By Russell Williams, USTA President
An Oversight Leads to No Oversight
Congress left something out of HISA: accountability
The Horseracing Integrity and Safety Act (HISA) is designed to eliminate accountability in racing regulation. HISA achieves this by setting up a private club called the HISA “Authority” in place of the existing, publicly-accountable state racing commissioners, who are appointed and overseen by elected officials.
The HISA Authority creates its own budget and imposes the cost of its operations either on the states or on anyone who still wishes to participate in racing in a post-HISA world. If the federal courts allow it to stand, this new concept of regulation by a private club will spread far beyond racing and will eliminate regulatory accountability in many other industries across the United States.
American civic life has been based on accountability from its beginning. Legitimate government derives its power from the consent of the governed, says the Declaration of Independence. Government accountability ensures that the will of the people is carried out, not the will of a privileged few. Freedom of speech and assembly, the right to petition government for redress of grievances, in fact all our liberties are empty concepts if government is not held accountable. Government that ceases to be accountable to those it governs is a dictatorship.
What does governmental accountability look like? Top officials in the executive branches and lawmakers in the legislative branches of state and federal government are subject to the electoral cycle. They are answerable to the people, who can vote them out. This is structural accountability. These officials prepare public budgets that account in dollars and cents to the people for how the work of government is done. Public budgets are an important basis of political discourse within government and between government and the people. This is fiscal accountability.
Most of the work of government is done by regulatory agencies, and accountability to the people remains an essential requirement for regulation, which is where the rubber meets the road in government. Decision makers in regulatory agencies are appointed by the President or a state governor, who also have the power to remove appointees when necessary. This achieves structural accountability. The regulatory agencies have a prominent place in state and federal budgets, and the amount of appropriations they receive reflects the importance that elected officials believe they have for the people.
This achieves fiscal accountability.
States Govern Commissions; HISA Governed by ‘Private Club’
State racing commissions are excellent examples of regulatory agency accountability, both structural and fiscal, because state regulators are appointed and can be removed by elected officials, and their funding is planned in the daylight, debated and approved in the public forum, and approved by elected officials. Both aspects of accountability at the regulatory level ensure that malfeasance is exposed and failed or harmful policies are swiftly corrected.
HISA lacks any accountability, either structural or fiscal. In fact, HISA seems designed to evade accountability. HISA’s governing body is its board of directors, chosen by a seven-member nominating committee, but the HISA statute is silent on who the nominating committee members might be and who chooses them.
Did this present an unworkable chicken-or-egg problem? Apparently not, because The Jockey Club, the Breeders’ Cup, Churchill Downs Inc., and Keeneland, the private organizations that wrote the HISA statute, were ready and waiting to do the choosing. The most powerful and privileged (and unelected) sliver of the Thoroughbred elite chose the committee that chose the HISA Board of Directors. This elite is so powerful and so privileged that it announced its choices on October 7, 2020, more than two months before Congress had a chance to consider HISA, which didn’t achieve passage until December 27, 2020.
Under the terms of the HISA statute, the HISA Board of Directors makes all of its own rules, including administrative structure, term limits for members, filling vacancies, and termination of membership. In state racing commissions, by contrast, state law governs administrative structure and term limits, and the governor appoints members, fills vacancies, and terminates membership where necessary.
State racing regulators conduct themselves under laws and regulations designed to ensure accountability and owe their positions to officials whom the people elect. HISA’s peculiar self-grooming character, on the other hand, ensures that racing will be governed by nothing more than a private club. Private clubs in general are accountable to no one but their own members. HISA is even worse than that: the regulated participants in racing are not members of the club and have no say in its operation, yet they must obey all of the club’s rules and pay all of its bills.
Who Pays? Not HISA
HISA eliminates fiscal accountability by changing regulatory funding from a public model to a private model. What sort of private model? Since mid-August 2021 the HISA Authority has been holding “implementation” meetings with state racing commissions. One state regulator described what it feels like to get implemented as follows: “HISA wants to call the shots, but they don’t want to pay for anything.”
Anyone taking time to read the HISA statute would have to agree that this is the one point about which its drafters were crystal clear: they are going to call the shots, but they are not going to pay for anything. Congress simply gave the HISA Authority a blank check, and whatever amount the Authority fills in, racing constituents will have to make good at the state level.
HISA’s private funding model will feel dramatically different to racing constituents, because when it takes effect the states will withdraw their funding of racing regulation. Under the state racing commissions, the states contribute to the cost of regulation to protect the public good. Under HISA, racing constituents will pay the full cost of whatever HISA decides to do but will have no ability to limit or cut off funding in case of malfeasance or incompetence.
To better understand this, we can look at the Pennsylvania State Horse Racing Commission’s budget, which is public and gets approved by multiple layers of elected officials. This will also shed light on the question whether racing breeds other than Thoroughbred will get opted into HISA in the future.
Pennsylvania’s racing commission budget totals about $18 million for both Standardbred and Thoroughbred breeds. Expenses related to testing total about $10.6 million, promotion of racing $1.5 million, and operation of the commission itself $6 million. Pennsylvania’s funding model is designed such that racing participants pay about $12 million for testing and promotion out of their purse money and the state pays about $6 million for commission oversight out of state taxes on pari-mutuel wagering, plus commission fees and fines.
Is it reasonable to assume that Pennsylvania will continue to contribute millions of dollars to subsidize the HISA Authority’s activities? No, it is not.
If States Can’t Call the Shots, Why Fund HISA?
The HISA statute blatantly and absolutely preempts state regulatory efforts. If the HISA Authority is going to call the shots, Pennsylvania will let HISA find its own funding, and take its annual $6 million funding contribution elsewhere. All fiscal accountability will leave at the same time. If that happens, the HISA statute requires the Authority to collect all of its funding directly from the participants in racing. The tracks as well as the breeders, trainers and other racing participants can all look forward to receiving monthly bills from the HISA Authority as the HISA statute requires. The same will happen in all the racing states.
This “call the shots, but duck the bill” principle disposes of the question whether harness racing will get opted into HISA. Operating a Thoroughbred program under HISA regulations and a Standardbred program under state regulations would be an administrative nightmare to say the least.
Look at but one example. Under its draft regulations, when HISA calls a positive it allows the split sample to be tested in the same facility that tested the original sample. In sharp contrast, Pennsylvania, and probably every other racing state, sends split samples to separate facilities, a practice that comports with best scientific practices, not to mention constitutional Due Process. These conflicting programs would be funded in two different ways, as explained earlier. The states’ only escape from this chaos would be to opt all the racing breeds into the HISA program.
Ten states along with numerous industry plaintiffs are now challenging HISA’s constitutionality in two federal lawsuits, but if HISA survives judicial scrutiny, opt-in looks like a sure thing for harness racing.
Basing medication regulation on science facilitates accountability by identifying shared principles on which all can agree. Returning to our example, Pennsylvania requires that $2 million of the $10.6 million testing fund is dedicated to scientific research. This demonstrates state government’s commitment to science as the only way to prevent individual bias and personal agendas from dominating regulatory policy.
The research funding supports things like cutting-edge research on biomarkers that could show exactly how long before a race a particular horse received shock wave therapy, enabling regulators to decide whether the effect is therapeutic or performance enhancing. This state-mandated, multi-million-dollar commitment to scientific research exemplifies the historical and ongoing dedication in all the states to science as the foundation of racing integrity and the welfare of the horse, something completely lacking from HISA.
HISA discards science in favor of an optics-based, agenda-driven approach to medication regulation. As used here, optics is a public relations term, and judging from the plain language of the statute, HISA will be driven only by its own medication committee’s notions of how the use of therapeutic medication might fit into a public relations campaign that substitutes optics for science.
For proof that HISA substitutes optics for science, look no farther than the plain language of the HISA statute, which bans therapeutic furosemide outright. Other therapeutic medications are left to the HISA Authority to regulate, but this one is singled out for elimination. Yet furosemide (still commonly known by its former trade name of Lasix) is the only therapeutic medication known to science that can alleviate exercise-induced pulmonary hemorrhage which, again according to science, threatens most racehorses.
Furosemide does not enhance performance, nor does it mask pain. However, to effectively alleviate pulmonary hemorrhage it must be administered within four hours of exercise, so horses that need it must receive an injection on race day. HISA bans furosemide for no better reason than that someone thinks this is not a good look, thus sacrificing science and equine welfare to optics.
The inhumanity to horses of sacrificing scientific principles to a public relations campaign is an important subject for another article. Here it need only be recognized that science supports accountability while optics undermines it. Science has not yet answered every question, but when used as the basis for therapeutic medication regulation, it uses shared truths where optics uses subjective agendas. A science-based regulator makes rules based on experimentally verified facts. The optics-based HISA Authority makes rules based on “because I said so.”
Decisions about the operations of state agencies like racing commissions are made entirely in the daylight and apply to publicly appointed officials and their employees. From enabling statute to official appointments and replacements through published regulations and enforcement, state racing commissions operate against a constant accountability benchmark that goes with being a part of state government. Even the funding of state racing commissions demonstrates accountability to the public. Let us turn now to some other concerns about HISA’s lack of accountability, beginning with its murky origins as a piece of legislation and concluding with the threat the HISA model poses to many industries well beyond horse racing.
HISA Passed Congress Without Floor Debate, Stand-alone Vote
The Thoroughbred elite that devised HISA about 10 years ago are small in number but titanic in clout. The Jockey Club has been the prime mover of HISA throughout. After HISA failed in three successive Congresses, Louisville-based Churchill Downs finally got on board. This awakened the interest of Louisville-based (former) Senate Majority Leader Mitch McConnell.
McConnell slipped the privately instigated HISA bill into the middle of a 5,500-page, must-pass Congressional appropriation measure at the end of 2020. After nearly a decade of failure in Congress, with never a minute of floor debate and never a standalone vote, this special interest legislation slipped through Congress at the very end of a session as a stowaway in an omnibus appropriations measure. HISA did not come from an industry-wide yearning or need for federal intervention, but instead from the agenda of a privileged few whose members can well afford to participate in horse racing as a hobby at any level to which it eventually shrinks.
Most participants in racing—indeed, all but the upper reaches of the Thoroughbred elite—have opposed HISA at every turn, ultimately challenging its constitutionality in federal court. HISA is therefore importantly different from publicly accountable regulatory legislation, which always grows from widely shared public concerns. The private club structure naturally makes sense to The Jockey Club, which is itself a private club, but it is directly contrary to publicly accountable federal regulatory programs, such as the Securities Exchange Commission, the Federal Election Commission, the Smithsonian Institution, the Environmental Protection Agency, and a complex of other agencies that came into being because of widely shared public needs that expressed themselves through Congressional action and merited funding from the public budget.
FTC Has No Power to Block Bad HISA Policies
“But wait,” some may say, “HISA operates under the oversight of the Federal Trade Commission!”
Anyone who reads the HISA statute and considers how the federal rules process actually works will find this laughable. The FTC will not be meeting with stakeholders about HISA rules, because the FTC does not draft or develop the HISA rules. When the HISA Authority submits its rule proposals to the FTC, they will be published in the Federal Register as HISA requires. The FTC will carefully review all public comments, but it will approve or disapprove rules solely to make sure that procedures have been followed and that the rules do not conflict with HISA’s statutory language. For example, the FTC cannot disapprove any HISA Authority rule on policy grounds or because it fears it will bankrupt the industry HISA regulates. HISA is written broadly enough that virtually any rule the HISA Authority proposes will comport with the statute. The FTC will be confined to what Winston Churchill called exalted brooding over form, not substance.
Congress knows how to ensure accountability when it generates a legitimate regulatory program. First, if the program proceeds from a broadly held public need, rather than the instigation of a faction, Congress puts the program in the federal budget. In this way, funding and accountability are linked, and if a program proves ineffective, federal funding dries up.
By contrast, HISA is given power to make its own budget, power that is unlimited as to either time or amount, and the states or the participants in racing will bear the cost instead of the federal budget. Second, if a legitimate regulatory program proves ineffective or even unworthy because of error, bias or arbitrariness, the Executive branch can step in and change the agency’s makeup, or Congress can abolish the agency or alter its charter. None of this is possible under HISA’s oppressive private club model, which will exercise unlimited power to tax those it regulates unless the federal courts intervene.
Should Unions Be Given Power to Write Rules for Labor Negotiations?
HISA’s dangerous effects could extend far beyond just harness racing or horse racing in general. Using the same structure of private instigation leading to unfunded federal programs administered by private clubs and paid for by the regulated parties, our whole national way of life could change, with regulation coming from autonomous, unaccountable agencies that, like the HISA Authority, will rule eternally, or at least so long as the industries they regulate survive.
How would it be if Congress gave unions the power to write the regulations governing labor negotiations, and the National Labor Relations Board could not modify those regulations even if it disagreed with the underlying policies?
The FTC has no power at all to block bad policies coming from the HISA Authority. How would it be if Congress gave either the Sierra Club or the coal companies the power to regulate fossil fuel emissions, and the Environmental Protection Agency was forced to approve them so long as they were not inconsistent with the governing statute? The HISA statute says as much with regard to racing medication regulation. Imagine what would happen if government contractors had the power to write regulations governing procurement of government contracts. Imagine what would happen if Congress gave internet companies the ability to craft net neutrality regulations. HISA is a Pandora’s box from which many deeply troubling possibilities could emerge.
Accountability is the essential, absolutely necessary principle to make a government not merely resemble a democracy, but in fact to function as one. Within a democratic system a regulatory agency must serve—that is, must be accountable to—not just all the constituents of the industry it regulates, but ultimately all the people. A regulatory program must have fiscal accountability to help guarantee broad public appeal rather than private benefit. A regulatory program must also have structural accountability, to help guarantee relevance and effectiveness rather than bias and caprice, to prevent corruption, and to shore up public faith in the democratic system.
Accountability is entirely absent from HISA; therefore HISA threatens to irreparably damage everything we have labored for more than half a century, under the oversight of the state racing commissions, to build.
Russell C. Williams
The views contained in this column are those of the author alone, and do not necessarily represent the opinions or views of the United States Trotting Association. To comment on this column, email us at firstname.lastname@example.org.