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Capitol Notebook

Raiding Pa.'s 'special funds' dedicated to roads, the environment — and horse racing?

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In January, Gov. Tom Wolf proposed diverting money from a special fund to support horse racing in order to create a scholarship program for state-owned schools. So what the heck is the horse-racing fund, and why does it exist?

Lawmakers created the Race Horse Development Fund in 2004 as part of a package that legalized casinos. Subsidized by slot machines, the fund’s stated purpose is to promote horse breeding, as well as to fund purses — total prize money distributed to winners — and horsemen’s pensions.

It’s actually one of more than 150 such funds created by the legislature to provide dedicated money to causes like the environment, caring for the elderly, and public transit. But over the years, these funds regularly have been raided to fill budget holes or balance the books.

The state House wanted to end a protracted budget battle in 2017 by rerouting $630 million in special fund money to help fill a $2.2 billion hole, PennLive reported. Gov. Tom Wolf eventually signed a budget that borrowed against one special fund in particular, funded by a landmark tobacco settlement.

Nathan Benefield is vice president of the Commonwealth Foundation, a conservative think tank that has deemed these funds the “shadow budget” and believes their “surpluses” should be utilized before raising taxes.

He said he doesn’t think pulling money out of the Race Horse Development Trust Fund would be that big of a deal.

“I think it is overblown what the impact is,” Benefield said. “These are certainly wealthy individuals getting those prizes.”

The horse-racing industry disagrees, and local farmers are raising alarm.

If lawmakers agree to pull $204 million out of the fund for the scholarship program, it wouldn’t be the first time that particular piggy bank has been raided.

Between 2010 and 2014, the legislature diverted $212 million from the Race Horse Development Trust Fund, mostly to fill budget gaps, according to an audit. But it’s hardly the only victim of fiscal maneuvers.

The Motor License Fund, for example, is bankrolled by license fees and gas taxes and was meant to be used to repair state highways. Instead, it now primarily pays for the Pennsylvania State Police.

It’s these kind of budget moves that just earned Pennsylvania a failing grade from a nonprofit that reviewed the budget practices of all 50 states.

“Only one state — Pennsylvania, which posted a bottom-dwelling average of D-minus — received no credit in any of the five indicators in budget maneuvers,” the report, produced by the Volcker Alliance, stated.