The Impact of Indiana Horse Racing on the Indiana Economy, a Preliminary Study

By Conners, Susan E.; Furdek, Jonathan M. et al. | Journal of Economics and Economic Education Research, September 2011 | Go to article overview
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The Impact of Indiana Horse Racing on the Indiana Economy, a Preliminary Study


Conners, Susan E., Furdek, Jonathan M., Couetil, Laurent, Preston, Gregory, Journal of Economics and Economic Education Research


INTRODUCTION

In 1988, the constitutional ban on all forms of gaming in Indiana was removed with a sixty-two percent majority of Indiana voters. In September, 1994, the first pari-mutuel racetrack opened in the state. The racetrack was a combined facility with a casino. From the beginning of pari-mutuel horse racing in Indiana, legislators displayed the foresight to give this fledgling industry a good head start and a solid foundation as it competed with older, more established state racing programs in other states, by providing a share of casino taxes to subsidize purses for the racetracks. A second racetrack and casino was opened and currently the two racetracks, one in Shelbyville, Indiana an the other in Anderson, Indiana continue to function.

In 2007, the Indiana General Assembly passed, and the governor signed into law, a bill that would permit electronic gaming at the state's two pari-mutuel racetracks. This "slots" legislation was the product of unprecedented cooperation and more than ten years of effort put forth by representatives of Indiana standardbred, thoroughbred and quarterhorse racing and breeding associations and the state's two pari-mutuel race tracks in building public understanding of the industry and legislative support for this concept.

With the passage of the slots law, state representatives and senators demonstrated judgment and vision in keeping Indiana dollars in Indiana by promoting the state's homegrown horse racing and breeding industry. The new law reinforced the framework for a growing, productive industry with the intent that it would generate future agribusiness economic activity, revenue and jobs throughout Indiana.

In the campaign for passage of gaming at the tracks, both horsemen and race tracks relied on the results of a 2005 study by the American Horse Council (American Horse Council, 2005) which was based on 2003 data. This study reported a direct economic impact of $181 million and a total economic impact of $294 million for the Indiana racing and breeding industry.

For the purpose of quantifying the effects of the 2007 slots law and an accurate representation of the current condition of the industry in the state, all four racing and breeding associations came together and commissioned a survey and business analysis of the racing and breeding industry and its economic impact on Indiana.

METHODOLOGY

The data collection portion of the research involved two surveys that were conducted simultaneously. One survey obtained economic data from the Indiana racetracks for the calendar year 2009 and both Indiana horse racing tracks responded with their data. The second part of the study involved a survey of over 7,000 members of the race horse breeding community requesting their economic data for 2009. The breeder survey resulted in 1,000 responses.

Estimation of economic impact utilizes state specific IMPLAN multipliers to estimate the overall economic impact of the industry on the state GDP and on employment. This platform was selected for several reasons. The IMPLAN modeling system is an input-output model that describes commodity flows from producers to intermediate and final consumers (Hodges 2007) . Total industry expenditures, employment compensation, and tax implications can be extracted using this modeling system. It has been in use since 1979 and is currently used by over 500 private consulting firms, university research centers, and government agencies (UNFCCC, 2010). The IMPLAN modeling system combines the U.S. Bureau of Economic Analysis' Input-Output Benchmarks with other data to construct quantitative models. From this data, one can examine the effects of a change in one or several economic activities to estimate its effect on a specific state, regional, or local economy (MIG 2010). The economic impacts of horseracing and breeding related activities were estimated using 2008 IMPLAN multipliers for the State of Indiana.

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