Interim Joint Committee on Licensing and Occupations


Minutes of the<MeetNo1> 4th Meeting

of the 2011 Interim


<MeetMDY1> September 9, 2011


Call to Order and Roll Call

The<MeetNo2> 4th meeting of the Interim Joint Committee on Licensing and Occupations was held on<Day> Friday,<MeetMDY2> September 9, 2011, at<MeetTime> 10:00 AM, in<Room> Room 129 of the Capitol Annex. Senator John Schickel, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator John Schickel, Co-Chair; Representative Dennis Keene, Co-Chair; Senators Tom Buford, Julian M. Carroll, Julie Denton, Denise Harper Angel, Jimmy Higdon, Dan "Malano" Seum, Kathy W. Stein, and Damon Thayer; Representatives Tom Burch, Larry Clark, Dennis Horlander, Wade Hurt, Joni L. Jenkins, Adam Koenig, Reginald Meeks, Charles Miller, Michael J. Nemes, David Osborne, Ruth Ann Palumbo, Sal Santoro, Arnold Simpson, and Susan Westrom.


Guests: Lisa E. Underwood, Executive Director, Greg Lamb, Supervisor of Pari-Mutuel Wagering, Mary Scollay, DVM, Equine Medical Director, and Jamie H. Eads, Division of Incentives and Development.


LRC Staff: Tom Hewlett, Bryce Amburgey, Carrie Klaber, Michel Sanderson, and Susan Cunningham.


Approval of minutes

Representative Burch moved to adopt the minutes from the August 12, 2011, meeting. Representative Keene seconded the motion, which carried by voice vote. Before proceeding with committee business, Senator Schickel asked for a moment of silence for Senator Carroll's family for the loss of Bradley Carroll.


The Kentucky Horse Racing Commission: an overview of horse racing in Kentucky

Lisa Underwood, Executive Director of the Kentucky Horse Racing Commission (KHRC), said the racing commission is affiliated with various national committees to facilitate consistency and uniformity among the states and to avoid federal government intervention. The Racing Compact, passed during the last session, will help states continue to use their unparalled expertise to regulate horse racing. Virginia and Colorado have now adopted this compact, and other states are reviewing legislation and regulations to join the compact.


The KHRC promulgated administrative regulations relating to historical horse racing. A historical horse race is one that was run at a licensed pari-mutuel facility and that concluded with official results. Regulations became law July 1, 2011, and Kentucky Downs received approval to offer historical horse racing, which began on September 1. There is pending litigation regarding these regulations. Jockey weights and riding crop regulations were reviewed in August. These regulations will standardize weights and crop size from state to state. The commission approved amended regulations related to jockey mount fees and has filed these with the LRC.


Mary Scollay, DVM, Kentucky's first equine medical director, said that an administrative regulation for out-of-competition testing would enable detection of substances that have duration of effect that exceeds their detection period. Some blood doping agents can affect a horse's performance but are not detectable in a post race sample. Examples include erythropoietin, darbepoetin, hemoglobin based oxygen carriers, venoms and toxins, and growth hormones. These substances can be detected for 24 to 28 hours, but the effect can extend much further. They can compromise the health and welfare of a horse or its athletic performance in competition. Out-of-competition testing was used at the 2010 Breeders' Cup Championship races at Churchill Downs, for the 2011 Toyota Bluegrass Stakes at Keeneland, and the 2011 Kentucky Derby, with all test results negative.


The KHRC believes that strategic post-race sampling and testing will more effectively detect violations. Stewards follow criteria to identify whose performance might be influenced by the presence of drugs or medication. Red samples are winning favorites or horses whose performance is consistent with form. Gold samples include a long shot winner beating the favorite, inconsistent performance, unusual wagering patterns, and security intelligence. Kentucky is the first racing jurisdiction to use this strategy. All gold samples are tested. Fifty percent of red samples are tested and fifty percent are retained and could be tested at a later date. Race tracks, which pay for testing, have saved money through this testing model.


The United States and Canada are the only countries that permit the administration of race day medications. A medication summit at Belmont Park in 2011 recommended phasing out all race day medication starting with the foals of 2013. The Breeders Cup 2012 Championship race for 2 year olds will prohibit administration of race day medication, and in 2013, all Championship races will prohibit race day medication. The Thoroughbred Owners and Breeders Association (TOBA) announced that stakes races for 2 year olds will lose their graded status unless they prohibit race day medication. The KHRC has formed a committee to study the issue of race day medications.


The Kentucky Equine Drug Research Council (KEDRC) recently approved three initiatives: elimination of race day adjunct bleeder medications; administration of furosemide (Lasix) by regulatory veterinarians; and reduction of the regulatory threshold for phenylbutazone. Industry organizations will forward their recommendations to the KHRC. The council chose four of 13 solicited research proposals based on their relevance and impact to the racing industry. The first proposal deals with articular cartilage stem cells, which have the potential to identify a method for curing arthritis, one of the primary reasons horses are retired from racing. The second proposal is related to responsibly regulating therapeutic race horse medications. The third proposal seeks to optimize the health and well-being of retired race horses by successfully placing horses after they have finished racing. The fourth proposal looks at specific bacteria affecting the respiratory tract, the primary part of a horse's body targeted by race day medications.


The Governor's Task Force on the Future of Horse Racing recommended establishing a world class drug testing laboratory in Kentucky. In February, HFL Sport Science built a facility in Lexington, Kentucky. Dr. Rick Sams, the Director of the laboratory, had already worked with both educators and researchers at the University of Kentucky, College of Pharmacy. The laboratory is linked to multiple databases, giving a broad library of substances, chemicals, and medications. It is also expanding service to include supplement testing and human athletic fitness testing. HFL provides cheaper testing for Kentucky racetracks compared to previous out-of-state laboratories.

Greg Lamb, Supervisor of Pari-Mutuel Wagering, said his division has recently developed several new reports and audits to increase wagering integrity in Kentucky. A new price verification workbook allows KHRC to verify prices produced by other tote system jurisdictions, which could have as many as 20 different takeout rates. The commission contracted with a technology company (CHRIMS) to provide a consolidated data base on all tote data. The KHRC now receives a monthly report that shows total handle, commissions, and the amount paid back to the public on both live and simulcast wagering.


The KHRC is conducting pre-meet hardware tests of all live racing tracks to ensure that the totalizator equipment is functional and will allow stewards to stop a race. Monthly compliance audits are being performed on all off-track betting (OTB) facilities in the state. Also, recent legislative and regulatory changes to thoroughbred track wager distribution provide consistency in calculations for bettors.


The KHRC now oversees live racing totalizator operations, and starting next month tote companies will be licensed. United Tote and AM Tote operate in Kentucky. The commission may now audit daily operation and software development. Because historical horse race wagering started just last week, there has been no reporting. Reports will be developed to show what money goes to the state and to the various breeds. When a totalizator company wants to upgrade its software, a price testing book will allow the commission to test for changes to the software calculations.


In response to a question from Representative Keene, Mr. Lamb said a program by Betfair, a company with Advance Deposit Wagering (ADW), provides near live-time wagering at tracks in the state. This program allows the commission to monitor wagering patterns and permits track investigators to review a particular spike in wagering. In response to a question from Senator Thayer, Lisa Underwood said the commission is expediting ADW licenses so that ADW data can be compiled.


Jamie Eads, Division of Incentive and Development, stated that the Thoroughbred Breeder Incentive Fund (TBIF) was developed in 2005 to ensure the strength and growth of the Kentucky horse industry. The fund is financed through the six percent sales tax collected from breeding a stallion to a mare. Qualified thoroughbred winners receive 80% of the tax receipts. In 2011, 10 million dollars has been awarded to eligible horses that raced in 2010. The average award, per race, was 3,166 dollars. A Kentucky bred horse has won the Kentucky Derby the last six years, and the breeder of the 2011 Derby winner will receive $100,000 in 2012. Over half of the mares bred each year are staying in Kentucky, maintaining eligibility for fund money. This year, 832,000 were eligible on or before August 1, showing breeder interest in this program.


The Standardbred breed is financed by 13 percent of the receipts collected from the sales tax on stud fees. The award is given in Lexington, Kentucky, at the Kentucky Sire Stakes at the Red Mile, the second oldest harness track in the world.


The non-race breeds are awarded 7 percent of receipts collected from the sales tax on stud fees. Kentucky is the only state that supports non-race breeds. Until November 1, the commission will be accepting applications for period three, which covers 2012 through 2014.


There are 11 recommended changes to the thoroughbred regulation 810 KAR 1:070. In addition to breeder input and multi-state research, the KHRC used information from a public committee that represented all breeds. Since approximately 80 percent of horses foaled in Kentucky are exported, the committee recommended consistent breeder awards for wins in Kentucky or in another state.


Other suggested changes include easing nomination filing requirements, delaying the August nominating deadline to avoid conflicts, lowering nominating fees to accommodate fall sales, and reducing the Kentucky Derby and Oaks component from $100,000 to $50,000. Foal age restrictions were reduced in 2007 to prolong the program. The committee also recommended uniform allocations for Allowance, Maiden Special Weight, and graded and group stakes races, and a tiering of those awards according to the level of racing. There is a large disparity between in-state and out-of-state awards, and the breeder does not have control over where the horse will run. The committee proposed including the Group 1 winner of races during the Dubai World Cup, Hong Kong International Day, and Japan Cup to acknowledge the international achievements of Kentucky bred horses. The committee recommended including United States stakes races outside Kentucky in the same allocation as Kentucky stakes races, and including Woodbine, in Toronto, in the United States component. They felt that the claiming component should be changed to pay more breeders, since total money allocated is $200,000 to approximately six people. The final recommendation was to fund awards equally based on available money.


In regard to a question from Senator Schickel, Dr. Scollay said Lasix is a diuretic used in race horses to reduce the event of exercise induced pulmonary hemorrhage (EIPH) in the lungs.


In response to a question from Representative Meeks, Greg Lamb said that each thoroughbred track used to submit its own payout price calculation, and there was no standardized calculation. Jamie Eads told Representative Meeks that an American Graded Stakes Committee determines the grade of a race. She added, in response to an additional question from Representative Meeks, that the 2005 horse breeding legislation supports both racing and non-race breeds. In response to a question from Representative Clark, Lisa Underwood said the KHRC will continue to require funding from the General Assembly and will receive revenue from licensing fees.


Representative Clark commented that he was concerned that more TBIF money was being paid to winners out-of-state than to in-state winners, giving less incentive to race in Kentucky.


In response to a question from Senator Seum, Lisa Underwood said that there probably have been studies about the impact of casinos and expanded gaming at racetracks; however, she was not aware of any reports.


Senator Thayer said Kentucky is a net exporter of thoroughbred bloodstock. Eighty percent of the horses that are bred here race elsewhere. Most breeders in the business are commercial breeders, in the business to breed to sell at auction. The Keeneland sale brings buyers from all 50 states and approximately 39 countries. Kentucky breeders have no control over where a horse goes. Therefore, paying more from TBIF for winning races in Kentucky is not an incentive to breed horses in Kentucky. To encourage racing in Kentucky, more money should be put into the Kentucky Thoroughbred Development Fund (KTDF), a purse supplement separate from the TBIF. The goal of the KTDF is for breeders everywhere to bring their mares to Kentucky and board them here year-round. To be eligible for this money, the mare must reside in Kentucky 365 days a year and be bred to a Kentucky stallion. This is the economic development component to the KTDF. Senator Thayer stated that he and Representative Clark have discussed supplementing the KTDF with ADW money.


In response to a question from Representative Westrom, Representative Osborne said he could not answer for all thoroughbred owners but he felt that the vast majority of owners and trainers are racing in other states for the larger purses. Senator Thayer added that 12 of the 38 thoroughbred racing states supplement their purses with expanded gaming. In response to a question from Representative Meeks, Jamie Eads said mares bred does not necessarily equate to live foals, but approximately 50 percent of mares bred in Kentucky stay in Kentucky. Also, the majority of breeders are breeding to sell.


There being no further business to come before the committee, the meeting was adjourned at 11:12 AM.