Pennsylvania’s Auditor General today slapped down the state Department of Agriculture for what he said were millions of dollars in inappropriate charges to the Pennsylvania State Racing Fund.

In a statement, Auditor General Eugene DePasquale said, “The horse racing industry is one of Pennsylvania’s largest agricultural industries, but it is in trouble because funds intended to provide necessary oversight and revitalize the industry are being diverted to plug budget holes.”

In his report, DePasquale said that the Department of Agriculture overbilled the fund by more than $873,000 over three years to cover budget shortfalls.  In addition, he cited the Department for billing the fund for some $5.2 million in personnel costs without being able to document whether those costs were related to horse racing.

The state Racing Fund collects revenue from wagering taxes, uncashed tickets, license fees, breakage, admission taxes and miscellaneous revenue.  It pays for for the personnel and operating costs of the Horse and Harness Racing Commissions, Equine Laboratories, the PA Fair, and some other expenses.

Because wagering in Pennsylvania has been declining in recent years, the fund has experienced declining revenues in the face of rising expenses.  Wagering tax revenue dropped 24 percent during the four-year audit period, the report said.

Indeed, the Fund would have run out of money this spring had the state legislature not diverted some $4.2 million from the slots-funded Race Horse Development Fund, DePasquale said.

“If the State Racing Fund goes bankrupt, the racing industry would shut down,” DePasquale said, which, given the regulatory activities funded by the State Racing Fund, is literally true.

Racing interests in the Keystone State cheered the audit.

“This report confirms what the Pennsylvania racing industry has been saying for a number of years: that money intended for the operation of the state’s racing commissions and for breeders incentives was improperly diverted for other purposes,” said Pete Peterson, spokesperson for the Pennsylvania Equine Coalition, which claims it represents “more than 10,000 horse owners, trainers, and breeders” in the state.  “We greatly appreciate the efforts of Auditor General DePasquale in taking a closer look at this issue. These diversions resulted in less money being available for oversight of the industry and shortfalls in the operating budget of the commissions.”

DePasquale’s report also said that approximately $212 million has been diverted from the Race Horse Development Fund to other purposes, primarily the state’s General Fund.

“When the amount of money available for purses and breeders incentives is in constant question, it discourages owners from making capital investments in their farms, it impacts the amount of money a buyer may pay for a Pennsylvania-bred horse and how many horses are bred in the state,” Peterson said.  “Uncertainty results in less dollars invested in Pennsylvania, directly impacting more than 20,000 hard-working Pennsylvanians who rely on the industry for their jobs, including blacksmiths, stable hands, track workers, horse trainers, jockeys and drivers, veterinarians, and farmers who produce feed.”

The Auditor General recommends increasing occupational license fees, adding unspecified new funding options, and prohibiting the Department of Agriculture from using State Racing Fund revenues for non-racing purposes.