FRANKFORT — A new study released Thursday by the state of Kentucky found that the Thoroughbred breeding industry is responsible for 17,600 jobs and total spending of $1.58 billion, including $350 million in wages.
That breaks down to $912 million in direct spending by Thoroughbred farms, which leads to an additional $673 million in spending at other Kentucky businesses, said Perry Nutt, lead researcher on the project.
The economic analysis was conducted by the Legislative Research Commission for the Program Review and Investigations Committee. The report quantified the impact to the state and looked at the state programs that assist the industry. The only recommendation made by the study was to codify the way Standardbred breeding incentives are distributed. The study did not directly address expanded gambling.
However, it provided an updated snapshot of the health of the breeding industry that could be used during the next session of the General Assembly to support a legislative agenda that is likely to include calls for more tax breaks for horses and for more gambling at racetracks.
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Overall, the study painted a picture of relative strength for Kentucky Thoroughbred breeding.
During the past two decades, the state's share of the breeding market has increased even as the overall market has decreased, Nutt said.
The number of Thoroughbred mares bred has fallen 42 percent during the past two decades, Nutt said. "This market's contracting," he said.
Kentucky's share of the market is roughly equal to the shares of the next nine states combined, he said. (The study did not include Ontario, Canada, which is a major breeding province and growing, with expanded gambling that pours money into purses and breeders' incentives.)
He compared Kentucky with six other significant breeding states: Florida, Indiana, Louisiana, New York, Pennsylvania and West Virginia, which are all states that allow racetracks to use expanded gambling.
From 1991 to 2010, those six states collectively saw their market share grow by 11 percent; Kentucky, which does not have slots or casino gambling, saw its market share grow by 30 percent.
In Kentucky, incentives and purse subsidies come from the sales tax on stud fees, primarily Thoroughbred, and from a small percentage of the parimutuel tax.
Both sources have declined by millions of dollars in recent years, even as Kentucky racing has become more dependent on purse supplements because of the decline in overall betting.
The study did not examine whether Kentucky faces increased vulnerability as New York ramps up revenue from gambling. New York opened a "racino" at Aqueduct on Oct. 28 that is pouring about $1 million a day into state coffers for education and the horse industry.
That kind of data will be crucial, said Rep. David Osborne, R-Prospect. Osborne, who is a Thoroughbred horse owner, predicted that in two years, the picture could be significantly different.
"How much money does it take to move an industry? We're about to find out," Osborne said. He said that by his calculations, Kentucky is offering an average of $700 a mare in incentives, but New York will be offering an average of $20,000 a mare, and that figure is rising.
"That's enough to make me consider relocating some mares," he said.
Osborne said he was considering several pieces of legislation on expanded gambling for the next session. He isn't sure he will present anything, but he plans to work with other lawmakers.
"I think you'll see a concerted push by a number of people to move this expanded gambling issue back to the forefront," he said.
He thinks there is enough support to get it through both houses this time, provided the issue is narrowly focused and simple. That might mean returning to a constitutional amendment that can be placed on the ballot in 2012.
"The most important thing is to get something out there," he said, "and if an amendment is the way to go, if it's a constitutional amendment, I think we need to drop all discussion of enabling legislation."
Kentucky horse farms also are likely to again push for a sales-tax exemption. Other kinds of farms in Kentucky are exempt from the 6 percent tax on goods used in agricultural production, such as farm machinery, fuel, hay and feed, and veterinary medicine, but horse farms pay taxes on those.
David Switzer, executive director of the Kentucky Thoroughbred Association, said he hoped that lawmakers would examine that part of the study closely.