HHR Passes Kentucky Senate 22-15

    The “emergency” bill to legalize historical horse race (HHR) gaming by defining “pari-mutuel wagering” to include previously run races passed the Kentucky State Senate late Tuesday afternoon 22-15, with one senator not casting a vote.

Proponents of the bill are aiming to align HHR in a way that they believe will make the slots-like form of gaming constitutionally legal so the machines can keep generating $2.2. billion in annual handle. The Kentucky Thoroughbred Development Fund's purse-money cut from HHR is three-quarters of 1% of that handle.

Senators speaking Feb. 9 in favor of SB 120 focused their arguments primarily on the economic advantages of maintaining HHR, whose operation has fueled what they described as a Kentucky Thoroughbred “renaissance” over the past decade. According to the state's constitution, only pari-mutuel wagering, the Kentucky Lottery, and charity-related gambling are considered legal.

Proponents also framed part of the debate as “class warfare,” and said keeping Kentucky's 3,625 HHR machines operational would be the commonwealth's best bet to protect its signature Thoroughbred racing and breeding industry.

Another “pro” argument was that keeping HHR legal and limited only to racetrack-related licensees would avoid any infiltration of big casinos in a state known for conservative opposition to expanding gambling.

Senate Majority Leader Damon Thayer (R-Georgetown) even made the dire prediction that “three or four” Kentucky racetracks could close within the next fiscal year if senators didn't advance the HHR bill.

Opponents hit repeatedly on what they described as the non-constitutionality of HHR, the perceived moral ills of gambling, and how the state's racing industry knew 10 years ago it was engaging in a dicey business gamble by building an HHR industry atop a murky legal premise that has repeatedly been questioned in the courts.

HHR was put into peril Jan. 21, when the Supreme Court of Kentucky denied a petition for rehearing an earlier judgment that called into question the legality of HHR because it didn't amount to “pari-mutuel wagering.” The question over that legal definition, led by anti-gambling activists, has worked its way through the court system ever since HHR was first allowed by the state in 2012.

Senator John Schickel (R-Union), who introduced SB 120 on Feb. 2 and also chairs the Senate Licensing and Occupations Committee that reported it favorably Feb. 4, championed his measure on the grounds that “what this bill does, is simply clarify [the pari-mutuel definition] issue once and for all” so that Kentucky can remain “the horse capital of the world.”

But when the Senate opened up its floor to questions, Schickel surprisingly couldn't come up with even basic answers when Sen. Whitney Westerfield (R-Crofton) asked him how many HHR machines currently operate in Kentucky and how much money they generate.

At a later point in the nearly 90 minutes of debate, Schickel returned to the floor armed with what he said were his favorite racetrack indulgences–a sugary Kentucky-made confection known as a MoonPie and a “stinky cigar”–in a difficult-to-follow attempt to illustrate “the role of virtue and vice in our society.” Schickel then asked rhetorically, “Is it really our role to tell poor people that we need to protect them from themselves?”

Westerfield spoke first among the opposition, launching into detailed arguments centering on what he believed was the non-constitutionality of HHR. He then segued into a soliloquy based around his moral perceptions of gambling, during which he lamented how some “white trash” consumers disproportionally bear Kentucky's societal costs related to gambling.

Westerfield wrapped up his remarks by terming SB120 as a “bailout” to the racing industry, whose tracks over the past decade invested “hundreds of millions of dollars in HHR-related expansions” even as the very legality of the machines was being appealed all the way up to the Supreme Court.

Westerfield continued, “The surest bet [the tracks] ever made was that if they were ever called out on the legality or the illegality of these machines, that they'd be quickly able to claim the very real economic harm from suddenly having to close…. This legal defeat was not some out-of-the-blue ruling by a rogue judge. This wasn't an unexpected risk that couldn't be planned for and mitigated. The tracks knowingly built their houses on quicksand.”

Speaking next, Thayer lambasted the opposition's attempts to derail HHR as being laden with “all kinds of ruses and red herrings and smokescreens to try and divert our attention from the matter at hand.”

That matter, Thayer said, “is simply [that] the signature industry of Kentucky, the home of the [GI] Kentucky Derby, the home of the market-leading horse-breeding business that exports our stock around the world…is under threat.”

Thayer continued, “I respect people who are morally and religiously opposed to gambling. But I'm not going to stand idly by while pejoratives are made about people who participate in this sport,” alluding to Westerfield's remarks.

Even senators who expressed neutrality on embracing the new pari-mutuel definition of HHR had strong opinions related to the measure.

Urging fellow lawmakers to “vote your conscience” on HHR, Sen. Stephen Meredith (R-Leitchfield) said what bothers him is Kentucky's trend of bills being presented to legislators under the premise that if they don't vote in favor, they'll be responsible “for killing so many jobs” in the commonwealth.

“I know this is their signature industry. I know it's important to us,” Meredith said. “But I feel like I'm almost being blackmailed, [as in] 'We need money in this state, and if we kill this industry we're going to lose all this money.' We spend a lot of time treating the symptoms of this state, but never curing the disease.”

Sen. Morgan McGarvey (D-Louisville) argued that judging “constitutionally” is not the job of senators. The judicial branch of government gets to decide that, he said, “and what the Supreme Court has said in this instance is that they are going to allow HHR if we make some legislative changes.”

McGarvey continued, “And when we talk about what's going to happen if we allow HHR, let's reframe this debate. We've had HHR for 10 years. We have not seen the problems that have been forecast here on the floor. We're not deciding whether we want HHR in Kentucky. It's here. We're deciding whether we want to keep HHR in Kentucky, and all of the jobs, and all of the help in the industry that goes along with it.”

That said, McGarvey added that even though he supports this particular bill, he “doesn't think the tax structure is fair” and will be seeking ways “to generate more revenue from it than is currently being generated.”

SB120 now advances to the Kentucky House of Representatives.