The1st meeting of the Subcommittee on Horse Farming of the Interim Joint Committee on Agriculture was held on Tuesday, November 10, 2009, at 10:00 AM, in Room 129 of the Capitol Annex. Senator Damon Thayer, Chair, called the meeting to order, and the secretary called the roll.
Members:Senator Damon Thayer, Co-Chair; Representative Susan Westrom, Co-Chair; Senator Joey Pendleton; Representatives Royce W. Adams, Charlie Hoffman, Tom McKee, Brad Montell, Fred Nesler, David Osborne, Don Pasley.
Guests: Dr. Alan Dorton, Woodford Equine Hospital; Mr. Kenny Smith, Horse Industry Organization – Kentucky Walking Horse Association; Mr. Keith Dane, Humane Society of the United States; Mr. Edward Bonnie, Kentucky Horse Racing Commission; Professor Tim Capps, University of Louisville; Mr. Matt Koch, Kentucky Thoroughbred Farm Managers Club; Ms. Jamie Eads and Ms. Lisa Underwood, Kentucky Horse Racing Commission; Dr. Nancy Cox and Mr. Drew Graham, University of Kentucky, and Lisa Hite, National Walking Horse Association.
LRC Staff: Lowell Atchley and Kelly Blevins.
The presiding co-chair, Senator Thayer, called on the first of multiple speakers as a part of a general subcommittee discussion centering on the issue of Walking Horse “soring,” or the deliberate injury of the horse’s front feet to get the animal to accentuate its gait for show purposes.
Dr. Alan Dorton, a veterinarian with the Woodford Equine Hospital, who has worked with Walking Horses, and Mr. Kenny Smith, chair of the Horse Industry Organization of the Kentucky Walking Horse Association, addressed the subcommittee first. Dr. Dorton, leading the discussion, reviewed the issue.
In his remarks, Dr. Dorton told the legislative panel that inspections at Walking Horse shows are inconsistent, that inspectors have personal biases, thermograph equipment used during inspections to detect body heat has been found to produce questionable findings, equine veterinary specialist exams will differ from USDA veterinary medical officer (VMO) exams, and a number of violations are ultimately thrown out. Dr. Dorton told the subcommittee that the “vast majority of horses are in compliance” and “bad apples are spoiling the show experience for all involved.” Among a list of proposals, Dr. Dorton suggested having VMOs and designated qualified persons (DQP) inspect without prior knowledge of the owner, trainer, or horse, would make the inspection process more fair and unbiased.
Following their remarks, Representative Adams observed that biases on the part of VMOs and DQPs should begin with the selection process for those individuals. Mr. Smith responded that HIO inspectors are held to a standard. If they are found to vary from a protocol or if they get a show-related ticket, they are disqualified from inspecting.
Responding to Co-chair Westrom, who alluded to freeing the process from internal politics, Dr. Dorton said anonymous inspections would mark a good start, and an appeals process should be established involving multiple veterinarians.
Next, the subcommittee heard from Mr. Keith Dane, Director of Equine Protection for the Humane Society of the United States (HSUS). Ms. Pam Rogers, Director of the Kentucky branch of the HSUS, appeared with Mr. Dane at the witness table.
Mr. Dane told the subcommittee that soring exists throughout the nation, despite the federal Horse Protection Act of 1970. According to Mr. Dane, Kentucky is second only to Tennessee in the number of soring violations found. In his remarks, Mr. Dane called on legislation at the state level to assign criminal penalties for soring. He said the HSUS is encouraging Congress to appropriate more money to the USDA to enforce the HPA “because the majority of HIOs are not getting the job done.”
Commenting after the presentation, Senator Pendleton mentioned legislation that he sponsored in 2004 which carries penalties for intentionally tampering with or sabotaging livestock. The senator said that legislation has improved livestock shows.
Next, the chair called on the final speaker for the soring discussion, Mr. Edward “Ned” Bonnie, who headed up a Kentucky Horse Racing Commission (KHRC) rules committee that investigated the issue after the KHRC withheld $375,000 in breeders’ incentive funds from the Kentucky Walking Horse Association because of the ongoing soring controversy. According to Mr. Bonnie’s testimony, the KHRC will allow the Walking Horse Association to once again receive breeders’ incentive funds provided that affiliated shows in Kentucky use one of three approved HIOs in their horse inspection process.
Co-chair Thayer commended Mr. Bonnie, the rules committee, and the KHRC for their work on the issue. He asked Mr. Bonnie to comment on Dr. Dorton’s earlier contention about “bad apples” and Mr. Dane’s assertion that soring is more widespread. According to Mr. Bonnie, people in various horse endeavors abuse the animals in their quest for financial gain and prestige.
Mr. Bonnie responded to Senator Thayer that the practice has not stopped since passage in 1970 of the HPA, but with a $370,000 “carrot,” the conduct of soring can come to an end at Kentucky’s Walking Horse shows.
Mr. Bonnie responded to Co-chair Thayer and Representative Nesler that legislation may not be needed at this time. “Let’s try what we’re doing, what the Racing Commission has recommended, and if that doesn’t work, it will be explosive at the Legislature,” Mr. Bonnie told the subcommittee.
In responding to a question from Representative Adams, Mr. Bonnie noted that since the KHRC withheld the breeders’ incentive funds this year for 2008 events, $700,000 will be available next year.
Co-chair Thayer passed the gavel to Co-chair Westrom for the remainder of the meeting. Co-chair Westrom then called Ms. Lisa Underwood, KHRC’s Executive Director, and Ms. Jamie Eads, KHRC Director of Incentives and Development, for a report on the Kentucky Breeders’ Incentive Program. Ms. Eads reviewed the report for the Thoroughbred, Standardbred, and non-race breeds. According to Ms. Eads’ remarks, decreases in available funds are anticipated in all three funds this year. For example, she pointed out the subcommittee that 9,934 mares were registered for 2009, a 10 percent decline. Stud fees also are declining.
When Ms. Eads finished her report, she responded to a series of questions from Representative Montell about the criteria used to allot moneys to organizations in the non-race breed segment of the program. Representative Montell mentioned a constituent representing a breed organization that fell short of a 1,000-horse standard used, in part, in granting funds. The representative indicated that the 1,000-horse standard was not disclosed when the constituent first applied for funds for her breed group.
Asked why a breed organization that otherwise qualifies, but is disqualified because of the 1,000-horse rule, Ms. Eads declined to answer the representative’s question, citing on-going litigation related to matter. But, according to Representative Montell, small breed groups have an economic impact as well.
Senator Thayer, as sponsor of the original Breeders’ Inventive Program legislation, said that the program is an incentive fund, not a “charity.” According to Senator Thayer, the commission needs to have standards which it uses in granting the funds.
In subsequent remarks, Senator Thayer made some observations about the Thoroughbred portion of the Breeders’ Incentive Program. He suggested re-evaluating awards for certain types of races and races in foreign countries. The senator mentioned the possibility of cutting back on the $100,000 bonus paid for Kentucky-born Kentucky Derby and Oaks winners. He suggested looking at some types of Thoroughbred owners who do not pay the tax which goes into the program, such as foal-sharing operations and other non-cash breeding partnerships. Since the program now has three years of history, the senator indicated it may be time to look at ways to redistribute funds in the program.
Before turning the next item on the agenda, Co-chair Westrom asked why the senator distributed to the subcommittee a chart showing the breeding connections and incentive fund earnings of a prominent Central Kentucky horseman. According to Co-chair Thayer, the horseman would not be in a top 10 list of incentive fund recipients as a single breeder, but would be on such a list by virtue of participating in the multiple breeder partnerships.
Next, the co-chair called on two speakers to discuss current trends in the Thoroughbred industry, Mr. Tim Capps, Executive in Residence of the University of Louisville Equine Studies Program, and Mr. Matt Koch, President of the Kentucky Thoroughbred Farm Managers Club.
Mr. Capps discussed trends in Thoroughbred racing, breeding, and sales in the United States as a whole, then focused specifically on trends in Kentucky. Giving a “snapshot” of Kentucky, Mr. Capps made the following points: Kentucky produces 37 percent of registered Thoroughbred foals and the percentage is rising; Kentucky stallions generate 88 percent of stud fees in North America; the average stud fee in Kentucky ($36,000) is twice the national average; more than 40 percent of active broodmares in North America reside in Kentucky; and over 75 percent of auction sales are generated in the state.
Mr. Capps responded to a series of questions from Representative Pasley about the growth of other states’ breeders’ incentive programs. Mr. Capps said there is no question that added revenue streams have allow those states’ breeders’ incentive awards to grow. Responding to another question about the possibility of leading sires leaving the state, Mr. Capps indicated he did not think the top tier of Kentucky’s breeding industry is threatened; rather it is the lower end of the market, which actually makes up the bulk of the industry.
Next, Mr. Koch talked about the industry from the perspective of a younger businessman operating a small Thoroughbred boarding and breeding operation. He discussed the difficulty of making a profit in the current economy and noted the realities of moving some of his horses to other states for larger purses and higher breeder incentives.
Following his remarks, Mr. Koch responded Co-Thayer’s question about over-production being an issue. Mr. Koch said the impact is being seen in the horses listed in Books 6 and 7 at the sales, the lower pedigree horses.
Co-chair Thayer commented that Kentucky is competing with states who have expanded gaming and that spread their breeders’ incentive funds over a smaller foal population. He noted there are proposals to attempt to increase Kentucky’s breeders’ incentives to enable the state to compete with other states.
Responding to Co-chair Westrom, who asked about the future of the industry, Mr. Koch said the industry needs something in place for the sales in July and September of next year to give the industry some hope. He pointed out that smaller farms like his are folding. He told the subcommittee that his business relies on boarding, which is break-even, and earning commissions on foals for July and September sales. If the prices do not turn around soon, he said, “we’re going to see a lot of closures.”
Asked about the impact of expanded gaming on the industry, Mr. Capps responded that the evidence from other states, beginning with Iowa, is that those revenue streams are “awfully powerful.” He told Co-chair Westrom that expanded gaming would preserve the year-round racing circuit in Kentucky, keep the tracks operating and even embellish them. He also said additional gaming revenues could help the breeder side of the business, particularly the lower end of the market.
Documents distributed during the subcommittee are available with meeting materials in the LRC Library. The meeting ended at approximately 12:30 p.m.