Cashing Out: States Consider Privatizing Lottery Illinois and Indiana are moving to sell their lotteries to private operators who may be willing to pay billions to run the gambling monopolies. In Illinois, the governor says the state could get more than $10 billion — which he says would dramatically boost funding for schools and new school buildings. Critics complain that the state would be losing more than $600 million a year in lottery profits.
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Cashing Out: States Consider Privatizing Lottery

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Cashing Out: States Consider Privatizing Lottery

Cashing Out: States Consider Privatizing Lottery

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From NPR News, this is ALL THINGS CONSIDERED. Melissa Block.


And I'm I'm Robert Siegel.

The governors of Illinois, Democrat Rod Blagojevich, and Indiana, Republican Mitch Daniels, certainly have their differences. One's liberal. The other's conservative. One's rooting for the Bears in this weekend's Super Bowl, the other for the Colts. But they do have at least one thing in common. Both hope to rake in billions for their state by selling their lotteries to private companies.

As NPR's David Schaper reports, those moves are not without risk.

DAVID SCHAPER: I'd like to buy one ticket for the MegaMillions.

Unidentified Man: (Unintelligible), right?


(Soundbite of printer)

SCHAPER: What's the jackpot I'm playing for?

Unidentified Man: $65 million.

SCHAPER: Do you know what my chances are of winning?

Unidentified Man: Winning chances depending on luck.

SCHAPER: My chances of winning this $65 million jackpot probably aren't that good, but despite the odds, millions of people play state lotteries all across the country each and every week. And because of that, states like Illinois are looking at leasing this asset to strike it rich themselves.

Mr. JOHN FILAN (Chief Operating Officer, Illinois): There's been an indicative value of $10 billion and possibly more.

SCHAPER: That's John Filan, chief operating officer for the state of Illinois, who says private investors would shell out that $10 billion up front for the chance to run Illinois's lottery and keep the profits for up to 75 years.

Indiana Governor Mitch Daniels wants to do the same with the Hoosier state's lottery, expecting it will fetch one billion dollars up front and another $200 million a year.

A handful of state and local governments around the country have started leasing out public assets to private companies in recent years to fill budget holes and fund new initiatives without raising taxes. It's most popular with toll highways. Governor Daniels did it last year with the Indiana Tollway. The city of Chicago has leased off its skyway and some city-owned parking garages. Those assets are pretty reliable sources of revenue, but gambling can be a little less predictable. Nonetheless, Filan says it makes sense to turn the lottery over to the private sector, which he says can do a much better job running and marketing it.

Mr. FILAN: The lottery is fundamentally a retail business. There's 7,800 retail outlets in Illinois alone for the Illinois lottery, and the state is in the, you know, healthcare, education and public safety business. We're not really retail operators.

SCHAPER: Governor Blagojevich proposes pumping four billion dollars from the deal into Illinois's cash-strapped schools and school construction. In Indiana, the money would boost spending on higher education. But in both states, legislators are skeptical of the plans. Critics say the states are acting like lottery players trying to get rich quick.

Dawn Clark Netsch was Illinois controller in the early 1990s and a state senator for nearly two decades before that who voted to create the Illinois lottery in 1974.

Mr. DAWN CLARK NETSCH (Former Illinois State Senator): I did vote yes. One of the several votes that I regret. There's just something that I find not quite attractive about governments sponsoring the get something for nothing attitude.

SCHAPER: Netsch says she finds it even more troubling that so many politicians now take that same approach when confronting deep and structural budget problems.

Ms. NETSCH: If there's one thing that drives me up the wall about politics and the political system, it is that it tends to be very short-term and, you know, quick fix.

SCHAPER: Netsch says selling off any state asset, whether it be the lottery or a tollway, may help states like Illinois erase debt now and fund needed new programs, but the state would be giving away a reliable source of revenue, possibly for decades.

Ms. NETSCH: Somebody has to pay the bill down the road.

SCHAPER: Others worry that privatizing the lottery would increase the burden on those who play the games.

Mr. DOUG DOBMEYER (Task Force to Oppose Gambling): The only way that the state or private company benefits from a lottery is when people lose. And that's a simple bottom line.

SCHAPER: Doug Dobmeyer is with the Task Force to Oppose Gambling in Chicago.

Mr. DOBMEYER: People have to be losers in order for the state or private company to be a winner.

SCHAPER: Dobmeyer says private operators won't bid billions on the lottery unless they can maximize profits. And he says that means more aggressive marketing of games to those who already play, many of whom can least afford to gamble. But industry officials disagree. They contend the way to increase profits is to get those who don't play and have more disposable income to start playing.

Michael Jones is the former director of the Illinois lottery, now with the consulting firm Independent Lottery Research.

Mr. MICHAEL JONES (Independent Lottery Research): Every piece of research that we have done, we find millions of people who would play the lottery if they thought about it. And the lottery and its products and its advertising and marketing and point of purchase are invisible to them.

SCHAPER: Jones says there's no shortage of casino and gaming companies willing to bid on state lotteries. He says they're monopolies with great earning potential and present a gamble that he'd sure be willing to take, but if private companies are so willing to invest billions to take over state lotteries, some wonder if the states are getting bad odds.

David Schaper, NPR News. Chicago.

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