The Pennsylvania Slots Polka

The latest threat to horse racing is in the Keystone State where (first reported by Bill Finley), $200M from the horse racing fund is planned to be diverted to tuition subsidies.

“Let’s bet on our kids instead of bankrolling race horse owners and ensure the viability of the Pennsylvania State System of Higher Education,” said the Governor.

As most know, this is similar to the province of Ontario back in 2013, where much of the $400M plus slotted for horse racing was killed unceremoniously by the cash-strapped government. Although at the time, the money was not earmarked to go into anything else.

Like Ontario, one might expect this salvo to look much different when the ink is dry. Generally governments do not cut something off cold turkey, because it's bad optics and bad optics are antithesis to their DNA. Horse owners et al can certainly hope that's the case. But it does bring a ton of uncertainty as it works through. Hey, at least it's not sales season.

It's somewhat ironic that they're diverting money into tuition, which has increased by 468% since the 80's, well above the rate of inflation. Most economists agree that this inflation has been in large part due to subsidy and the free flow of student loans. So, it appears they've moved from propping up purses artificially to propping up tuition artificially, with neither $200M to the schools or $200M to horse racing fixing an underlying supply and demand, negative return on investment problem.

We've spoken on the little blog for some time (I know you're bored by now) about political risk for horse racing. Whether it be from breakdowns at Santa Anita or slot money in government budgets, the effects can be savage. It's not a drip, drip where losses are smooth and revenue changes are gradual; it's a tsunami.

Over the next several months we'll see how Pennsylvania racing tackles this prescient political problem. They're not the first to deal with it, and they likely won't be the last.