Governor’s budget proposal could ‘destroy’ Pa. horse racing, but reduce student debt

Gov. Tom Wolf is doubling down on a plan to divert millions of dollars that prop up Pennsylvania’s anemic horse racing industry in order to spend the money on a major new college tuition program.

In his new budget plan, Wolf has proposed to shift $199 million flowing from a special racing fund to pay for the educational assistance.

Wolf unveiled a similar proposal last year, but it never left the starting gate. Leaders of the horse racing business said it failed to pick up support from either Republicans or Democrats. Supporters of the funding transfer say that the measure languished because of a governmental focus on COVID-19.

Horse racing in the state is propped up by about $230 million a year from a tax on casino slot machine revenues. The funding pays for all but a small share of race prize money.

Since the financing began in 2004, Pennsylvania horsemen have collected about $3 billion. Without the money, analysts agree, racing may have a tough time surviving.

“This would absolutely destroy the horse racing industry and the more than 20,000 jobs that are associated with it,” said Pete Peterson, spokesman for the Pennsylvania Equine Coalition, which represents horse owners and breeders in the state.

Racing directly supports about 7,400 jobs, according to a 2018 report paid for by the Pennsylvania Department of Agriculture. That report said about 8,000 more jobs are affected by the racing industry. That’s among a Pennsylvania workforce of about six million.

The scholarship program would help 20,000 students graduate with less debt, Wolf said. Annual scholarships would range up to $5,700 per student, depending on family household income.

“There is a student loan debt crisis across our country,” Wolf said Tuesday in a statement. “It’s a burden on young people and their families that can last for years and holds them back.”

Pennsylvania college graduates have the second-highest loan debt in the nation, research shows.

The proposal would provide financial assistance loans or grants to full-time students enrolled in state-owned colleges and universities, with priority given to students pursuing careers in education and health care. In exchange, students would agree to stay in Pennsylvania after graduation for the same number of years for which they receive financial assistance through the program.

“The legislature has to make a choice,” said Susan Spicka, executive director of Education Voters of Pennsylvania, a pro-public education advocacy group. “They can either fund college students who will become our teachers and nurses or continue to give $200 million to wealthy horse owners, many of whom live out of state.”

Wolf dubbed the venture the Nellie Bly Scholarship Program, from the pen name of a pioneering investigative journalist who feigned insanity to expose the horrors of a New York City mental asylum. Born Elizabeth Jane Cochran, near Pittsburgh, Bly turned her undercover reports into a book. Ten Days in a Mad-House was a bestseller in 1887 that spurred systemwide reforms.

In Pennsylvania the racing industry runs on lucrative prizes, called purses, that are generated by a 55% tax on the casino revenue from slots. In the state, about 95% of the purse money is derived from slot machines. The rest comes from bets at the tracks.

The decision to fund racing in part from slot revenue was part of the political calculus under which casino gambling was legalized in Pennsylvania in 2004.

States vary in how much they assist racing. California, for example, does not subsidize purses.

But horse racing now competes with lotteries, casinos, fantasy sports betting, and online wagering. As late as the mid-1970s, the tracks were among the very few places where people could place a legal bet. Now gambling is as close as your phone.

In Pennsylvania, the audience for racing has dwindled to the point where it’s no longer included in the gaming commission’s annual report. In 2018, attendance fell to about 580,000 admissions for all six racetracks in the state. That was a skid from more than 800,000 just four years earlier.

In 2018, the average Pennsylvania race drew only about 650 people.

“The average daily attendance for the Williamsport Crosscutters minor-league baseball team is greater than attendance at any of the state’s six horse tracks,” said Sharon Ward, senior fellow at Education Voters of Pennsylvania.

Elizabeth Rementer a spokesperson for Wolf, put the governor’s case bluntly Wednesday:

“While the racing industry is important to Pennsylvania, it is time for the industry to support itself and continue to build upon the unprecedented generous economic investment made by the commonwealth to this single industry.

“The industry survived long before the subsidy began and it has had 16 years and $3 billion to develop what, by now, should be a self-sustaining industry,” the spokesperson said.

Racing is already reeling from the ongoing economic crisis. Tracks and the casinos were closed for almost three months. Slots revenues plummeted about 36%. When slots revenues crash, so do the taxes levied on those revenues.

The political prospects of the proposal are unclear.

The racing industry has a political action committee that has given out more than $300,000 in total to Republicans and Democrats in the state since 2017, records show.

Peterson, of the Equine Coalition, believes Wolf’s proposal is a likely nonstarter due to a law already in place.

In 2017, the legislature passed Act 42 and the governor signed it. Peterson said the law created an untouchable trust fund for the Race Horse Development Fund, to which the slot money goes, and that the commonwealth would never be entitled to the funds.

“We believe that law is ironclad,” Peterson said.

But Greg Thall, special assistant to Wolf’s budget secretary, disagreed. He said Act 42 could be altered.

Thall also said the issue would not pit Democrats against Republicans.

“It’s easier than a tax increase because they don’t have to vote for it,” he said Wednesday. “We’re hopeful for bipartisan support.”