Creating a trust fund was, after all, just a tiny piece of the law expanding gambling in the Keystone State. It was part of a massive piece of legislation that authorized various forms of online gambling (casino, sports betting, poker, keno, lottery), mini-casinos, and video gaming terminals.

At the time, Wolf took no issue with changing the existing fund earmarked for the horse industry into a protected trust, even though it meant preventing him from tapping it for other purposes.

In this case, the language in the provision requires repayments for money diverted from the fund since 2009, and it sets a timetable of just 30 days to make good on the repayments.

The provision, included in section (h) of the trust fund law approved by Wolf just two years ago reads:

Unauthorized use of funds:

If any funds from the Pennsylvania Race Horse Development Trust Fund are diverted, redirected, taken or allocated for any purpose other than the purposes authorized under this section through legislative or administrative action, the General Assembly shall within 30 days of the diversion, redirection, taking or allocation restore all funds that have been diverted, redirected, taken or allocated from the Pennsylvania Race Horse Development Fund since 2009 for any purpose other than the purposes authorized under this section.

Not the first proposed raid on the horse fund

The trust provision was the result of the horse fund being repeatedly raided, a ready way of paying for state spending without new taxation.

The best estimate of the amount of money taken from the fund tops $380 million.

The money diverted from the horse fund paid for state Department of Agriculture expenditures, such as the state’s animal health and diagnostic commission, fairs showcasing agriculture, the state vet lab, the state farm show, and more than $183.8 million to the state’s general fund. The oversight of the horse industry falls to the Department of Agriculture.

The money raids are why the horse fund was converted into a protected trust when gambling expanded in 2017. New sources of revenue (and competition to horse betting) were added, but with no new cut for the ponies.

The cart before the horse?

But the nascent scholarship plan is so far light on some pertinent details – student eligibility criteria, legislative support for diverting horse funds, process for circumventing or changing the trust agreement – other than his plans to tap the horse industry trust fund.

As Wolf’s spokesman J.J. Abbott said Friday:

“Establishing (a) scholarship program would require implementing legislation, which is still being developed, and that could redirect the tax revenue to the scholarship program instead of the fund for the subsidizing of purses.”

Asked about the provision of the trust fund requiring large repayments, Abbott responded:

“Per the statute, it looks like that is a question for General Assembly.”

The question of just what legislative action is to be taken to reverse the 2017 trust provision remains unanswered. Add to that the fact that bipartisan support would be needed to pass such a drastic reversal, and it’s a tough sell.

The legislative history and purpose of the fund

Since 2004, equine businesses had gotten about 10 percent of the revenue from the state’s land-based casino slot machines as part of the deal ushering in brick-and-mortar casinos.

Former Gov. Ed Rendell, another Democrat, signed the original law, a compromise between rural Republicans allied with horse farms and urban Democrats allied with casino interests. The fund compensates for gambling money sucked away from waning horse tracks.

Pete Peterson, leader of the Pennsylvania Equine Coalition, said the 2017 legislation had it clear the horse funds were not the Commonwealth’s.

He also said the trust was meant to assure the stability for the horse business, and gaming revenue began to move from retail casinos to online wagering, which does not provide a cut for the industry.

“I think there is bipartisan opposition,” to fund the governor’s plan via the trust. He added: “Certainly the governor and his staff did not do due diligence.”

What’s in a trust?

Robert Williams, a law professor at Rutgers University – Camden, said the word “trust” in legislation does not necessarily mean a law is not subject to repeal or amendment.

When it comes to the phrase “trust” in a political and legislative document, Williams agrees with the famous movie phrase, “I do not think it means what you think it means.”

That’s because a trust cannot be made “in perpetuity” (i.e., permanent). And if the law established a contractual obligation, that could raise constitutional questions, he added.

“I don’t have a horse in this,” the legal scholar pointed out, saying the trust law is “a political question first, and a legal question second.”

He added: “Based on the political element, it may not happen.” If a change were to come about though, he said, “I have no doubt a legal challenge would result.”

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Kevin Shelly

Kevin C. Shelly is an award-winning career journalist who has spent most of his career in South Jersey. He's the former assistant city editor of The Press of Atlantic City, where he covered the casino industry and Atlantic City government as a reporter. He was also an investigative, narrative enterprise, and features reporter for Gannett’s Courier-Post.

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