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Early last week, a bill landed on the doorsteps of the nation's state racing commissions containing their portion of the money needed to fund the Horseracing Integrity and Safety Act (HISA) remit for next year.

The total $72,509,662 amount is broken down four main ways:

• $58,108,758 to run the anti-doping and medication control (ADMC) program overseen by the newly minted Horseracing Integrity and Welfare Unit (HIWU);
• $3,654,830 towards HISA's racetrack safety program, which initially went into effect on July 1 this year;
• $5,466,709 to continue building the technology needed to support HISA's programs;
• And $5,279,365 for administrative and organizational costs, with $1.8 million of that budgeted for litigation expenses.

That $72.5 million figure doesn't necessarily have to be the final total. The Horseracing Integrity and Safety Authority–the non-profit umbrella established by HISA to broadly oversee the national program–has offered state racing commissions approximately $23 million in monetary credits against the assessment.

“These credits are available to [state racing commissions] who choose to provide sample collection personnel and investigative services (including stewards involved in investigations) in compliance with the new Anti-Doping and Medication Control (ADMC) Program rules,” a HISA press release stated.

To dig down into the particulars, the TDN spoke earlier this week with HISA CEO, Lisa Lazarus.

The Primer

The financial assessments recently sent to individual state rate commissions form a “worst-case scenario” budget “if nobody works with us and we can't hold onto any of that money,” explained Lazarus.

In other words, that $72.5-million figure is the sum total to the industry if no states reach an agreement with HISA and HIWU to continue performing many common anti-doping and medication control program tasks like sample collection and certain investigative duties.

All state commissions could, of course, deicide to fund their portion in full. But for those jurisdictions that reach an agreement with HISA and HIWU, they will likely want to offset some of those costs through the $23 million in credits on offer.

Credits are based, said Lazarus, on how much it would cost the Authority to fill a designated position, rather than what it currently costs the commission for the same role.

And because such a calculation isn't necessarily a 1:1 trade-off–and because many commission personnel often perform more than one task–Lazarus said that she believes the credit system largely plays to a commission's financial advantage.

“Let's say Kentucky's spending $1 million dollars a year on sample collectors,” said Lazarus, using a hypothetical number. “If we had to go in there and hire all new collectors from scratch, we'd actually have to pay $1.5 million. A lot of those state collectors might [also] do other things for the state.”

More broadly, HISA will assume other financial burdens come Jan. 1, including investigation costs, laboratory fees and shipping costs, as well as legal expenses associated with prosecuting ADMC program violations.

But this leads to a potential conundrum for some commissions whose budgets were finalized many months ago in the state legislature when HISA's 2023 budget was unknown, and who, in some circumstances, might have already accounted financially for these costs, including for personnel.

In response, Lazarus pointed in a follow-up statement to the available HISA budget relief, and added, “It's been clear for months that HISA's ADMC program would be going into effect by January 1, 2023. Our goal is that some processes and staffing that have been in place in the past can be re-purposed in collaboration with HIWU so we're all being as efficient and strategic about the transition as possible.”

Ultimately, per Lazarus's calculations, the additional cost of the federal program to the entire industry is roughly $20 to $25 million more than what is currently spent nationally, and she calls those extra monies the cost of “automating and professionalizing a national program.”

Said Lazarus, “That's a relatively small amount, in my view, to invest in safety and integrity to protect a sport that has so much potential.”

Opting Out

Fourteen different jurisdictions are scheduled to host racing on Jan. 1, when the new anti-doping and medication control program goes into effect. And these respective states have until Nov. 17 to decide whether or not to enter into an agreement with HISA and HIWU.

The others will be required to make that agreement decision later down the line, proportionate to the date of their first scheduled 2023 race meet. So far, said Lazarus, no individual states have entered into a voluntary agreement.

On the flip side, only Ohio has so far officially opted out, said Lazarus.

For those commissions that shun a voluntary agreement, HISA's monetary assessment falls onto the shoulders of the respective tracks–a figure which, among all the tracks in the state, is no larger than what had been assessed each respective commission. All sample collections in that state will also become HIWU's responsibility.

The amount charged each track is based on a per-start calculation that factors in numbers of starts and the total purses paid out.

As such, the per-start calculation can vary quite wildly between different tracks, with Los Alamitos charged a per start fee of around $85 and Kentucky Downs looking at a fee of over $1,000 per start. Churchill Downs would face the largest overall assessment if the state commission opts-out of an agreement–nearly $3.9 million.

Furthermore, “if the state opts out, they lose the opportunity for the monetary credit,” said Lazarus. But she added that there are possible avenues for individual tracks or racing associations to unilaterally enter into agreements with HISA to access some of the $23 million in credits.

A track, for example, could form a not-for-profit organization–similar in effect to the New York Racing Association–and hire their own team to conduct tasks like sample collection.

“We're open to any agreement,” said Lazarus, mirroring HISA's approach for the race-track safety portion of the program. “We've had to be really creative because every state is different, and we have to be sensitive to that.”

Which leads to perhaps the most urgent question: Will HISA have enough adequately trained personnel to fill the required positions among those states that opt-out before Jan. 1?

“We've been working very hard on recruiting and getting the workforces in place so that we don't miss a beat on Jan. 1,” said Lazarus.

She is unsure, however, which of the 14 jurisdictions scheduled to race on Jan. 1 will opt-in or out beforehand, stressing how the financial assessments have only very recently been issued.

That said, “I think I can predict with a fair amount of certainty–maybe give or take one or two states–on who's going to enter into an agreement and who's not,” said Lazarus, pointing out how 18 of the 23 individual states entered into an agreement of sorts with HISA for the racetrack safety portion of the program.

Not all agreements were identical, however, and it's believed that only about a handful of states shouldered their racetrack safety costs in full.

Other Budget Components

HISA has priced the entire cost of sample collection, laboratory analysis, enforcement, and other program costs at around $58 million.

Lazarus pinned the laboratory costs alone at around $18.7 million. This is in comparison to estimated national laboratory costs of between $13.2 and $13.8 million from a few years ago.

HIWU can tap all laboratories currently accredited by the Racing Medication and Testing Consortium (RMTC) for adoption into the ADMC program. Laboratory contracts have yet to be inked though, said Lazarus. “I think they're pretty far along,” she added, about those negotiations.

“What I'll tell you is that the strategy and the focus is on smart intelligence-based and investigation-based testing,” she said, adding that, “I actually think you'll see an increase in out-of-competition testing almost everywhere, because that's going to be an important component of the new testing plan.”

Lazarus demurred, however, when asked if this scenario could also lead to a potential reduction in post-race testing among those states with currently the most rigorous post-race testing programs.

A key part of HISA's intelligence-based investigatory approach appears to be the use of technology and centralized databases. For this, HISA has budgeted around $5.4 million for next year.

The racetrack safety database is, of course, already up and running, though Lazarus said that it's constantly being tweaked and improved. She also said that the database for the ADMC program will be “ready to go” on Jan. 1.

At least initially, the ADMC database will compile information like the responsible person in the event of a violation, their charges, case status and the eventual rulings.

HISA has also budgeted $1.8 million next year for the costs associated with fighting the four suits seeking to derail the law. In the event HISA succeeds in court, could it seek cost recovery from the plaintiffs?

“I'm going to leave that one for lawyers,” Lazarus responded. “I do know they have looked into it and we're evaluating our options there.”

Other Stakeholder Questions

The TDN spoke with several stakeholders around the country to canvas other questions and concerns about the budget and the impending roll-out of the ADMC program. The key questions are posted below along with Lazarus's response.

 

Q: Even if a jurisdiction enters into an agreement with HISA for next year, could some current state commission positions be culled, made redundant through efficiencies made in the national program?

“Obviously, many responsibilities will no longer be on the shoulders of the racing commissions, but don't forget they still have other breeds like Standardbreds and Quarter Horses,” she said.

“How all of that works out, it's hard for me to say at this stage, but I think you're probably right philosophically that we'll continue to see efficiencies in this space as we work towards a national uniform professionalized system, but one that's also as cost-efficient as we can make it.”

Q: What can you tell stakeholders in those states with the highest HISA assessments who feel as though they're essentially subsidizing the high volume racing, low purse states?

“The HISA board approved a cost-assessment methodology that equally weighed starts and strength of purse. If you didn't have that methodology, you'd have states like Pennsylvania paying more than Kentucky. The statute requires us to be equitable, and it felt to the board that was the place you would land on equity,” said Lazarus.

“They may have potentially an outsized role to play in their view now, but they also have a tremendous amount to gain because when a horse dies or tests positive in a state that maybe doesn't have the same integrity and safety [protocols] in place as some of the bigger, stronger states, that hurts horse racing everywhere,” Lazarus added.

“At the end of the day, if HISA works as it should, it should form a protective ring around the industry and give it a stronger foundation with which to build.”

Q: HISA statute precludes state commissions from billing a track or association for the same services that fall under HISA's purview. What will HISA do to do to prevent this from happening?

“There was some discussion about this around the racetrack safety program and where it came up, we just stepped in and said, 'it's not allowed from a legal standpoint,'” said Lazarus.

“All of these commissions, they work for state governments. These are ethical people who are professionals. So, if you put it to them that it's not allowed, they acknowledge it pretty quickly. I don't see that as being a real concern.”

Q: Do you expect any states to drop-away due to costs?

“Ultimately, there's no avoiding the cost. I mean, I'm not sure if you heard me say that we'll work with all of the states and racetracks to find a way of dealing with them that's affordable for them, that works for them,” said Lazarus.

“We will do our best to reach some kind of agreement that is manageable. But at the end of the day, if they just don't want to pay, then the only real option for them is the Texas option, which is deciding not to send out your pari-mutuel signal.”

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