Last fall, South Dakota's Commission on Gaming made its annual allocations to the two remaining horse racing venues in the state. It amounted to $170,000 for each of the tracks, in Aberdeen and Fort Pierre.
That could have kicked off preparations for the continuation of a Fort Pierre tradition that goes back at least to 1948 – spring horse racing at the Stanley County Fairgrounds.
But it didn't.
The commission's allocation last fall could be compared to a field-goal kicker putting his boot to the ball. What happened after that reads a little like this report by Jeff Mammenga – he was the Capital Journal's sports guy three decades ago – written about the Stanley County Buffaloes semi-final game against Herreid-Pollack in 1986:
"...as [the ball] neared the crossbar against the wind, it seemed to deflate. It hit the bar..."
Last fall, horse racing in Fort Pierre hit the crossbar, too. After the commission's decision on allocations, the group that has organized the races all these years, the Verendrye Benevolent Association (VBA), announced it would not be holding the races the following spring.
The VBA eventually reconsidered its decision. So by the end of April, Mammenga's account of the football game, after the ball hit the bar, still fit. The ball "... bounced over, setting off the SC cheering section."
Horse races were held this year in Fort Pierre. Same for Aberdeen.
It's not clear if horse races will be held anywhere in South Dakota next year. It will likely take more than one lucky bounce.
An offensive lineman on that 1986 Buffs football team, which went on to win that year’s state championship, has been carrying the ball for horse racing in Fort Pierre, and Aberdeen. His name is Shane Kramme.
Kramme has worked as the starter for the last few years for Fort Pierre and Aberdeen horse races. This year he was track manager in Fort Pierre.
Kramme, who says he "left blood on that field" as a Buff, was a key player this past year, in the effort to run races in Fort Pierre, and worked with the state Commission on Gaming to help make it happen.
The financial crunch that made horse racing uncertain this year looks to be even worse for next year. Kramme traces the issue back to the late 1990s, when money in two designated horse racing funds started to be transferred out to pay for other things, with authorization by the state legislature.
The practice of moving money out of those horse racing funds was deemed constitutional by the South Dakota Supreme Court in a case decided in the early 2000's.
Kramme sees the challenge now as finding a way to support horse racing financially for the next three years. By then, he hopes that a funding stream can be established from general sports gambling, which a U.S. Supreme Court ruling earlier this year made possible.
Looking ahead to next year, it's estimated that significantly less money will be available to the two tracks. A Chapter 7 bankruptcy filing last October by Bettor Racing, Inc. has had a significant impact, because wagers placed through Bettor Racing previously generated around half of the revenue awarded to horse racing tracks.
According to Kramme, a total of $142,000 is projected to be available for allocation to the two tracks for racing in 2019, less than half this year's total of $360,000.
In many conversations with South Dakota horsemen about the future of the sport, the topic will turn to former Gov. Bill Janklow.
Words like "take," "grab," "steal" and "raid" are used by some to describe the transfer of money in the late 1990s and early 2000s, from two designated funds, one meant to support South Dakota bred horses and the other a revolving fund. The "money grab" is attributed by horsemen to Janklow.
Among some current legislators, there's a vague recollection that some money might have been moved out of horse racing funds.
The online records of legislative action maintained by the Legislative Research Council document Janklow's role in the initial transfers. Records on 1997’s HB 1262 include the caption, "Introduced by: The Committee on Appropriations at the request of the Governor."
The point of HB 1262 was simple – take $250,000 from horse racing funds and use it to support social services. "The Commission of Gaming on or about July 30, 1997 shall transfer one hundred twenty-five thousand dollars from the special racing revolving fund and one hundred twenty-five thousand dollars from the South Dakota-bred racing fund to the Department of Social Services..."
What started as a quarter-million dollar transfer in 1997 stretched to a total of $5.85 million by 2003 – $3.11 million from the South Dakota-bred Racing fund and $2.75 million from the Special Racing Revolving Fund, according to LRC records. Larry Eliason, currently the Gaming Commission's executive secretary, recently confirmed to the Capital Journal the transferred amounts each year as reflected in the commission's annual reports. Eliason was also serving as executive secretary to the commission at the time of the transfers.
"At the time nobody wanted to step up and fight it because [the money] was going to worthy causes. Whatever the cause was, it was noble," said Mike Schmidt, the general manager for NE Area Horse Racing. Among the departments receiving money that had been designated for horse racing were social services, education (child development programs, technology in K-12 schools), and agriculture (resource conservation, state fair).
The word Shane Kramme likes to use nowadays to describe the transfers is "borrow" – because he'd like to see the money returned to horse racing.
SD SUPREME COURT
When the state legislature first approved fund transfers out of the designated horse racing funds in 1997 the votes wasn’t unanimous. By 2001, some legislators seem to have felt some legal discomfort transferring money out of a fund that was described in state law has having a specific purpose.
An amendment was proposed in the 2001 session to change the law to read: "The fund shall be used by the commission to encourage horse racing and the raising and breeding of horses in South Dakota and shall be used for the purpose of providing compensation to South Dakota-bred horses by providing funds to all horse tracks licensed in South Dakota, AND FOR ANY OTHER PURPOSE PROVIDED BY THE LEGISLATURE." The bill failed on a 22-48 vote in the House.
Another 2001 bill authorizing the transfer of $250,000 out the two horse racing funds also failed. It died on a 15-19 vote in the Senate and never made it to the House. A third bill that would have transferred money from the horse racing funds to fund the State Fair also failed. Even though the House and Senate each passed versions of the bill, the legislation didn't make it through the conference committee process. The House didn't appoint a committee.
The issue was resolved in the general appropriations bill. The amount of the transfers increased from the $250,000 a year the legislature had been approving. In 2001, a total of $2.25 million worth of transfers from the horse racing funds to the departments of health, social services and agriculture (state fair) was included in the general appropriations bill, which passed.
That led several legislators to file suit, asking the Supreme Court for a writ of prohibition against the transfers. The case is known as Apa v. Butler.
Part of the argument made by the legislators was the idea – set as precedent in an earlier court case – that the legislature could not use a general appropriations bill "in a manner that changes, amends or repeals existing law." Transfers from the horse racing funds effectively amended or repealed the existing law on the permissible use of the horse facing funds, the legislators contended.
The Supreme Court found that the general appropriations bill transferred "funds previously subject to a continuing appropriation for those purposes to the general fund and reappropriated those funds." The reappropriation, the court concluded, did not change the law making the funds initially subject to the continuing appropriation.
Another argument made by the legislators was based on the fact that the two special horse racing funds required a two-thirds majority vote to create. Allowing money from the two funds to be reappropriated by the general appropriations bill meant the legislature could undo by a simple majority what it took a two-thirds majority vote to create, they argued.
The court was not persuaded by that argument, because it meant the court would have to read into the state Constitution a two-thirds vote requirement for the amendment or repeal of any special continuing appropriations measure. "This we cannot do," said the court in the opinion, written by John Konenkamp.
The court was split 3–2 on the decision. Joining Konenkamp in the ruling against the legislators were David Gilbertson and Gene Paul Kean, who was a circuit court judge, filling the slot left open by Robert Miller, who retired. Dissenting from the opinion were justices Richard Sabers and Robert Amundson.
Kramme analyzes that Supreme Court decision as a kind of watershed moment for horse racing in South Dakota. He sees it as a signal that was sent to race horse owners, breeders and trainers, that South Dakota was not a place where they should invest. He points to that decision as the start of a decline in numbers.
US SUPREME COURT
South Dakota horse racing might have an alternative to the now relatively meager revenue stream from taxes on pari-mutuel betting, but it's likely at least three years away.
In May this year, the US Supreme Court struck down a 1992 federal law that prevented commercial sports betting in most states. State Attorney General Marty Jackley has said South Dakota's constitution would need to be changed in order for the state to get a piece of the billions of dollars in business sports betting could bring.
If voters approved a constitutional amendment, it would then be up to the legislature to enact laws that would regulate how the sports betting business is conducted in the state, and whether horse racing would have a designated funding stream from that business.
In an interview with the Capital Journal, District 24 Senator Jeff Monroe sketched out a possible timeframe for the sports betting revenue to help horse racing. If the legislature puts a constitutional amendment in front of voters in 2020, and voters approved it, that would mean the legislature could act during the 2021 session to pass sports betting legislation that assigns a funding stream to horse racing. That means 2022 would be the first horse racing season that could benefit from the new funding source.
That leaves the next three racing seasons – 2019, 2020 and 2021 – as a gap to be bridged.
NEXT THREE YEARS
Kramme is looking to the legislature to help bridge the anticipated three-year funding gap for horse racing in Fort Pierre and Aberdeen.
It's essential to continue to race for the next three years, because letting even one year go by without holding races would kill the industry in South Dakota, according to Kramme and Schmidt. It wouldn't be possible to re-start from scratch, they say.
That's because a pause in racing would eliminate the remaining ag-economy infrastructure to which horse racing is tied, Kramme says. Horses eat feed, they have to be pastured and stabled, and that makes it an agricultural issue, he says.
Horsemen are already making decisions about where to foal their mares, Kramme says, and if there aren't going to be any races in South Dakota with purses for South Dakota-bred horses, there's no incentive to foal them in South Dakota.
Whether race horses are going to be stalled at Stanley County Fairgrounds next spring has an impact on farmers even now, Kramme said. He said he talked to a farmer recently who had alfalfa he was going to sell – and he wondered if he should sell it all now, or save some out to sell to horsemen in the spring.
The case for horse racing, Kramme says, is economic. He points to a study of economic impact of horse racing in North Dakota that shows it generates $25 million annually. For every dollar invested, it generates $50 in economic activity, Kramme says.
Bridging the three-year funding gap will include more than persuading legislators of the merits of horse racing. The state's elected officials would need to identify a source of funding.
One kind of funding that's off limits is the emergency reserve. Kramme said he's inquired with the governor's office about tapping reserves. Kelsey Pritchard, the governor's communications director, told the Capital Journal that those reserves are used for natural disasters.
When the legislature convenes its 2019 session, it will be hashing through the budget for the 2019-2020 fiscal year, which is settled towards the end of the session. The state's fiscal year runs from July to June. So the regular budget process won't yield any funding in time for the 2019 horse racing season.
So the most likely source of interim funding from the legislature for horse racing could be the surplus left at the end of the state's fiscal year. At the end of the 2018 year, there was nearly a $17 million surplus.
The legislature could vote to spend some of that surplus – one-time dollars – earlier in the session.
Rounds says the fact that $5.85 million was transferred out of the horse racing fund "does come into play." But Rounds told the Capital Journal: "In order to use those one-time dollars, there's gotta be a plan, where they're going to be self-sufficient in the future. If we give them a boost can we know they'll be able to go into the future on their own?"
Rounds said there'd likely be a political "dogfight" over the one-time dollars, because there are other interests competing with horse racing. The new governor, whoever it turns out to be, will also probably have some ideas about what should happen to that budget surplus, Rounds said.
Rounds concluded, "My goal is to keep horse racing in South Dakota."
Jeff Monroe, the senator for District 24, told the Capital Journal, "Legislators can't just go get money for a cause. It has to be voted on, and it will depend whether it fits the budget."
About the possibility of allocating some one-time funding for horse racing, Monroe said he thought it would be straightforward to get the issue put to a vote in the legislature. But he's not sure how that vote might turn out.
State representative Mary Duvall told the Capital Journal on the night of the Republican primary election that the transfers out of the horse racing fund back in the late 1990s bothered her. She called it "irresponsible" to do that. But Duvall said that making a special appropriation would be a "heavy lift" for the legislature.
Kramme admits it will be a heavy lift, saying, "That's why we all have to get our fingers under it."
Kramme seems to have all his own fingers, on both hands, under the weight to be lifted. He’s planning to address the state’s Commission on Gaming at its meeting Sept. 19 in Deadwood in support of horse racing "I can't stand to see horse racing go away without attempting to fix it, to at least try," he says.