Will Gov. Wolf Take A Bite Out Of Horse Racing To Feed Scholarship Fund?

Posted on February 4, 2020

Pennsylvania Gov. Tom Wolf 2020 budget address placed a big focus on education in the Commonwealth. The Feb. 4 speech to the House and Senate touched on Wolf’s plan to improve education from pre-kindergarten to college.

He proposed a $200 million college scholarship program to cut student debt, which would be funded by the state’s horse-racing industry.

Funding students on the back of horses

The scholarship program is a part of Wolf’s plan to curb rising student debt. It’s geared toward lower- and middle-class students who graduate from one of the Commonwealth’s 14 state-owned universities.

According to the Associated Press, the Wolf administration estimates that at least 25,000 students of the state-system university would benefit. The funds would come with the caveat that students would have to remain residents of Pennsylvania for a certain number of years after graduating.

To fund the proposed scholarship program, Wolf proposes diverting $200 million from the slot-machine revenue tax. Since 2006, the tax has subsidized the Race Horse Development Fund.

Said Wolf:

“Let’s bet on our kids instead of bankrolling race horse owners and ensure the viability of the Pennsylvania State System of Higher Education.”

The scholarship program is inspired by Nellie Bly, who Wolf called a “Pennsylvanian of modest means.” Bly dropped out of what is now known as the Indiana University of Pennsylvania after her father passed away and she couldn’t afford tuition. She never got a degree and moved out of state to start her career. She went on to become a pioneering journalist responsible for bringing reforms to the mental health care system in the early 20th century.

“That’s why the Nellie Bly Scholarship will pay for what other financial aid does not cover so that they can spend more time contributing to our Commonwealth and less time paying off their debts. And by incentivizing them to stay in Pennsylvania after graduation, we can all reap the benefits of their intellect and their creativity. We all have a stake in the success of young Pennsylvanians. Let’s give them every opportunity to fulfill that potential.”

What is the Pennsylvania Race Horse Development Fund?

Pennsylvania Race Horse Development Fund was established in 2004 to give more funding to horsemen’s organizations and purses in order to offset the possible dip in racing wagers due to the arrival of slots in the state. All casinos must pay the assessment with proceeds divided as follows:

  • 80% for increasing purses
  • 16% for breeding funds
  • 4% to fund health and pension benefits for members of the horsemen’s organizations

In 2016, due to decreased pari-mutuel wagering, the State Racing Commission, which regulates horse racing and does drug testing, was in dire straits. Gov. Wolf negotiated funding, and he signed House bill 941, which provided significant reforms to the racing industry.

The PRHDF provides purses for races at the following PA tracks and off-track betting parlors:

Thoroughbred:

  • Parx Casino
  • Presque Isle Downs & Casino
  • Hollywood Casino at Penn National Race Course

Harness:

  • The Downs at Mohegan Sun Pocono 
  • The Meadows Racetrack and Casino 
  • Harrah’s Philadelphia Racetrack and Casino 

How much money goes into the fund?

About 10% of slot revenue goes to the PRHDF.

During the 2018 calendar year, the Pennsylvania Gaming Control Board reported that $242 million was earmarked for the fund. It’s a small uptick from 2017 when taxes generated from slot machines yielded $239 million for the Fund.

The proposed $200 million diversions would mean a more than 80% cut of the annual fund allotted for horse racing.

Pete Peterson, the executive director of the Pennsylvania Equine Coalition, a horse racing industry lobbying group, said of the initiative:

“If approved by the legislature, this raid would result in the end of horse racing in Pennsylvania by eviscerating the primary funding source for the purses and breeder incentives that serve as the lifeblood of the industry.”

Peterson also noted that diverting the trust fund monies would be against the law, as reported by the Daily Racing Form.

Provisions protecting horse fund could hinder Gov. Wolf’s plans

A bill Wolf signed in 2017 might come back to bite him in terms of getting his scholarship fund wishes.

The 2017 gambling expansion bill, which paved the way for sports betting and iGaming in Pennsylvania, also included provisions for the horse racing fund. The fund was renamed the Race Horse Development Trust Fund and set stipulations to protect the money from being siphoned off for other state programs, as the legislature had done in the past.

According to the Thoroughbred Horseman’s Association, the language found in the bill “specifies that assessments received are not Commonwealth funds.”

There is also a “claw-back” provision that required repayment of money diverted from RHDF since 2009.

Proposal may be a long shot

What are the chances of Wolf being able to redirect the money to the proposed scholarship program? Not as pie-in-the-sky as a quarter horse winning the Kentucky Derby but still a long shot.

Wolf, a Democrat, faces a Republican-controlled legislature. The deadline for Pennsylvania to pass its budget is July 1.

What does all of this add up to?

It’s possible that Gov. Wolf gets more budget support for educational programs, including for higher education, but from which revenue pockets it will come remains to be seen.

You can bet that horse racing industry stakeholders in PA and beyond will provide resistance to tapping into their livelihoods to get it done.

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Katie Kohler

Katie Kohler is a Philadelphia-area based award-winning journalist. She covers the Pennsylvania gambling industry with an emphasis on sports betting, online casino/poker and the lottery.

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