Administrative Rule of the Month - 71 IAC 5.5-3-3(a)(4) Other Responsibilities

Indiana Breeder and Owner Protection, Inc. (IBOP) established the Administrative Rule of the Month to point out areas where the Indiana Horse Racing Commission (IHRC), in our opinion, has stepped beyond their statutory authority, flat out made mistakes with administrative rules, or created administrative rules that just don't quite work. Each month, there are many choices as we have about 7 years worth of options. This month's edition is going to focus on an administrative rule, which carries the rule of law in Indiana, that appears to just not work from an enforcement perspective, and could compromise the IHRC's ability to maintain control over a recognized race meeting, which is their statutory mandate.

The administrative rule we are going to review is '71 IAC 5.5-3-3(a)(4) Other responsibilities,' which is a list of 30 'other responsibilities' of trainers while racing in Indiana. This is just one of the trainer responsibility rules on the books. Needless to say, trainers, and rightly so, have quite a few responsibilities. Below is a copy of the rule, and to keep things brief, we've removed all but the specific subsection we'd like to focus on. If you'd like to see this administrative rule in its entirety, simply follow this link: http://www.in.gov/legislative/iac/T00710/A00055.PDF?. 71 IAC 5.5-3-3(a)(4) describes a trainer's requirement to maintain what is routinely called a 'badge list' or 'stable roster' as used by the IHRC. We're going to use the term badge list through this article as that seems to be the term of choice with horsemen.

71 IAC 5.5-3-3 Other responsibilities
Authority: IC 4-31-3-9
Affected: IC 4-31
Sec. 3. (a) A trainer is responsible for the following:
(1)-(3) REMOVED
(4) Providing a list to the commission of the trainer's employees on association grounds and any other area under the jurisdiction of the commission. The list shall include each employee's:
(A) name;
(B) occupation;
(C) occupational license number.
The commission shall be notified by the trainer, in writing, within twenty-four (24) hours of any change.
(5)-(30) REMOVED
(Indiana Horse Racing Commission; 71 IAC 5.5-3-3; emergency rule filed Jun 15, 1995, 5:00 p.m.: 18 IR 2856, eff Jul 1, 1995; emergency rule filed June 8, 1999, 9:30 a.m.: 22 IR 3121, eff May 26, 1999 [NOTE: IC 4-22-2-37.1 establishes the effectiveness of an emergency rule upon filing with the secretary of state. LSA Document #99-107(E) was filed with the secretary of state June 8, 1999.]; emergency rule filed Jun 22, 2000, 3:05 p.m.: 23 IR 2778; readopted filed Oct 30, 2001, 11:50 a.m.: 25 IR 899; emergency rule filed Jan 21, 2004, 2:30 p.m.: 27 IR 1914; emergency rule filed Mar 10, 2006, 11:00 a.m.: 29 IR 2214; errata filed Apr 10, 2006, 2:00 p.m.: 29 IR 2546; emergency rule filed Mar 20, 2007, 1:43 p.m.: 20070404-IR-071070198ERA, eff Mar 16, 2007 [IC 4-22-2-37.1 establishes the effectiveness of an emergency rule upon filing with the Publisher. LSA Document #07-198(E) was filed with the Publisher March 20, 2007.]; readopted filed Mar 23, 2007, 11:31 a.m.: 20070404-IR-071070030RFA; emergency rule filed Mar 19, 2009, 11:07 a.m.: 20090401-IR-071090195ERA, eff Mar 12, 2009 [IC 4-22-2-37.1 establishes the effectiveness of an emergency rule upon filing with the Publisher. LSA Document #09-195(E) was filed with the Publisher March 19, 2009.]; emergency rule filed Mar 23, 2010, 1:27 p.m.: 20100331-IR-071100170ERA; emergency rule filed Mar 3, 2011, 11:50 a.m.: 20110309-IR-071110100ERA)

What's very easy to see is that its the trainer's responsibility to provide information to the IHRC regarding their employees and to notify the IHRC of any changes which would mean existing employees leaving the trainer's employment and new employees added through the racing season. It's our belief that since the IHRC is the regulatory body that issues every license, and since an employing trainer is required to sign the license applications for his or her employees, that the IHRC can maintain their own 'badge list' as licenses are issued. That is a pretty simple thought, yet still, the IHRC requires a trainer to notify the IHRC WHAT THEY ALREADY SHOULD KNOW! Keeping track of a trainer's badge list for his or her employees would be a very simple process.

Here's an example of how the system currently works. Through a public records request to the IHRC, IBOP was able to acquire the IHRC's Trainer Stable Roster for 2012 for the then Indiana Horsemen's Benevolent and Protective Association President Randy Klopp. The form (2 pages) can be found at the following link: http://freepdfhosting.com/ca5c10c473.pdf. What you'll see is that this badge list/stable roster was created on April 3, 2012 with the three grooms in Mr. Klopp's employment listed accordingly, along with five owners and a listing of four horses. Given that this badge list was completed in early April, there is a possibility that the license office wasn't open, so having a trainer supply an initial list of employees makes for good sense, especially if they were going to be working on the backside of a track. As licenses are issued early in the racing season, the IHRC could easily refer to the initial list for verification purposes and then add to the badge list as new employees are hired. But, of course, the IHRC does not and place the responsibility on the employing trainer.

However, above the signature line you'll see the IHRC's statement spelling out Mr. Klopp's, and all other trainers, responsibilities to maintain such a badge list with a very specific reference to the sentiment of 71 IAC 5.5-3-3(a)(4), "It shall be the trainer's responsibility to maintain with the commission an up-to-date roster of owners, current employees, and others having access to the trainer's assigned premises. This roster shall contain all information considered pertinent by the commission. Changes in ownership of horses, new or discharged grooms, and additional and/or deletion of horses on this roster must be reported." We do recognize that a trainer should report to the IHRC those licensees leaving his or her employ. That's a must for the IHRC to maintain control over a recognized race meeting. But, doesn't the fact that the IHRC issues a license mean that they are granting a licensee access, not only "to the trainer's assigned premises," but to the entire backside of a track? The trainer is required to sign the license application for his or her employees, so shouldn't that be notice enough to the IHRC?

So, let's see how this requirement to maintain an up-to-date badge list works in practice. Through a public records request to the IHRC, IBOP was able to acquire the 2012 license application for a groom named Mimi Gilbert. (The IHRC, as they should have, removed non-public information, namely a social security number.) The application can be found at: http://freepdfhosting.com/f0b55c36cc.pdf. The license application is signed by Ms. Gilbert on August 25, 2012, so there was about two months of racing left in Indiana when she was licensed. Per 71 IAC 5.5-3-3(a)(4), the responsibility of the employing trainer, Randy Klopp, was then required to notify the IHRC to add Ms. Gilbert to his badge list. Again, given the fact that the IHRC approved Ms. Gilbert's application, they could have updated Mr. Klopp's badge list very easily. But, of course, they didn't. According to the IHRC's documents, Mr. Klopp didn't update his badge list either to include Ms. Gilbert's employment as required by 71 IAC 5.5.-3-3(a)(4). So, obviously, there is a break down of a system that is necessary to maintain proper control over a recognized race meeting. Based upon our public records request, the IHRC could not produce any documents that Mr. Klopp updated his badge list beyond the initial April 3, 2012 submission.

When we requested Mr. Klopp's badge list, we also requested any changes as required by 71 IAC 5.5-3-3(a)(4). Here's exactly how the request was worded, "Copies of the submission(s) to the commission of the name, occupation, and license number as required by 71 IAC 5.5-3-3(a)(4), including any changes, submitted by Randy Klopp during and/or for calendar years 2012, 2011, and 2010." The only documentation of Mr. Klopp's employees that the IHRC could provide was the two pages signed on April 3, 2012 in the link above. In other words, the IHRC had no record of any changes to Mr. Klopp's badge list, meaning no employee changes on record, beyond April 3, 2012. Upon receipt of those two stable roster pages, we questioned the IHRC's records pointing out that they had already provided us a signed license application for Ms. Gilbert under Mr. Klopp's signature as part of a prior public records request. Yet, the IHRC had no records as required by 71 IAC 5.5-3-3(a)(4). We expressed our concern to the IHRC that either they were not enforcing or selectively enforcing what is designed to, as we said, "maintain proper control over a race meet." The IHRC's General Counsel Lea Ellingwood responded with the following email:

-----Original Message-----
From: Ellingwood, Lea
To: Jim Hartman
Sent: Fri, Feb 15, 2013 4:04 pm
Subject: Open Records Request; Commission meeting

Jim,

I have been assured by staff that the documents I forwarded to you are the only documents maintained by the commission which might be responsive to your request for information submitted to the commission under 71 IAC 5.5-3-3(a)(4). For that reason, we consider this particular request completed; however, if there’s another document which might have licensee’s occupational license number on it that you’d like to request, we would be happy to process that upon receipt.

On another note, I wanted to remind you that your item regarding the cost of split sample testing is still scheduled to be on the agenda for the next Commission meeting, which is scheduled for February 22nd. I’ve attached the link to the notice: http://www.in.gov/hrc/files/February_22_2013_Commission_Meeting_Notice.pdf for your reference. Just so you’re aware, we have not sent any information to the Commissioners regarding this issue other than that already provided to them for the December 14, 2012 meeting.

Best regards,


Lea

Lea Ellingwood | General Counsel | ph: 317-233-3119
Indiana Horse Racing Commission | 1302 N. Meridian Street, Suite 175 | Indianapolis, IN | 46202
-------------------------------------------------------------------------------------------------

Obviously, if Mr. Klopp did comply with 71 IAC 5.5-3-3(a)(4) and reported Ms. Gilbert's employment to the IHRC, there was no record available. Our basic premise with this rule is that the IHRC clearly knew Ms. Gilbert became licensed as a groom under Mr. Klopp's signature, so it would have been easy to add Ms. Gilbert as an employee of Mr. Klopp. Further review of Ms. Gilbert's application raises some interesting questions, however.

In reviewing the application, Mr. Klopp signed Ms. Gilbert's groom license application as employer; however, under item #12, Mr. Klopp is not listed AS Ms. Gilbert's employer. According to IHRC General Counsel Lea Ellingwood, this information was not redacted. According to the license application, no one was employing Ms. Gilbert and there is no date of employment indicated. The employer information being blank raises a number of questions. Why in the world would the IHRC issue a license to a groom with an incomplete application with no apparent employer other than Mr. Klopp's signing as employer? We've asked the IHRC, with no response as of yet, if the IHRC regularly approves licenses in this manner with no employer information stated?

Given that the IHRC is now investigating the Indiana HBPA for alleged misuse of benevolence funds, we are wondering if Ms. Gilbert did, in fact, work for Mr. Klopp. Given no direct employer information, could Ms. Gilbert's application have been solely for the purpose of gaining a license to apply for benevolence funds from the IHBPA Benefit Trust? We raise this question very cautiously as last month, IBOP received an audio file which is purported to be Ms. Gilbert explaining such a scenario to another horseman. Since IBOP has no investigative authority, and we are in no position to substantiate the validity of this audio file, we have notified the IHRC we are in possession of this audio file and offered to provide it to them upon their request.

What we can do to delve into this subject a bit further is to file additional public records request to the IHRC for more license applications. As a start, this past week, we filed a request for all license applications signed by Mr. Klopp in 2012 and in 2013. We'd like to know just how many employees should have been reported under 71 IAC 5.5-3-3(a)(4), which of course, is a number the IHRC already should know from their license application process. The net result of our public records request should be a complete badge list as required by 71 IAC 5.5-3-3(a)(4). Somebody ought to know.

Administrative Rule of the Month - 71 IAC 13-1-3 Information To Be Submitted With a Registration

The section of Indiana law that provides the formula for the distribution of slot revenues to horse racing interests is IC 4-35-7-12. The formula includes allocations to each breed for backside benevolence, equine promotion and welfare, purses, breed development funds, and the horsemen's associations. When the law was first established in 2007, the title for this particular section read "Part of adjusted gross receipts that must be devoted to purses, horsemen's associations, and the gaming integrity fund." After the most recent changes in the 2013 legislative session the title for IC 4-35-7-12 now reads "Mandatory support for the horse racing industry; allocation among breeds; regulatory oversight." Even though the title now includes "regulatory oversight," the Indiana Horse Racing Commission (IHRC) has always had the statutory responsibility of the oversight of these funds.

While new subsections have been added to the IC 4-35-7-12 over the last six years of legislative action, the oversight responsibility of the IHRC has always read as follows:

"(h) Money distributed under this section (Note: meaning section 12) may not be expended unless the expenditure is for a purpose authorized in this section and is either for a purpose promoting the equine industry or equine welfare or is for a benevolent purpose that is in the best interests of horse racing in Indiana or the necessary expenditures for the operations of the horsemen's association required to implement and fulfill the purposes of this section. The Indiana horse racing commission may review any expenditure of money distributed under this section to ensure that the requirements of this section are satisfied. The Indiana horse racing commission shall adopt rules concerning the review and oversight of money distributed under this section and shall adopt rules concerning the enforcement of this section. The following apply to a horsemen's association receiving a distribution of money under this section:
(1) The horsemen's association must annually file a report with the Indiana horse racing commission concerning the use of the
money by the horsemen's association. The report must include information as required by the commission.
(2) The horsemen's association must register with the Indiana horse racing commission."

The IHRC has the responsibility to make sure that slot funds are used only for the intended purposes of supporting the horse racing industry and only "for a purpose authorized in this section." What the law also did was grant the IHRC rulemaking authority "concerning the review and oversight of money distributed under this section" which leads to Indiana Breeder and Owner Protection, Inc.'s (IBOP) Administrative Rule of the Month. With that rulemaking authority, the IHRC has established an entire section in the Indiana Administrative Code entitled "Registered Horsemen's Associations." We are going to focus on parts of '71 IAC 13-1-3 Information to be submitted with a registration' which defines part of the requirements that horsemen's associations must provide to be considered to receive benevolence funding, equine welfare and promotion funding, and funding for the administrative budgets of the association. First, a little background.

No later than September 1st each year, prospective horsemen's associations who claim to represent "owners and trainers" for each breed and, with thoroughbreds, an additional association claiming to represent "owners and breeders" can apply for registration. In the history of these registration applications, only once have two competing organizations ever filed applications for slot funding in the same category. Per commission regulations, not Indiana law, the IHRC must approve a registration application for the upcoming year by December 31st if there are no competing applications for registration. Below is '71 IAC 13-1-3' and we are going to focus specifically on '71 IAC 13-1-3(3) and 71 IAC 13-1-3(5).'

71 IAC 13-1-3 Information to be submitted with a registration
Authority: IC 4-31-3-9; IC 4-35-7-12
Affected: IC 4-31; IC 4-35
Sec. 3. In addition to the information described in section 2(b) of this rule, the registration of a horsemen's association to
receive monies allocated pursuant to IC 4-35-7-12 shall include, but not be limited to, the following information:
(1) A proposed budget for the calendar year (or, in the case of a registration under section 1(c) of this rule, the calendar
years) to which the registration applies that separately identifies general categories for the expenditure of funds anticipated
to be paid by the permit holders to the horsemen's association for:
(A) equine promotion or welfare pursuant to IC 4-35-7-12(b)(1);
(B) backside benevolence pursuant to IC 4-35-7-12(b)(2); and
(C) the purposes provided for in IC 4-35-7-12(f) in the amount provided for by IC 4-35-7-12(d)(1)(A)(ii) and IC 4-35-
7-12(d)(1)(A)(iii), IC 4-35-7-12(d)(2)(C)(ii), or IC 4-35-7-12(d)(3)(A)(ii).
(2) A specific description of the accounting, auditing, internal control, and reporting procedures that will be maintained by
the horsemen's association with respect to the three (3) separate accounts required by section 8(a)(7) of this rule during the
calendar year for which payments will be made, as well as the name and contact information of the individuals responsible
for each function.
(3) A certification by the board of directors of the horsemen's association that the expenditures from funds paid by the permit
holders for (1)(A) and (1)(B), above [subdivision (1)(A) and (1)(B)], are in the best interests of horse racing in Indiana for
the breed represented by the horsemen's association.
(4) A conflict of interest policy approved by the commission that has been executed by all of the officers, directors, and
employees of the horsemen's association.
(5) Certification by an officer of the horsemen's association that no monies distributed pursuant to IC 4-35-7-12 have been
used in either the current year or will be used from the budget year for either:
(A) a contribution to a candidate or committee; or
(B) lobbying, as defined in IC 2-7-1-9.
(6) Any other information requested by the commission or its executive director.
(Indiana Horse Racing Commission; 71 IAC 13-1-3; emergency rule filed Jul 11, 2008, 2:13 p.m.: 20080723-IR-071080595ERA;
emergency rule filed Sep 10, 2012, 2:01 p.m.: 20120912-IR-071120525ERA; emergency rule filed Apr 4, 2013, 1:05 p.m.:
20130410-IR-071130134ERA)

At their October 29th meeting, the IHRC was scheduled to consider the applications of the Indiana Horsemen's Benevolent and Protective Association (IHBPA), the Indiana Standardbred Association (ISA), the Quarter Horse Racing Association of Indiana (QHRAI), and the Indiana Thoroughbred Owners and Breeders Association (ITOBA). There were no competing applications for registration. Chairman Bill Diener admonished all four horsemen's associations for submitting incomplete applications and suggested that in the future incomplete applications will not be considered. With each submission, there was a "Staff Report" that provided the commissioners a review of the application. To be fair, the QHRAI submission was deemed to have not provided a particular certification letter for an IHRC requirement, but the staff considered that their application demonstrated that they did meet the requirement.

The Staff Report for each applicant for 2014 funding can be found at: http://freepdfhosting.com/6c710668f3.pdf.

The applications from the IHBPA, ITOBA, and ISA, however, were all deficient in providing a certification under 71 IAC 13-1-3(5) which only requires a single officer (President, Vice-President, Secretary, or Treasurer) to certify that no slot funds were used as political contributions or for lobbying. 71 IAC 13-1-3(5) is simply incorporating a requirement from the law that prohibits slot fund to be used in these ways. Shame on the IHBPA, ITOBA, and ISA as this statutory requirement has been in effect from day one. Since 71 IAC 13-1-3(5) is based in a statutory requirement, we're not suggesting there's a problem with the requirement. However, 71 IAC 13-1-3(3) might be a different story.

71 IAC 13-1-3(3) requires that the entire board of directors of a prospective horsemen's association certify that the monies spent on equine promotion and welfare and backside benevolence "are in the best interests of horse racing in Indiana." The staff reports cited both ITOBA and the ISA as having not provided the required certification under 71 IAC 13-1-3(3). First of all, for the IHRC staff to cite ITOBA for not providing this certification is absolutely ridicules, but what else is new. Per statute, ITOBA doesn't receive equine welfare and promotion money nor do they receive backside benevolence funds. Yet, they are required to certify that the funds they don't receive are used in the best interests of horse racing. Perhaps the IHRC staff should read the law. The ITOBA application was approved for 2014 anyway. However, the ISA does receive equine promotion and welfare funding as well as backside benevolence funding, and their application was approved as well.

What we found interesting is that the IHRC staff in their report didn't consider a lack of certification under 71 IAC 13-1-3(3), or 71 IAC 13-1-3(5) for that matter, as being substantive deficiencies! Here's the exact statement on the IHBPA, ISA, and ITOBA applications, "The Commission staff finds no substantive deficiencies in the application for registration." What! First, 71 IAC 13-1-3(5) is based in Indiana state law, so any certification is substantive according to the Indiana legislature. Second, 71 IAC 13-1-3(3) is a fundamental extension of the law as well and beyond substantive in the IHRC oversight. 71 IAC 13-1-3(3) mirrors a huge part of the IHRC's required oversight.

71 IAC 13-1-3(3) was added to the Indiana Administrative Code in April, 2013, but approved by the IHRC at their March meeting. The addition of this subsection was a specific request by Chairman Diener. Here's what he said, direct from the official transcript, "This commission when it operates and considers applications for registration, we have to meet the standard that expenditures of state directed funds by these horsemen's associations are in the best interest of horse racing in Indiana and that particular breed. This commission is not in the business of micromanaging horsemen's associations and how they operate, but we felt that or I felt -- I'm the proponent of this rule. I felt that it was important that the Board of Directors of the association, when they submit their applications, certify that their proposed budgets meet the same statutory standard."

We understand the sentiment behind Chairman Diener's remarks; however, this rule is not about "proposed budgets." The rule is about "expenditures from funds paid" which is past tense and not prospective as in a proposed budget. This is a requirement about what has already happened, as required by Indiana law. Now, imagine a new board member's position regarding past slot fund use by a horsemen's association. Realistically, we don't see how the IHRC can require a board member to sign off on expenditures that pre-dated their involvement with the board. In the case of the IHBPA, we don't see how the IHRC can require a certification from a new board member, or any board member for that matter, to sign off on the activities of the Indiana HBPA Benefit Trust and their expenditures since the IHBPA is the the only organization that has a separate structure and a separate board for its benevolence activities.

An approval of the registration of a horsemen's association to receive slot funding by the IHRC should require each commissioner and each staff member involved in the application review to sign an affidavit stating that all expenditures of slot funds have met the statutory standard of being in the best interests of horse racing in Indiana. The law requires the IHRC to be the ultimate guarantor of compliance with the statute, so this is not an unreasonable thought. Also, in our view, the requirement in 71 IAC 13-1-3(3) doesn't actually go far enough as any ex-board member or any ex-employee should be required to sign a similar affidavit if slot funds were received during their tenure.

No one should be able to leave a board or leave employment with a horsemen's association to potentially avoid the scrutiny of how slot funds were handled under their watch. Plus, any current employee, including Executive Directors of a horsemen's association, or appointees to a committee of a horsemen's association or benefit trust that has any potential influence over how slot funds are distributed or is in a position to determine who qualifies to receive benevolence funding should have to sign a similar affidavit. Yet, according to the IHRC's administrative rules, they don't. Many times individual board members are not in positions to fully understand or scrutinize the daily activities of others, especially employees, and are generally provided only summaries of those activities. Having all individuals involved with the handling of slot funds provide a written statement is a must. How else can the integrity of the use of slot funds be maintained? How else do you hold all parties accountable for their actions or inactions? That's what Indiana law mandates.

Administrative Rule of the Month - 71 IAC 10-3-20 Administrative Complaints

In the 2013 legislative session, Senate Bill 609 (SB 609) became the 'horse racing' bill. While the bill expanded to include changes to how slot revenues will be distributed to the horse racing industry, SB 609 was originally intended to implement recommendations of Indiana's Inspector General (IG) stemming from the investigation into the practices of the Indiana Horse Racing Commission (IHRC). There were a number of reforms recommended to the IHRC and the legislature in the IG's report regarding the IHRC's due process and disciplinary action procedures. Here's a direct quote from the IG's report, "Our investigation, however, revealed that this current system provides many challenges which may, in fact, be detrimental to the horse racing community as the adjudication is currently being applied by the HRC." That's a very strong statement, yet mostly ignored by the IHRC.

Knowing that the IHRC's system WAS "detrimental to the horse racing community" and considering the general lack of any appreciable implementation of those recommendations by the IHRC led certain legislators to create aspects of SB 609 to force the IHRC's hand to reform their procedures. Or, so those certain legislators thought. This month's Administrative Rule of the Month takes a look at '71 IAC 10-3-20 Administrative complaints' which was an administrative rule highlighted in the IG's report and targeted by changes in SB 609. But first, let's look at how SB 609 modified certain aspects of the IHRC's authority.

In reviewing any change to the law, keep in mind that, once modified, the law cannot have the same meaning as before the change. With that in mind, consider the language that SB 609 strikes from the IHRC's authority to penalize horsemen for medication violations. Effective January 1, 2014, the following change will be made to a portion of the 'Medication of Race Horses' section of Indiana law:

SECTION 8. IC 4-31-12-16 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2014]: Sec. 16. The commission or the commission's designee, as determined under the rules of the commission, on its own motion or in addition to a penalty assessed by the stewards and judges, may impose one (1) or more of the following sanctions against a licensee who violates sections 2 through 13 of this chapter:
(1) Revocation of a license held by the licensee.
(2) Suspension of a license held by the licensee.
(3) A civil penalty not to exceed five thousand dollars ($5,000).

One of the concerns that the IG had regarding adjudication of penalties at the IHRC was the lack of involvement of the commission, meaning the commissioners themselves, in lieu of the Executive Director ("the commission's designee"). The IG's report expressed a concern that having to navigate through multiple levels of the IHRC staff is essentially ".....the same persons (or their co-workers) who have issued the violations, thereby challenging the appearance of impartiality." The IG also felt that "this current procedure loses the independence the HRC Commission could add by being the adjudicating body." SB 609 eliminates the IHRC from being able to create rules to delegate their authority to fine a horseman or to revoke or to suspend a license. While the judges and stewards will have authority to issue fines and suspensions for violations, the Executive Director will not, or might we say, should not, given the changes to the law.

In addition, SB 609 strikes from the law the language "or in addition to a penalty assessed by the stewards and judges." Normally, most violations are of the variety of small fines and minor suspensions. Beginning January 1, 2014, if the judges or stewards create a ruling on an alleged violation, neither the Executive Director nor the commissioners can increase that penalty, or might we say, should not, given the changes to the law.

There is also a similar change in the portion of the IHRC's authorizing statute regarding "Offenses and Enforcement" for non-medication violations. You'll see that effective January, 1, 2014, the commission cannot delegate to the Executive Director ("the commission's designee") the ability to penalize a horseman. In addition, the commissioners will not have the authority to increase penalties for non-medication violations issued by the judges or stewards. Here's how the law will read:

SECTION 9. IC 4-31-13-1 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2014]: Sec. 1. (a) The commission or the commission's designee, as determined under the rules of the commission, on its own motion or in addition to a penalty assessed by the stewards and judges, may issue orders under IC 4-21.5 to:
(1) issue, deny, suspend, diminish, or revoke permits and licenses as authorized by this article; and
(2) impose civil penalties, in addition to any other penalty imposed by the commission on a person who violates this article or a rule or an order of the commission. and
(3)
(b) The commission or the commission's designee, as determined under the rules of the commission, on its own motion or in addition to a penalty assessed by the stewards and judges, may issue orders under IC 4-21.5 to rule a person off one (1) or more permit holders' premises, if necessary in the public interest to maintain proper control over recognized meetings.
(b) Except as provided in IC 4-31-12-16, (c) A civil penalty imposed against a licensee under subsection (a)(2) may not exceed five thousand dollars ($5,000). For purposes of subsection (a)(2), each day during which a violation of this article or a rule or an order of the commission continues to occur constitutes a separate offense.
(c) (d) Civil penalties imposed under this article shall be deposited in the state general fund.

At their September 17, 2013 meeting, the commissioners were presented with and approved emergency rules that were characterized by the IHRC's General Counsel Lea Ellingwood as "the administrative rules that we believed would require some kind of adjustment, amendment, or creation" given the changes in the law. One of those changes, which is copied below, was to '71 IAC 10-2-3 Summary suspension' which is a suspension of license without a hearing. What you will see is that subsection (d), which delegates the commission's authority to summarily suspend a license to the Executive Director, is being removed from the administrative rule book. Eliminating the Executive Director's authority within this disciplinary process and the duplication of the process was what the IG had recommended. Here's how the rule was presented to the commissioners:

71 IAC 10-2-3 Summary suspension
Authority: IC 4-31-3-9
Affected: IC 4-21.5-4; IC 4-31-13
Sec. 3. (a) If the judges determine that a licensee's actions constitute an immediate danger to the public health, safety, or welfare, or are not in the best interest of racing, or compromise the integrity of operations at a track or satellite facility, the judges may summarily suspend the license pending a hearing pursuant to the provisions of IC 4-21.5-4.
(b) A licensee whose license has been summarily suspended by the judges is entitled to a hearing following a written request by the licensee.
(c) The judges shall conduct a hearing on the summary suspension in the same manner as other disciplinary hearings. At a hearing on a summary suspension, the sole issue is whether the licensee's license should remain suspended pending a final disciplinary hearing and ruling.
(d) Notwithstanding the provisions of 71 IAC 10-3-20, the commission delegates to the executive director the authority to summarily suspend licenses at any time that a live race meeting is not being conducted on association premises or when the judges are not otherwise available. The commission delegates to the executive director the authority to summarily suspend licenses at satellite facilities at any time. In the event of a summary suspension by the executive director and if the licensee makes a written request for a hearing, a hearing on the summary suspension shall be conducted by the commission or an administrative law judge as quickly as is practicable. (Indiana Horse Racing Commission; 71 IAC 10-2-3; emergency rule filed Feb 10, 1994, 9:20 a.m.: 17 IR 1198; emergency rule filed Jan 27, 1995, 3:30 p.m.: 18 IR 1505; emergency rule filed Nov 30, 1995, 1:00 p.m.: 19 IR 688; emergency rule filed Mar 25, 1997, 10:00 a.m.: 20 IR 2162; emergency rule filed Feb 13, 1998, 10:00 a.m.: 21 IR 2426; readopted filed Oct 30, 2001, 11:50 a.m.: 25 IR 899; readopted filed Mar 23, 2007, 11:31 a.m.: 20070404-IR-071070030RFA)

However, we don't think the changes to 71 IAC 10-2-3 go far enough. To understand this statement, you'd have to read our Administrative Rule of the Month from July: (http://ibopindy.blogspot.com/2013/07/administrative-rule-of-month-71-iac-10.html). We had our suspicions that the IHRC wouldn't voluntarily modify a certain aspect of '71 IAC 10-2-3 Summary Suspension' to conform with what is required by SB 609. We'll make certain legislators aware, yet, the summary suspension is not this month's rule of the month, remember it's '71 IAC 10-3-20 Administrative Complaints.' The impression given by Ms. Ellingwood at the last commission meeting indicated that the staff's review of the administrative rules for SB 609-related changes is complete. We see their review as far from over and that is where the "Administrative Complaints" rule comes into play.

Prior to the IG's report, 71 IAC 10-3-20 was titled as "Preliminary reports" instead of "Administrative complaints." In his report, the IG stated, "We also recommend the elimination or modification of the “preliminary report” procedure granted by promulgation to the HRC Executive Director. 71 IAC 10-3-20(b)." In January, 2012, instead of eliminating 71 IAC 10-3-20(b), the IHRC chose to modify the "preliminary report" rule by simply changing those two words to "administrative complaint" as they appeared in the rule. Certain legislators were not amused by the IHRC's indifferent attitude to this supposed modification of this administrative rule. Take a quick read of 71 IAC 10-3-20(b) while keeping in mind the striking of "the commission's designee" and "in addition to a penalty assessed by the stewards and judges" by SB 609.

71 IAC 10-3-20 Administrative complaints
Authority: IC 4-31-3-9
Affected: IC 4-31-13
Sec. 20. (a) If the commission determines that a person regulated under the Act has violated the Act or a rule or order adopted
under the Act in a manner that constitutes a ground for disciplinary action under the Act, the commission may assess an administrative penalty against that person as provided by this section.
(b) The commission delegates to the executive director the authority to prepare and issue administrative complaints pursuant
to the Act. If, after examination of a possible violation and the facts relating to that possible violation, the executive director
determines that a violation has occurred, the executive director shall issue an administrative complaint that states the facts on which the conclusion is based, the fact that an administrative penalty is to be imposed, the amount to be assessed, and any other proposed sanction, including suspension, or revocation. Furthermore, when the judges have issued a ruling that a violation has occurred, the executive director may issue an administrative complaint identifying the underlying ruling that serves as the basis for the administrative complaint, the fact that an administrative penalty is to be imposed, the additional amount to be assessed, and any other proposed sanction including additional suspension or revocation. The amount of the penalty may not exceed five thousand dollars ($5,000) for each violation. Each day or occurrence that a violation continues may be considered a separate violation. In determining the administrative penalty, the executive director shall consider the seriousness of the violation.
(Please note that subsections(c) through (f) were removed for brevity's sake.)
(Indiana Horse Racing Commission; 71 IAC 10-3-20; emergency rule filed Feb 10, 1994, 9:20 a.m.: 17 IR 1208; emergency rule filed Jan 27, 1995, 3:30 p.m.: 18 IR 1507; errata filed Mar 23, 1995, 4:30 p.m.: 18 IR 2126; readopted filed Oct 30, 2001, 11:50 a.m.: 25 IR 899; emergency rule filed Mar 20, 2007, 1:43 p.m.: 20070404-IR-071070198ERA, eff Mar 16, 2007 [IC 4-22-2-37.1 establishes the effectiveness of an emergency rule upon filing with the Publisher. LSA Document #07-198(E) was filed with the Publisher March 20, 2007.]; readopted filed Mar 23, 2007, 11:31 a.m.: 20070404-IR-071070030RFA; emergency rule filed Jan 25, 2012, 12:20 p.m.: 20120201-IR-071120056ERA)

Effectively, the changes to SB 609 will eliminate the IHRC's authority to keep 71 IAC 10-3-20(b) in the administrative code. By design, SB 609 was supposed to make sure 71 IAC 10-3-20(b) was eliminated. Remember, per SB 609, the IHRC will no longer have the authority to delegate the ability to penalize to the Executive Director, yet 71 IAC 10-3-20(b) does delegate that ability. What we find interesting is that the first line of 71 IAC 10-3-20(b) "delegates to the executive director.......pursuant to the Act," yet beginning January 1, 2014, the "Act" will not allow for that delegation. Also, per SB 609, the IHRC will no longer have the authority to add their own penalty to a ruling by the judges and stewards, yet 71 IAC 10-3-20(b) currently allows for that to happen via an administrative complaint.

We don't see any way in which 71 IAC 10-3-20(b) should exist on January 1, 2014. Yet, the IHRC staff failed to present this administrative rule as part of those that needed modification in light the changes required by SB 609. Was the IHRC staff attempting to misguide the commissioners or was 71 IAC 10-3-20(b) simply overlooked? We'll try to find out by filing a petition directly with the commissioners to have 71 IAC 10-3-20(b) removed from the Indiana Administrative Code by citing the changes made by SB 609. Another 'strike out,' if you will. And, evidently, we'll also have to let certain legislators know how the IHRC staff has reacted to SB 609.

Administrative Rule of the Month - 71 IAC 1.5-1-50 “Jurisdiction” defined

A question Indiana Breeder & Owner Protection, Inc. (IBOP) has posed many times, either through our newsletters, letters to the commissioners, blog articles, etc. is 'what are the limits to the Indiana Horse Racing Commission's (IHRC)authority?' The IHRC believes and acts as if their authority is unlimited. Their penchant for the use of emergency rulemaking to create 'law,' without any meaningful oversight, creates an environment where the IHRC continually steps beyond their actual statutory authority. Within "their environment," which are their administrative rules in the Indiana Administrative Code (IAC), it's still fairly easy to point out when the IHRC goes beyond their statutory authority. We've pointed this out many times, and a few times, the IHRC has modified administrative rules based upon IBOP petitions.

However, the biggest problem with the IHRC's unchecked power is that no one in the legislature, attorney general's office, or the Governor's office reviews the administrative rules the IHRC creates. Plus, the IHRC doesn't want to give up any authority in their rulemaking which provides for their control over horsemen whether they are within their statutory authority or not. This month's Administrative Rule of the Month takes a look at how the IHRC goes beyond their statutory authority with how they define their 'jurisdiction.'

Both the standardbred and flat racing rulebooks have 'jurisdiction' definitions, and to keep things simple we are going to use '71 IAC 1.5-1-50 "Jurisdiction" defined' as our example. Now, most every administrative agency's authorizing statute as determined by the Indiana legislature has a 'definitions' chapter. The IHRC's authorizing statute 'IC 4-31 Pari-Mutuel Wagering On Horse Racing' has IC 4-31-2 as the 'Definitions' chapter. In the Indiana Administrative Code, an administrative agency can, if authorized by statute, create additional definitions as necessary to implement the State's laws. And, here's how 71 IAC 1.5-1-50 reads:

71 IAC 1.5-1-50 "Jurisdiction" defined
Authority: IC 4-31-3-9
Affected: IC 4-31
Sec. 50. "Jurisdiction" of the commission means the state of Indiana. (Indiana Horse Racing Commission; 71 IAC 1.5-1-50;
emergency rule filed Jun 15, 1995, 5:00 p.m.: 18 IR 2819, eff Jul 1, 1995; readopted filed Oct 30, 2001, 11:50 a.m.: 25 IR 899;
readopted filed Mar 23, 2007, 11:31 a.m.: 20070404-IR-071070030RFA)

It's easy to see that the IHRC is defining their jurisdiction as the entire state of Indiana. Merriam-Webster defines jurisdiction in a number of ways: 1) the power, right, or authority to interpret and apply the law, 2a) the authority of a sovereign power to govern or legislate, 2b) the power or right to exercise authority : control, 3) the limits or territory within which authority may be exercised. So, the IHRC believes their "power," "authority," "control," and "territory" is the entire state. Effectively, the IHRC is claiming that its regulatory jurisdiction is the entire state of Indiana. We disagree, and actually, Indiana statute disagrees in a number of ways as well.

First, the idea that the IHRC has to create a definition of their jurisdiction in their rulebooks is actually laughable because the whole idea of an authorizing statute IS to define the limits of an administrative agency's authority. The 'Definitions' chapter in Indiana law (IC 4-31-2) does not include a 'jurisdiction' definition because the entirety of the law is simply a definition in and of itself. Yet, the IHRC's arrogance and/or defiance leads to such a definition as "the State of Indiana." Had the Indiana legislature felt it was necessary to specifically define the IHRC's geographical jurisdiction, they would have.

Second, 'IC 4-31 Pari-Mutuel Wagering On Horse Racing' is not the only aspect of Indiana law that addresses horse racing which we are sure will come as a surprise to the IHRC. However, IC 4-31 is the only 'Article' that gives the IHRC any authority over horse racing and more specifically "pari-mutuel" horse racing. The Indiana legislature was very specific in IC 4-31-1-1 which provides that the applicability of the law “does not apply to horse racing meetings at which pari-mutuel wagering is not permitted.” Therefore, the opposite is true in defining the jurisdiction of the IHRC to only horse racing meetings at which pari-mutuel wagering IS permitted which doesn't take place across the entire state of Indiana, only at race tracks during recognized meetings.

The Indiana legislature in ‘IC 15-19-3 Regulation of Horse Racing’ grants no authority to the IHRC over other horse racing within Indiana. Yet, with this particular administrative rule, the IHRC defines their ‘jurisdiction’ as the entire state. Given the purpose of the IHRC as outlined in ‘IC 4-31-1-2’ and the legislative intent expressed in ‘IC 4-31-5.5 Satellite Facilities,’ the IHRC’s jurisdiction is actually only over locations WITHIN the state that provide pari-mutuel wagering on live horse racing and those off-track simulcasting locations that can provide pari-mutuel wagering on horse racing on races in Indiana and around the country. By statue, the IHRC's jurisdiction is defined as being only at Indiana race tracks and at all licensed OTB's, and not beyond.

Third, the authority line in 71 IAC 1.5-1-50 claims that IC 4-31-3-9 gives the IHRC the authority to even create a jurisdiction definition that encompasses the entire state. An administrative agency is required to cite from where they get their rulemaking authority with each administrative rule. In reviewing IC 4-31-3-9, the only possible portion of this statute that provides the IHRC discretionary rulemaking authority is IC 4-31-3-9(a)(1)(H) which states, "any other regulation that the commission determines is in the public interest in the conduct of recognized meetings and wagering on horse racing in Indiana." What the law actually allows for is rulemaking at recognized race meetings and places where people can wager on horse racing which is a very limited definition when compared to the IHRC's 'entire state of Indiana' claim. Again, the law only allows rulemaking, and therefore, exercise of authority, at the two tracks and at all licensed OTB's.

Fourth, statutory construction, which is a set of interpretation guidelines established by courts that apply to laws and to administrative rules, does not allow for any interpretation that would lead to an absurd result. Here's a great example of the IHRC's absurdity with their definition of their jurisdiction. State law, through IC 4-31-13-1(a)(3), allows the IHRC to "rule off" a person from a race track "if necessary in the public interest to maintain proper control over recognized meetings." The IHRC expands upon this authority (unnecessarily) in "71 IAC 2-10-1 Exclusion of patrons and licensed and unlicensed persons." In this administrative rule, the IHRC concludes that their authority allows for "exclusions under this section shall be for all of the premises under the regulatory jurisdiction of the commission, including satellite facilities." Given their definition of jurisdiction, the IHRC's own administrative rule gives them the ability to exclude someone from their "regulatory jurisdiction" which they define as the entire state of Indiana. This, of course, is absolutely absurd that the IHRC can rule someone off and exclude them from the entire state of Indiana.

Again, the problem is that no one within Indiana government keeps tabs on the legality of the rules or the rulemaking procedures at the IHRC. However, IBOP is attempting to change that by challenging the IHRC's jurisdiction definitions and about 80 other administrative rules. (This challenge includes the entirety of '71 IAC 10 Due Process and Disciplinary Action" where the IHRC really goes beyond their statutory authority.) Administrative rules in the IAC expire on January 1st of the seventh year from there adoption and must be readopted. The majority of the IHRC's rulebooks are due to be readopted as of January 1, 2014. The IHRC has already, without a vote at a meeting, filed a Notice to Intent to Readopt for those rules: http://www.in.gov/legislative/iac/20130731-IR-071130345RNA.xml.html. Effectively, the IHRC is saying 'we're good with these rules and we are readopting them 'as is' as of January 1st.' No further action is necessary, and no further review takes place.

However, under a provision in Indiana law, IBOP has requested that these 80 or so rules "be considered separately" from the Notice of Intent to Readopt. What this means is that simply providing a basis with the request to be considered separately, those rules are now required to go through the regular rulemaking process and cannot be readopted by another emergency rule. We've selected those 80 or so rules based primarily on the IHRC's overstepping their statutory boundaries. With almost every single request for rules to be considered separately, we included the following basis, "Given the IHRC’s past history of exclusively using the emergency rulemaking process to promulgate administrative rules, the public interest would be served by a more extensive review of this administrative rule which would finally include a public hearing and a review for statutory authority, for statutory compliance, for consistency with public policy, and for any effects on small businesses." In addition, each request had at least one other reason/basis for the request. This 'Administrative Rule of the Month' is a great example of the additional information (basis) provided to the IHRC.

We will develop more of the ideas behind our requests in future 'Administrative Rule of the Month' articles as well as keep you up to date as to how the IHRC reacts to them. To help ensure that the IHRC follows the law, we are also providing copies of each request to Indiana's Legislative Rules Oversight Committee. A new law that was established as of July 1st gives this committee more responsibility in taking an active role in monitoring an administrative agency's rulemaking. We're confident IBOP's requests and the bases (yes, that's the plural of 'basis')for each request will be eye-openers to this committee. With these requests, we are trying to facilitate real change with the IHRC's rulemaking procedures and to make sure all administrative rules stay within their statutory boundaries. (As horsemen, if you don't know the deck is stacked against you by the IHRC's administrative rules, then go back and read everything we have posted to this website.)

To meet our objectives, we need your help and your support. You can help by sending a link to this article to every horseman on your email list. The more people that are aware of IBOP's effort, the better. And, you can support this effort by considering a donation to IBOP. We'll be able to do more through this process with your support than without. This is an opportunity that only comes along once every seven years.

2012 Indiana Horse Racing Commission Annual Report

The Indiana Horse Racing Commission has released their 2012 Annual Report, which is the first under new Chairman Bill Diener. Here is the link to the report: http://freepdfhosting.com/bfcf53cea5.pdf.

If you're sharp, and understand basic math, see if you can find the errors on page 5 regarding handle on Indiana races. The same errors have been made in every Annual Report in recent history.

Update: On August 16th, the IHRC updated the 2012 Annual Report to correct some on-going math errors. Here's the link to the corrected report: http://www.in.gov/hrc/files/12_Annual_Report_book.pdf. While we didn't get a response, here's exactly what we said to Chairman Diener last week:

"Chairman Diener, I noticed that the IHRC's 2012 Annual Report has been posted the commission website. Each year, the annual report is one of the few publications, and possibly only publication, that provides a summary of the handle at Indiana's race tracks. In this year's edition, the 'Live Racing at Tracks' is page 5, and each year, the same mathematical error is made on this page.

If you look at the 'Total' column on the page, you'll see simple addition of the Hoosier Park handle numbers to the Indiana Downs handle numbers for each breed. For most of the metrics on this page, simple addition works to create a total. Where simple addition doesn't work is with the averages calculated on this page. More specifically, the average daily handle and average handle per race for quarter horses are being added together. What the annual report does is add the averages together to create a total, yet averages can't be added together as overall averages are a completely separate calculation.

More specifically, the average quarter horse handle per race at Hoosier Park is indicated to be $2,742 with the average at Indiana Downs indicated to be $3,084. The average in the Total column is indicated to be $5,826. Yet, based upon the numbers provided, the overall average is really $2,912. It's mathematically impossible to have an overall average greater than either of the other two averages in the calculation. This same adding-averages-together error is also made on the Simulcast Handle chart on the same page.

For your convenience, here's the link to the current annual report: http://www.in.gov/hrc/files/12_Annual_Report_book.pdf


Thanks,


Jim Hartman"

Administrative Rule of the Month - 71 IAC 7.5-3-4 Scale of Weights

This month's Indiana Breeder & Owner Protection, Inc. (IBOP) Administrative Rule of the Month is going to focus on a thoroughbred and quarter horse rule '71 IAC 7.5-3-4 Scale of Weights.' With the filing of this particular rule with the Indiana Register on July 18, 2013, the Scale of Weights administrative rule became the first and only rule, in the history of the Indiana Horse Racing Commission (IHRC), to be completed by going through the regular rulemaking process. As our regular readers are well aware of, IBOP has been very critical over the years of the IHRC's use of emergency rulemaking process which only requires a majority vote of five commissioners and filing with the Indiana Register to become "law." The regular rulemaking process requires, among other steps, a public notice, a public hearing, a review by the Attorney General's office for legality, and a final approval by the Governor.

The 'Scale of Weights' rule was absolutely the most ridicules administrative rule for the IHRC to have go through the regular rulemaking process. In fact, doing so was downright stupid, but definitely illustrates the IHRC's cavalier attitude toward their responsibilities as regulators as well as demonstrates their overall lack of class. While that last statement is more directed at the IHRC staff, as you will soon see, the commissioners have an overall responsibility to provide oversight to a group of state employees who appear as if they are completely oblivious and quality control challenged. Our timeline with the 'Scale of Weights' rule should demonstrate our last statement.

The 'Scale of Weights' timeline begins on April 19, 2012. (Yes, 2012.) The first agenda item at that particular IHRC meeting was, "Consideration of an emergency rule amendment regarding 71 IAC 7.5-3-4, Scale of weights." (Yes, emergency rule.) Jeff Johnston, from The Jockey's Guild, presented the Association of Racing Commissioners International (ARCI) Model Rule for the new scale which basically increased the minimum weight for thoroughbreds to 118 pounds from 116 pounds. The presentation took three minutes and the commissioners voted unanimously to approve the new scale and the entire agenda item took just a few minutes. Yet, the actual ARCI Model Rule, approved in April of 2012, will not be finalized until August 17, 2013.

As we mentioned earlier, an emergency rule isn't finalized until the language is filed with the Indiana Register. In late June, 2012, the 'Scale of Weights' emergency rule was never filed with the Indiana Register, (yes, over two months later) yet every other emergency rule approved at the April 19th meeting was already filed with the Indiana Register. Our curiosity as to why led us to actually read the approved emergency rule which was a hand-out at the April 19th meeting. What we found was that the 'Model Rule' approved by the IHRC included an error. Instead of assigning a minimum weight of 120 pounds for two-year old quarter horses, the IHRC approved a minimum weight of 130 pounds. (Yes, 130 pounds.) This makes no sense in any racing jurisdiction, especially when considering the minimum weight assignments in the rule were 122 pounds for three-year olds and 124 pounds for four-years. The combination of the rule not being filed in a timely fashion and knowing of their approved error, we sent the following to all of the commissioners: http://ibopindy.blogspot.com/2012/06/71-iac-75-3-4-scale-of-weights.html. The error of their ways was pointed out on June 30, 2012.

On July 12, 2012, the IHRC staff filed the emergency rule, which was approved almost three months earlier, with the Indiana Register. They also filed the rule with the 130 pound minimum weight for a two-year old quarter horse. So, now the 130 pound minimum for a two-year old quarter horse is law in Indiana. And, below is exactly how the 'Scale of Weights' rule reads today, August 1, 2013. (Yes, the IHRC's error is still not fixed.)

71 IAC 7.5-3-4 Scale of weights
Authority: IC 4-31-3-9
Affected: IC 4-31
Sec. 4. (a) With the exception of apprentice allowances, handicap races, Indiana breds, Indiana restricted races, three (3) year old horses entered to run in races against horses four (4) years old and upwards, and the allowance provided in subsection (2) of this section [redesignated subsection (b) by the Publisher], no jockey shall be assigned a weight of less than one hundred eighteen (118) pounds. For three (3) year old horses entered to run in races against horses four (4) years old and upwards from January 1 through August 31, no jockey shall be assigned a weight of less than one hundred sixteen (116) pounds.
(b) Except in handicaps, fillies two (2) years old shall be allowed three (3) pounds, and fillies and mares three (3) years old and upward shall be allowed five (5) pounds before September 1, and three (3) pounds thereafter in races where competing against horses of the opposite sex.
(c) Quarter horses, appaloosas, and paints minimum scale weights shall be one hundred thirty (130) pounds for two-year-olds, one hundred twenty-two (122) pounds for three-year-olds, and one hundred twenty-four (124) pounds for four-year-olds and older.
(d) A notice shall be included in the daily program that all jockeys will carry approximately three (3) pounds more than the published weight to account for safety equipment (vest and helmet) that is not included in required weighing out procedures.
Additionally, jockeys may weigh in with an additional three (3) pounds for inclement weather gear when approved by the stewards.
(Indiana Horse Racing Commission; 71 IAC 7.5-3-4; emergency rule filed Jun 15, 1995, 5:00 p.m.: 18 IR 2868, eff Jul 1, 1995; emergency rule filed Aug 23, 2001, 9:58 a.m.: 25 IR 119; readopted filed Oct 30, 2001, 11:50 a.m.: 25 IR 899; readopted filed Mar 23, 2007, 11:31 a.m.: 20070404-IR-071070030RFA; emergency rule filed Jul 12, 2012, 3:31 p.m.: 20120718-IR-071120428ERA)

At the August 30, 2012, IHRC meeting, the new Chairman laid out the IHRC's new policy as to when the regular rulemaking process would be used instead of the emergency rulemaking. When the IHRC first asked for input from horsemen on this matter in May 2012, IBOP responded with the following: http://www.ibopindy.blogspot.com/2012/06/letters-to-commissioners-input-on.html to basically state to use the emergency rulemaking process when an emergency exists. The emergency rulemaking considerations in the IHRC's policy include; whether the ARCI has previously adopted a model rule, effect of the safety of race participants, impact on the integrity of racing, and housekeeping, which we equate to correcting errors to name a few. All of those 'considerations' could have easily been justification to use the emergency rulemaking process to correct the 130 pound assignment for two-year old quarter horses. Not with this bunch. They decide to fix this error by going through the regular rulemaking process.

On October 19, 2012, the IHRC staff filed a 'Notice of Intent to Adopt' to fix their error: http://www.in.gov/legislative/iac/20121003-IR-071120549NIA.xml.pdf. The IHRC staff waited until February 20, 2013, to file the Proposed Rule: http://www.in.gov/legislative/iac/20130220-IR-071120549PRA.xml.pdf. At the same time, the IHRC staff published the public hearing announcement: http://www.in.gov/legislative/iac/20130220-IR-071120549PHA.xml.pdf which was scheduled for March 22, 2013. Oh, yeah, the rule's Economic Impact Statement was also filed on February 20, 2013: http://www.in.gov/legislative/iac/20130220-IR-071120549EIA.xml.pdf, and imagine that, there is no economic impact when you change the minimum weight of a two-year old quarter horse from 130 pounds to 120 pounds.

IBOP representatives didn't attend the public hearing held on March 22, 2013, but we did send our comments to be part of the record. What we suggested was that using the regular rulemaking process to fix an error in a rule that was approved by the commission via an emergency rule on April 19, 2012, was a complete waste of time and a complete waste of the tax-payers money. Those written comments became part of the record for this particular rulemaking adventure that ultimately went on to the five commissioners and to the Indiana Attorney General's (AG) office for a legal review.

At their April 5, 2013, meeting, the IHRC approved this 'new' rule almost one year removed from their initial mistake. After the IHRC approval, the proposed rule moved on to the AG's office. Evidently, the AG found no legal issues (sarcasm included) with lowering the minimum weight assignment for a two-year old quarter horse to 120 pounds as they signed off on the 'legality' on July 11, 2013. Hopefully, our comments gave some poor assistant deputy attorney general a chuckle when the record was reviewed. After the AG sign-off, the Governor's office approved the proposed rule within a week with the Final Rule being filed with the Indiana Register on July 18, 2013: http://www.in.gov/legislative/iac/20130718-IR-071120549AFA.xml.pdf. Per Indiana law, this rule goes into effect 30 days after the filing with Indiana Register which will be August 17, 2013, almost 16 months after the IHRC staff screwed up the rule in the first place! As we always say, we can't make this stuff up!

Administrative Rule of the Month - 71 IAC 10-2-3 Summary Suspension

Unless deemed to be an emergency, new laws or sections of new laws in Indiana usually become effective on July 1st to coincide with the State's new fiscal year. The exception would be if within the body of the new law there is a later effective date. So, many of the provisions of Senate Bill (SB) 609, which was deemed the "horse racing" bill, go into effect today. This includes a requirement for the Indiana Horse Racing Commission (IHRC) to annually report the competitiveness of Indiana racing versus other states (maybe they will actually learn something by doing so), to annually post to their website a summary of disciplinary actions taken (like most other states), and to "develop internal procedures for accepting, recording, investigating, and resolving complaints from licensees and the general public." In sworn testimony as part of a hearing in 2012, when asked whether the IHRC had a formal written complaint procedure, Executive Director Joe Gorajec said, "I'm not certain." Well, now the IHRC has a requirement to create a complaint and response policy. In addition, all complaints and their resolutions must also be posted to the IHRC website.

Many of the provisions within SB 609 were developed from the 2011 investigation into the IHRC by Indiana's Inspector General (IG). The reaction by the IHRC to many of the recommendations in the IG's report was to say the least underwhelming which necessitated changes in the law to force a few issues. One of those issues was the IHRC's system of due process and disciplinary action, which the IG suggested may actually be detrimental to horse racing. Essentially, what portions of SB 609 are designed to do is force the IHRC to follow existing laws rather than create administrative rules (their own laws) that attempt to circumvent Indiana statute. Given IBOP's interpretation of SB 609, the IHRC should be required to significantly modify, and eliminate, large portions of their administrative rules in '71 IAC 10 Due Process and Disciplinary Action.' This aspect of SB 609, however, doesn't go into effect until January 1, 2014, giving the IHRC the next six months to rework and/or eliminate their administrative rules that conflict with what will be Indiana law. But, will they? One possible answer to that question leads us to our Administrative Rule of the Month,'71 IAC 10-2-3 Summary suspension.'

Knowing that SB 609 would require the IHRC to overhaul or eliminate portions of their administrative rules, in March, IBOP tested the IHRC's willingness to modify a due process administrative rule that is clearly beyond current Indiana statute. So, IBOP petitioned the IHRC to amend '71 IAC 10-2-3 Summary suspension' to conform with 'IC 4-21.5 Administrative Orders & Procedures Act,' which should be the law of the land here in Indiana even for the IHRC. (At the same time, we raised this particular administrative rule to the legislative team that actually drafted SB 609, even suggesting additional language be added to SB 609.) Our petition asked for the IHRC to amend 71 IAC 10-2-3 by striking 71 IAC 10-2-3(c), as being contrary to Indiana law as it is written today. 71 IAC 10-2-3(c) can be seen copied below.

For some background, a summary suspension is simply a suspension of a person's license without first having a hearing. Two Indiana laws, IC 4-31-12-15(a)(2) for medication violations and IC 4-31-13-2(a)(2) for other infractions, provide that judges and stewards may sanction a licensee with "A temporary order or other immediate action in the nature of a summary suspension if a licensee's actions constitute an immediate danger to the public health, safety, or welfare." Neither IC 4-31-12-15(a)(2) or IC 4-31-13-2(a)(2) make any direct reference of an authorization for the judges or the stewards to issue these suspension without a hearing, but is implied by "immediate action." IBOP's view is that an order of this type is governed by Indiana law via IC 4-21.5-4 and not procedures established through the IHRC administrative rules. In fact, our view is actually reinforced by the IHRC's own language used in 71 IAC 10-2-3(a) which is copied below:

71 IAC 10-2-3 Summary suspension
Authority: IC 4-31-3-9
Affected: IC 4-21.5-4; IC 4-31-13

Sec. 3. (a) If the judges determine that a licensee's actions constitute an immediate danger to the public health, safety, or welfare, or are not in the best interest of racing, or compromise the integrity of operations at a track or satellite facility, the judges may summarily suspend the license pending a hearing pursuant to the provisions of IC 4-21.5-4.
(b) A licensee whose license has been summarily suspended by the judges is entitled to a hearing following a written request by the licensee.
(c) The judges shall conduct a hearing on the summary suspension in the same manner as other disciplinary hearings. At a hearing on a summary suspension, the sole issue is whether the licensee's license should remain suspended pending a final disciplinary hearing and ruling.
(d) Notwithstanding the provisions of 71 IAC 10-3-20, the commission delegates to the executive director the authority to summarily suspend licenses at any time that a live race meeting is not being conducted on association premises or when the judges are not otherwise available. The commission delegates to the executive director the authority to summarily suspend licenses at satellite facilities at any time. In the event of a summary suspension by the executive director and if the licensee makes a written request for a hearing, a hearing on the summary suspension shall be conducted by the commission or an administrative law judge as quickly as is practicable. (Indiana Horse Racing Commission; 71 IAC 10-2-3; emergency rule filed Feb 10, 1994, 9:20 a.m.: 17 IR 1198; emergency rule filed Jan 27, 1995, 3:30 p.m.: 18 IR 1505; emergency rule filed Nov 30, 1995, 1:00 p.m.: 19 IR 688; emergency rule filed Mar 25, 1997, 10:00 a.m.: 20 IR 2162; emergency rule filed Feb 13, 1998, 10:00 a.m.: 21 IR 2426; readopted filed Oct 30, 2001, 11:50 a.m.: 25 IR 899; readopted filed Mar 23, 2007, 11:31 a.m.: 20070404-IR-071070030RFA)

Very clearly, 71 IAC 10-2-3(a) states that a summary suspension is governed by "IC 4-21.5-4" which is labeled as "Special Proceedings; Emergency and Other Temporary Orders" in the Indiana Code and can be found at: http://www.in.gov/legislative/ic/code/title4/ar21.5/ch4.html. In a scenario where a summary suspension of a person’s license is issued without first having a hearing, that order is actually authorized and issued under IC 4-21.5-4-2(a)(1), and the balance of IC 4-21.5-4 spells out the required procedures. One of those procedures in IC 4-21.5-4-4 promises an evidentiary hearing “as quickly as is practical" with an administrative law judge having the ability to determine one of five potential outcomes. What is supposed to happen is that a hearing takes place where the judges' or stewards' decision is either “voided, terminated, modified, stayed, or continued.” That's the law, or supposed to be the law. The language in 71 IAC 10-2-3(c) directly contradicts what is written in current Indiana law via IC 4-21.5-4-4 which states:

IC 4-21.5-4-4
Hearings
Sec. 4. Upon a request by a party for a hearing on an order rendered under section 2(a)(1) of this chapter, the agency shall, as quickly as is practicable, set the matter for an evidentiary hearing. An administrative law judge shall determine whether the order under this chapter should be voided, terminated, modified, stayed, or continued.
As added by P.L.18-1986, SEC.1.

However, 71 IAC 10-2-3(c) attempts to circumvent the law by forcing a summarily suspended licensee to have a hearing in front of the judges or stewards, not an administrative law judge as per the current law, with only one possible outcome ("sole issue") as to whether or not a stay is granted pending further hearings. This portion of the IHRC's administrative rule is absolutely contrary to Indiana law. In other words, if 71 IAC 10-2-3(a) is an accurate representation of the IHRC's statutory responsibilities, which according to Indiana law it is, then 71 IAC 10-2-3(c) should not exist, yet it does. The IHRC is effectively creating their own law that deviates from current Indiana law. Yet, when petitioned with this information, the IHRC has done nothing to bring their administrative rule into compliance with current Indiana law. It's this attitude that provides no confidence that the IHRC will voluntarily adjust their 'Due Process and Disciplinary Action' section accordingly to comply with any new Indiana law.

As the year progresses, IBOP will be monitoring the progress (or lack of progress) at the IHRC regarding the changes required by SB 609. The best predictor of future behavior is past behavior. With that said, we're not expecting much, so IBOP is armed with a few strategies of our own using some nuances within Indiana's laws that can affect some changes. We'll have more on this subject later.

Administrative Rule of the Month - 71 IAC 1.5-1-53 "Maiden Race" Defined

According to Indiana law via IC 4-22-2-3(b), when administrative agencies like the Indiana Horse Racing Commission (IHRC) creates an administrative rule, that rule "has or is designed to have the effect of law." If you're a regular reader of materials created by Indiana Breeder & Owner Protection, Inc. (IBOP), you know that we are very critical of how the IHRC's five commissioners create "law" without any meaningful oversight via an emergency rulemaking process. We've also pointed out many flaws in their "law-making" process, and we will continue to do so as the IHRC staff and the commissioners give us many flaws to point out. Yet, this mistake-prone commission actually has created an administrative rule, 71 IAC 10-3-12(f), that grants themselves expert status over any evidence involved proceedings against horsemen by stating, "The special skills and knowledge of the commission and the commission staff may be used in evaluating the evidence."

Effectively, the IHRC has created a "law" that they are experts due to their "special skills and knowledge." This laughable notion, however, shows up as an argument against a horsemen in almost every case that IBOP has reviewed. The IHRC's sentiment is that they have "special skills and knowledge" that horsemen don't have. In this month's Administrative Rule of the Month, we figured we'd put the IHRC's special skills and knowledge to the test with something very simple, like the definition of a "maiden race." After all, everyone in horse racing, especially those with special skills and knowledge, knows what a maiden race is, right?

The Indiana Administrative Code (IAC) is where the IHRC publishes all of their "laws." Most know that the horse racing portion of the IAC has two rulebooks, one for standardbreds and another for flat racing. Each of these two rulebooks begin with an article that spells out the definitions used throughout the rulebooks which is a pretty standard approach with administrative rules. Both the IHRC's rulebooks define a 'maiden race' exactly the same via 71 IAC 1-1-56 and 71 IAC 1.5-1-53. The flat racing version is copied below:

71 IAC 1.5-1-53 "Maiden race" defined
Authority: IC 4-31-3-9
Affected: IC 4-31
Sec. 53. "Maiden race" means a contest restricted to maidens. (Indiana Horse Racing Commission; 71 IAC 1.5-1-53; emergency rule filed Jun 15, 1995, 5:00 p.m.: 18 IR 2819, eff Jul 1, 1995; readopted filed Oct 30, 2001, 11:50 a.m.: 25 IR 899; readopted filed Mar 23, 2007, 11:31 a.m.: 20070404-IR-071070030RFA)

So, a maiden race is "a contest restricted to maidens?" No kidding! The IHRC's definition, which references a term (maiden) to describe what is being defined (maiden race), would lose points in any academic setting for their attempted definition. Why these folks with special skills and knowledge don't simply state that "a maiden race means a race restricted to non-winners" defies a certain element of simplicity and logic. Based upon the IHRC's definition of "maiden race," you have to understand what a 'maiden' is, and everyone in horse racing, especially those with special skills and knowledge, knows what a maiden is, right?

Here's the definition of 'maiden' in the standarbred rule book:

71 IAC 1-1-55 "Maiden" defined
Authority: IC 4-31-3-9
Affected: IC 4-31
Sec. 55. "Maiden" means a horse that has never won a heat or race at the gait at which it was entered to start and for which
a purse is offered. Races or purse money awarded to a horse after the official sign has been posted shall not be considered a winning
performance or affect status as a maiden. (Indiana Horse Racing Commission; 71 IAC 1-1-55; emergency rule filed Feb 10, 1994 9:20 a.m.: 17 IR 1118; readopted filed Oct 30, 2001, 11:50 a.m.: 25 IR 899; readopted filed Mar 23, 2007, 11:31 a.m.: 20070404-
IR-071070030RFA)

So, the standarbred rulebook defines a 'maiden' with terms that include "never won a heat or race" (as in non-winners) and "entered to start" with "a purse" being offered (as like in a race). Cluttered, but we get it. Now, let's look at the definition of 'maiden' in the flat racing rulebook:

71 IAC 1.5-1-52 "Maiden" defined
Authority: IC 4-31-3-9
Affected: IC 4-31
Sec. 52. "Maiden" means a horse that has never won an official or recognized race as defined in breed registry rules. (Indiana
Horse Racing Commission; 71 IAC 1.5-1-52; emergency rule filed Jun 15, 1995, 5:00 p.m.: 18 IR 2819, eff Jul 1, 1995; readopted
filed Oct 30, 2001, 11:50 a.m.: 25 IR 899; readopted filed Mar 23, 2007, 11:31 a.m.: 20070404-IR-071070030RFA)

In breaking down this definition promulgated with the use of special skills and knowledge, we do see terms like "never won" and "race" which are easily understood considering that the term "race" is actually another definition in the rulebook. However, their definition incorporates by reference definitions in the "breed registry rules." So, the definition of "race" in the flat racing rulebook means nothing in defining a "maiden" in Indiana. Why the IHRC doesn't just stop their definition after the word "race" defies logic, but the phrase "as defined in breed registry rules" has the rule of law. To truly, then, understand the definition of maiden and maiden race in Indiana's flat racing rulebook, the definitions in the breed registry rules, which are now "law" in Indiana, must be reviewed to complete the definition.

If you go to The Jockey Club website, http://www.thejockeyclub.com/default.asp, they define themselves as "the breed registry for Thoroughbred horses in the United States, Canada, and Puerto Rico." The Jockey Club's breed registry rules are compiled in The American Stud Book: Principal Rules and Requirements, which can be found at http://www.thejockeyclub.com/pdfs/rule_book.pdf. In reviewing these breed registry rules, we see no definition of "official race," "recognized race," or "race" for that matter. The entirety of this breed registry uses the word 'race' maybe a half dozen times, mostly in paragraphs about changing a thoroughbred name prior to a first race and about getting a 30-day foreign race permit. The special skills and knowledge of the IHRC has incorporated definitions from the "breed registry rules" into Indiana's flat racing rulebook that DO NOT exist! The Jockey Club's breed registry rules do, however, have the following definition: "Maiden: A filly or mare that has never been bred (mated)." Since "maiden" is the only term from the IHRC's definition actually defined in the breed registry rules, the special skills and knowledge of the IHRC have now defined a "maiden" in Indiana flat racing in the terms of being bred, not in being a non-winner of a race. Now, isn't that special?

2013 Legislative Session Review

This page was last updated on May 10th - On May 8th, Governor Pence signed the two-year budget bill, HB 1001, into law. On May 9th, Governor Pence signed HB 1176 and SB 609 into law. SB 528 has yet to be signed by the Governor, but we fully expect him to do so. While IBOP will develop the implications of these bills in our next newsletter, below is a recap of those bills that survived the session and those that did not. As we had expected, SB 609 was used as the "horse racing" bill that went beyond the original intent of modifying aspects of the Indiana Horse Racing Commission's due process. Many of the provisions of SB 609 go into effect on July 1, 2013, while others are delayed until January 1, 2014.

House Bill 1001 (Budget Bill): The conference committee's two-year budget was released on April 25th with all the key leaders, including the Governor, satisfied with the result. The Republican-dominated Senate and House approved HB 1001 on Friday, April 26th. While the Governor didn't get his 10% income tax cut, he did get a 5% income tax cut phased in by 2017.

As far as the impact to horse racing, the budget bill did not change the 15% allocation to horse racing from slot machines at the racinos. In the bill, the racinos will be getting a tax break beginning July 1, 2013. The budget bill specifically defines "adjusted gross receipts" (AGR) with new language as now including the allocation to horse racing which had been challenged by the racinos during the Indiana Grand/Downs bankruptcy. The trade-off to the racinos for the inclusion of this language is that they will now only pay the slot machine tax on 91.5% of AGR, and not on the 99% they had been paying. This is an overall win for the racinos.

The budget bill does create a claiming tax amnesty program similar to the concept in HB 1350 listed under the "Dead Bills" below. Those owners who have been hit with a use (sales) tax bill, penalties, interest, fines, liens, etc. will have until January 1, 2014, to pay their taxes on claims which had always flown under the taxation radar until recently. The Indiana Department of Revenue sent tax bills to owners in an attempt to collect these taxes on prior claiming transactions. While not an abatement of the tax, if the claiming tax is paid by the year-end, all penalties, interest, fines, liens, etc. will be abated. No other elements of HB 1350 were included in the budget bill.

Senate Bill 609 Conference Committee Summary: Requires the Indiana horse racing commission (IHRC) to report on the competitive status of the Indiana horse racing industry as compared to the horse racing industries of other states. Provides that the prohibition on members of the IHRC, employees of the IHRC, racing officials, and their respective spouses wagering on horse racing at racetracks and satellite facilities located in Indiana applies after December 31, 2013. Requires the IHRC to post information concerning complaints and disciplinary actions on the IHRC Internet web site. Specifies the following concerning disciplinary action initiated by stewards and judges: (1) That unless appealed within 15 days, a suspension or civil penalty must be imposed within 180 days of the sanctioned violation. (2) That judges and stewards must prove the violation by the preponderance of the evidence. (3) That the IHRC must conduct a hearing on an appealed sanction as required by the administrative adjudication law. Allows the horse racing commission to reduce the percentage that a permit holder is required to retain from amounts wagered if reducing the amount retained is in the best interests of horse racing in Indiana. Authorizes horse racing associations and racino licensees to negotiate an agreement requiring between 10% and 12% of the licensee's adjusted gross receipts to be used to support the horse racing industry. Provides that accounts, books, and records relating to the distributions are subject to audit by the state board of accounts. Recodifies the requirement that each racino pay $250,000 to the gaming integrity fund. Provides that the racino slot machine wagering tax is imposed on 91.5% of adjusted gross receipts that include amounts used to support the horse racing industry. Makes technical corrections.

Last Significant Action: April 26, 2013 - Both the Senate and the House approved the conference committee version of SB 609 and the bill will be forwarded to the Governor for a signature. The bill included an annually negotiated 10% to 12% of revenues from the slot mahcines at the racinos for the support of horse racing. The strategy behind a negotiated amount is to eliminate the thinking in the legislature that the revenues to horse racing are a state-sponsored subsidy. The hope is that with a negotiated amount each year that the revenues will not be considered as a potential funding source for other legislative initiatives.

While IBOP will cover the pluses and minuses of this approach in an upcoming newsletter, the bill also eliminates the $3 million smoking cessation allocation and the $500,000 to the Gaming Integrity Fund which are currently subtracted from the horse racing allocation from slot revenues. The bill also eliminates the statutory caps to the horse racing allocation which were originally based upon the first year slots existed at the tracks and only provided an increase each year that was limited to the change in the consumer price index (CPI) regardless of the growth in overall slot revenues. Because of the statutory caps being limited to the CPI increases off of the first year, the 15% allocation to horse racing was actually 11.97% in the last fiscal year. So, a negotiated amount of 12% would keep all revenues whole.

While we will have more on the numbers later, in fiscal year 2012 the slots at both tracks combined produced $467,676,831 in adjusted gross receipts (AGR) with $55,990,498 to the horse racing allocation. (In fiscal year 2013, slot revenues are tracking slightly below 2012 results.) This calculates to the 11.97% allocation mentioned earlier. Whatever percentage is negotiated in the fall of 2013, will begin in 2014. The 2013 fiscal year ends on June 30, 2013, and the current law will dictate revenues to horse racing (15% with the $3 million to smoking cessation and the $500,000 to the Gaming Integrity Fund) from July through December, 2013.

Senate Bill 528 Conference Committee Summary: Authorizes the use of limited mobile gaming systems at racetracks, satellite facilities, and in the gaming area of a riverboat or racino. Allows gaming licensees to deduct adjusted gross receipts attributable to free play wagering on the day that the free play wager is made. Provides that the total amount deducted by a licensee for free play may not exceed $2,500,000 in state fiscal year 2013 and $5,000,000 in state fiscal years 2014 through 2016. Provides that certain local development agreement reports must be made available through the Indiana transparency web site for local government. Provides that the lowest bracket of the wagering tax rate schedule for riverboats that had less than $75,000,000 of adjusted gross receipts during the preceding state fiscal year is 5% instead of 15%. Imposes an additional tax of $2,500,000 if the riverboats taxed under the alternative schedule receive adjusted gross receipts exceeding $75,000,000 in a particular state fiscal year. Increases the maximum value of a prize that may be won in a toy crane machine or other device played for amusement. Requires the gaming commission to study the use of complimentary promotional credit programs. Repeals obsolete provisions concerning the riverboat admissions taxes formerly distributed to the horse racing commission. Makes technical corrections. (This conference committee report does the following: (1) Authorizes the use of limited mobile gaming systems. (2) Provides that the total amount deducted by a licensee for promotional play may not exceed $2,500,000 in state fiscal year 2013 and $5,000,000 in state fiscal years 2014 through 2016. (3) Provides that deductions may be taken at any time during a state fiscal year. (4) Reduces the tax rate for the lowest bracket from 15% to 5% for riverboats that had less than $75,000,000 of adjusted gross receipts during the preceding state fiscal year. (5) Deletes provisions that have passed in either HEA 1176 or SEA 609. (6) Deletes a provision concerning amusement devices.)

Last Significant Action: April 27, 2013 - The House-approved version of SB 528 included a negotiated 9% to 11% of racino slot revenues to support horse racing. This provision was negotiated out of the conference committee version. The Senate version included table games for the two racinos which did not make the conference committee version either. The Governor had threatened to veto any bill that expanded gaming. However, the conference committee did approve a version of SB 528 that has very little impact on horse racing as a whole. While the bill includes mostly tax benefits for Indiana's casinos and included an authorization to use limited mobile gaming systems at the race tracks, OTBs, and other parts of a casino/racino.

House Bill 1176 Summary: Prohibited horse racing and gaming wagers. Prohibits members of the Indiana horse racing commission (IHRC), employees of the IHRC, and racing officials from wagering on horse racing at the racetracks and satellite facilities located in Indiana. Provides that the prohibition also applies to the spouse of any individual prohibited from wagering. Provides that a person who wagers on horse racing in violation of the statute commits a Class A misdemeanor. Prohibits members of the Indiana gaming commission (IGC) and employees of the IGC, from wagering on gambling games at the riverboats and racinos located in Indiana. Provides that the prohibition also applies to the spouse of any individual prohibited from wagering. Provides that a person who wagers on gambling games in violation of either statute commits a Class A misdemeanor. Adds gaming agents to the definition of "law enforcement officer" for purposes of the criminal code.

Last Significant Action: April 23, 2013 - The House concurred with a minor Senate amendment so this bill is going to the Governor for a signature. The wagering prohibitions in this bill begin on January 1, 2014. The bill codifies in statute what are already prohibitions within the IHRC's administrative rules.

Dead Bills

Senate Bill 91 House Amended Summary: Authorizes horse racing associations and racino licensees to negotiate the amount of slot machine receipts used to support the horse racing industry. Provides that the agreement must require between 9% and 11% of the licensee's adjusted gross receipts. Establishes the Indiana motorsports commission. Allows the commission to adopt a resolution establishing a motorsports investment district. Specifies that the budget committee shall review and make a recommendation to the budget agency regarding the resolution. Specifies that the maximum amount of revenue allocated to the district in a state fiscal year may not exceed $5,000,000. Provides that the Indiana finance authority may issue bonds for the purpose of obtaining money to pay the cost of improving, constructing, reconstructing, renovating, acquiring, or equipping improvements within a qualified motorsports facility. Provides that the amounts allocated to the district are loans that will be repaid from the growth in sales tax and individual adjusted gross income tax revenue realized within the district and from an admissions fee imposed on race day admissions to a qualified motorsports facility. Requires goals for participation in the procurement and contracting process involved with a motorsports investment district by minority business enterprises of 15%, women's business enterprises of 8%, and veteran or disabled business enterprises of 3%, consistent with the goals of delivering projects on time and within budget.

Last Significant Action: April 27, 2013 - What had started out as a bill in the Senate that established a motorsports investment district (read Indianapolis Motor Speedway district) morphed into a version passed by the House that could have impacted horse racing. The House version of SB 91, just like the House version of SB 528, established an annually negotiated amount from slot revenues (9% to 11%) between the tracks and the horsemen. The Senate dissented with the House version, which had actually failed to reach a majority vote the first time around in the House. Once in a conference committee, the bill died as the motorsports bill became HB 1544 which had no horse racing-related items.

House Bill 1350 Summary: Provides that a person may not claim a race horse unless the person has on deposit with a permit holder an amount sufficient to pay the use tax on the claimed horse. Provides for the collection and remittance of the use tax on claimed horses for claiming transactions occurring after June 30, 2013. Provides that when a race horse is claimed for a subsequent time, the use tax rate is applied to the increase in the claiming price from the previous claiming transaction, if any. Requires the department of state revenue to establish an amnesty program for collecting the use tax on claiming transactions occurring before June 1, 2012.

Last Significant Action: January 17, 2013 - This bill was referred to the Ways and Means Committee and did not progress. However, the concept of a claiming tax amnesty program did make it into the approved version of the two-year budget which is HB 1001.

Senate Bill 607 Summary: Reduces the nominal percentage of racetrack casino slot machine revenues that must be used to support the horse racing industry from 15% to 12% and specifies that the amount is a racing support fee. Recodifies statutes governing the use of the fee. Establishes the Indiana horse racing support fund (IHRSF) for the deposit of the racing support fee. Requires that the fees must be remitted on a daily basis. Subtracts the racing support fees and county slot machine wagering fees from a licensee's adjusted gross receipts for purposes of the slot machine wagering tax. Recodifies amounts formerly subtracted from the 15% of revenue otherwise payable to support horse racing as an addition to a licensee's annual license renewal fee, a tobacco cessation support fee, and an increased gaming integrity fee. Specifies that the annual license renewal fee, tobacco cessation support fee, gaming integrity fee, and problem gambling fee may not be subtracted from a licensee's adjusted gross receipts. Repeals an obsolete definition, obsolete provisions concerning the riverboat subsidy for horse racing that predated the slot machine wagering at the racetracks, the statute requiring a permit holder to use part of the permit holder's slot machine revenue to support the horse racing industry, and the supplemental fee. Appropriates money in the IHRSF to the Indiana horse racing commission.

Last Significant Action: January 17, 2013 - This bill was referred to Committee on Public Policy and never progressed.

Administrative Rule of the Month - 71 IAC 8.5-1-1 & 71 IAC 8.5-1-1.5 Medication

This month's Indiana Breeder and Owner Protection, Inc. (IBOP) Administrative Rule of the Month is technically 'Rules' of the month. We are taking a look at why the current flat racing rule book has two separate administrative rules with a heading of 'Medication' where there should be only one. More specifically, these rules are 71 IAC 8.5-1-1 and 71 IAC 8.5-1-1.5. For the most part, they are almost identical except that one indicates that DMSO can be used (71 IAC 8.5-1-1.5) and the other indicates that DMSO is a prohibited foreign substance (71 IAC 8.5-1-1.5). If conflicting administrative rules regarding the use of DMSO sounds familiar, we've covered this conflict a few times before over the last year. Sadly, this issue has a long history that has stretched over the last year, and the Indiana Horse Racing Commission (IHRC) just can't seem to get it right. First, some background.

Over a year ago, IBOP had noticed that the recently approved 'Threshold levels' administrative rules in both the standardbred and flat racing rule books had established a threshold for the use of DMSO that was in conflict with already established 'Medication' rules. On April 27, 2012, IBOP petitioned the Indiana Horse Racing Commission (IHRC) to change the 'Medication' rules to remove the conflict. That communication can be seen on our "Letters to the Commission" page at: http://ibopindy.blogspot.com/2012/04/on-april-27-2012-following-was-sent-to.html. The IHRC chose not to fix this conflict at either of their meetings held on June 25th or August 30th. In advance of the IHRC's October 12th meeting, IBOP filed a second request, which can be found at: http://ibopindy.blogspot.com/2012/10/second-request-to-modify-medication.html. Once again, the IHRC did not resolve the DMSO use conflicts at their October 12th or December 22nd meeting. By their inaction, the IHRC actually allowed the standardbred 'Medication' to expire on January 1, 2013.

Our January, 2013, Administrative Rule of the Month reviewed exactly why '71 IAC 8-1-1 Medication' in the standardbred rule book was allowed to expire. In short, the reasons behind the IHRC allowing the standardbred 'Medication' rule to expire is a great example of their lack of respect for Indiana law. However, for this article, just know that the equivalent thoroughbred 'Medication' administrative rule was not due to expire until January 1, 2014. But, if you'd like to review why the standardbred version was allowed to expire, you can read the article at http://ibopindy.blogspot.com/2013/01/administrative-rule-of-month-71-iac-8-1.html. The fact that the flat racing 'Medication' rule didn't expire until 2014 is key to understanding the ongoing mistakes made by the IHRC staff.

At their February 22, 2013 meeting, the IHRC approved a 'Medication' administrative rule for both the standardbred and the flat racing rule books that fixed the DMSO conflicts. Or, so they thought. At that meeting, IBOP informed the commissioners and the IHRC staff that since 71 IAC 8-1-1 (standardbred version) was allowed to expire that the section heading, 71 IAC 8-1-1, could no longer be used. We suggested that due to the expiration that the old standardbred rule would always read, '71 IAC 8-1-1 Medication (Expired).' While we were met with skepticism, IHRC General Counsel Lea Ellingwood was able to verify this fact before the end of the meeting. So, the IHRC would have to submit the new standardbred 'Medication' rule under a different heading. What they ultimately chose was 71 IAC 8-1-1.5. But, what about the flat racing 'Medication' rule or should we say 'Medication' rules?

To understand why the flat racing rule book now has two 'Medication' rules, you have to understand what the IHRC staff did with the standardbred rule approved on February 22nd. First, they did nothing. If you are a regular reader of IBOP's Administrative Rule of the Month or our newsletter, you've probably read that an emergency rule is not effective until the approved emergency rule is actually filed (published) with the Indiana Register. The 2013 standardbred meet at Hoosier Park opened on April 2, 2013, and we had noticed the new 'Medication' rule had not been filed. Therefore, the standardbred meet opened without a valid 'Medication' rule being in effect. So, we reminded the IHRC staff that the rule had not been filed. Sure enough, the standardbred rule, under the heading of 71 IAC 8-1-1.5 Medication,' was filed the very next day on April 3, 2013. And, the flat racing emergency rule that was approved back on February was also filed at the same time.

While the flat racing rule '71 IAC 8.5-1-1 Medication' had not expired, the IHRC staff had submitted the new rule to the Indiana Register under a different section heading '71 IAC 8.5-1-1.5 Medication' as if the rule had expired. So, now the flat racing rule book has as active rules '71 IAC 8.5-1-1 Medication' and '71 IAC 8.5-1-1.5 Medication' and, as stated earlier, one says DMSO is a prohibited foreign substance and the other allows for the use of DMSO. If you'd like to see how these rules read in the Indiana Administrative Code, click the following link: http://www.in.gov/legislative/iac/T00710/A00085.PDF? or go to the two pages we've downloaded via: http://freepdfhosting.com/1dd8802c3b.pdf.

At some point, we believe that the IHRC will get this right. Left to their own initiative, probably not, so we sent the following petition to the IHRC on April 23, 2013, to have '71 IAC 8.5-1-1 Medication' repealed.

"Pursuant to '71 IAC 2-12-1 Procedures,' Indiana Breeder & Owner Protection, Inc. (IBOP) is requesting that the Indiana Horse Racing Commission (IHRC) consider the repeal of '71 IAC 8.5-1-1 Medication.' IBOP would appreciate this request be considered as an agenda item at the next regularly scheduled IHRC meeting. Please consider this correspondence as our petition for the repeal of 71 IAC 8.5-1-1, which is a flat racing administrative rule, due to its conflict with '71 IAC 8.5-1-1.5 Medication' which was put into effect on April 3, 2013.

As background, on April 27, 2012, IBOP submitted a petition to have '71 IAC 8.5-1-1 Medication' modified to conform 71 IAC 8.5-1-1(e) with the newly established threshold for dimethyl sulfoxide (DMSO) in '71 IAC 8.5-1-4.2 Threshold levels.' Effectively, 71 IAC 8.5-1-4.2 established a specific gravity for the use of (DMSO) while 71 IAC 8.5-1-1(e) classified DMSO as a prohibited foreign substance. At the February 22, 2013, IHRC meeting a modification via an emergency rule was approved to fix the conflicting language in 71 IAC 8.5-1-1.

However, on April 3, 2013, the modified rule was actually filed with the Indiana Register as having a new section heading of '71 IAC 8.5-1-1.5 Medication' and not simply filed as an update to the existing '71 IAC 8.5-1-1 Medication.' With 71 IAC 8.5-1-1 still being an active rule at the time, a filing with a separate section heading was not actually necessary. (The equivalent rule in the standardbred rule book did have to be filed with a new section heading due to the rule's expiration on January 1, 2013.) The net result to the flat racing rule book is that now there are two 'Medication' sections; 71 IAC 8.5-1-1, which still indicates DMSO as a prohibited foreign substance, and 71 IAC 8.5-1-1.5, which is in concert with the intent of '71 IAC 8.5-1-4.2 Threshold level.'

Therefore, the flat racing rule book will still have conflicting administrative rules regarding the use of DMSO for the beginning of the flat racing meet at Indiana Downs. However, this year, the conflict is between 71 IAC 8.5-1-1 and 71 IAC 8.5-1-1.5. Both of these 'Medication' rules can be viewed in the Indiana Administrative Code at http://www.in.gov/legislative/iac/T00710/A00085.PDF? . We've also attached a two-page pdf that captures both 'Medication' rules. Our view is that simply repealing 71 IAC 8.5-1-1 will match the stated intent of the IHRC.

Thank You,

Jim Hartman
IBOP Vice-President

CC: Chairman Diener
Vice-Chair Schaefer
Commissioner Grimes
Commissioner Barclay
Commissioner Schenkel"