BILL ANALYSIS Ó AB 1539 Page 1 Date of Hearing: April 27, 2015 ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION Adam Gray, Chair AB 1539 (Committee on Governmental Organization) - As Introduced March 26, 2015 SUBJECT: Horse racing: advance deposit wagering: deductions and distributions: jockey retirement plan SUMMARY: Provides that a person becomes a participant in a designed California jockey retirement plan when he or she is licensed as a jockey in California. EXISTING LAW: 1) Provides that the California Horse Racing Board (CHRB) shall regulate the various forms of horse racing authorized in this state. 2) Provides that jockeys must be licensed by CHRB. AB 1539 Page 2 3) Authorizes Advance Deposit Wagering (ADW) to be conducted, with the approval of the CHRB. 4) Requires that amounts distributed under advance deposit wagering provisions be proportionally reduced by an amount equal to 0.00295 multiplied by the amount handled on advance deposit wagers originating in California for each racing meeting, except for harness racing meetings, provided that the amount of this reduction not exceed $2,000,000. The method used to calculate the reduction in proportionate share shall be approved by CHRB. The amount deducted shall be distributed as follows: a) Fifty percent of the money to CHRB to establish and to administer jointly with the organization certified as the majority representative of California-licensed jockeys pursuant to Section 19612.9, a defined contribution retirement plan for California-licensed jockeys who retired from racing on or after January 1, 2009. b) The remaining 50 percent of the money shall be distributed to supplement the trainer- administered pension plans for backstretch personnel and to the welfare fund established for the benefit of horsemen and backstretch personnel, as defined. 5) Requires CHRB to establish safety standards governing the racetracks, equipment, medical services, and other facilities to ensure the safety of horses, riders, and workers at the racetrack. FISCAL EFFECT: Unknown AB 1539 Page 3 COMMENTS: Purpose of this bill : AB 765 (Evans), Chapter 613, Statutes of 2007, reauthorized horse racing's ADW law. As part of that legislation, a portion of the revenue generated by ADW was to be deposited into a trust jointly managed by the Jockeys' Guild and the CHRB. All licensed California jockeys are eligible to participate in the plan. A contribution is made for every race that a jockey rides. Nearly two hundred California jockeys have been enrolled in the plan. The pension fund has no unfunded liability, as it is a defined contribution plan. The plan is similar to a 401K plan, not a traditional pension fund, which "owes" retirees a fixed benefit upon retirement. Each jockey has an individual account, which becomes active after riding in their first horse race in California. When jockey retires, he or she receives an annuity purchased with the balance in their particular account, which pays them a monthly benefit. The funds are invested by the trustees and the contributions and earnings are annually allocated to each jockey on a per race basis. The current balance in the jockey pension plan is approximately $4.7 million. According to the author, the purpose of the bill is to ensure that a jockey shall become a participant in the existing AB 1539 Page 4 retirement plan when he or she is "licensed by the CHRB" to be a jockey in California. By streamlining the jockey retirement plan within the licensing process, it will ensure that every jockey receives his or her fair share of earned benefits. Background : What is Advance Deposit Wagering ? The California horse racing industry entered into a new era in 2002 with the advent of ADW (AB 471, Chapter 198, Statutes of 2001), which allows customers to deposit funds into an account in order to wager online and over the telephone. These wagers are commingled into pools at the host track where the races are run, and within the pari-mutuel wagering system regulated by CHRB. ADW was authorized at a time when California racetracks were beginning to experience declining attendance and handle figures. The industry believed that making the product easier to access not only would expose and market horse racing to potential customers, but also would make it more convenient for the existing patrons to wager more often. In general, industry stakeholders agree that ADW has become an important element to the financial stability of California's horse racing industry. Currently, the CHRB has approved three companies (TVG, Twinspires.com, and XpressBet) to provide ADW services to California customers. AB 1539 Page 5 ADW constitutes about $600 million in handle for the horse racing business. It has become an important segment of the industry - in fact, it is the only segment that has been growing. California jockeys are independent contractors : For purposes other than workers' compensation insurance, jockeys are independent contractors. California jockeys supply their own equipment, choose which horses to ride, ride only those races they elect to ride at race meets they select, and are allowed to negotiate their own rate of compensation. (California Code of Regulations, Title 4, Divisions 4, Rule 1632.) The minimum wage that jockeys receive in a horse race is established by the CHRB (per regulation) as a minimum riding fee. Jockeys may earn additional compensation if the horse they are racing is a winning mount, a second place mount, or a third place mount. Prior legislation : AB 1226 (Hall), Chapter 434, Statutes of 2013. Required the CHRB not to permit any portion of any entry, nomination, or other fee paid by any owner to be deducted from a jockey riding fee unless the entry, nomination, or other fee is paid exclusively by the owner and not reimbursed by any other person or entity. AB 1539 Page 6 AB 765 (Evans), Chapter 613, Statutes of 2007. Reauthorized ADW law in the state, which was set to "sunset" on January 1, 2008, as specified. AB 471 (Hertzberg), Chapter 198, Statutes of 2001. Allowed customers to deposit funds into an account in order to wager online and over the telephone (ADW). ADW wagers are commingled into pools at the host track where the races are run, and within the pari-mutuel wagering system regulated by CHRB. The bill established a process for the distribution of the revenue received from ADW to mirror existing distributions for track commissions, owner purses, and breeder incentive awards. REGISTERED SUPPORT / OPPOSITION: Support Jockeys' Guild Opposition None on file AB 1539 Page 7 Analysis Prepared by:Eric Johnson / G.O. / (916) 319-2531