Government Out of The Lottery Business
Time to get your government out of the lottery business. I know it's irresistible for governments to keep their sticky fingers in this free money "pie", but it's time they were shown the door.
January 22, 2007
Illinois Seeks to Privatize Its State Lottery
By JENNY ANDERSON and CHARLES DUHIGG
The State of Illinois is seeking to privatize its state lottery system, hoping to attract as much as $10 billion from private investors interested in an operation with 800 retail outlets and 2005 revenue of about $650 million.
John Filan, Illinois? chief operating officer and until recently its chief budget officer, said private operators would bring a technological and marketing expertise to the lottery system that the government cannot provide.
?This is fundamentally a retail business, and governments are not equipped to manage retail businesses,? said Filan. ?Gaming is getting so competitive around the world that we?re worried our revenues could go down unless there is retail expertise to run the lottery.?
The deadline for bids is Feb. 20. Since 1974, according to the state, the lottery has contributed $13 billion to Illinois schools.
But the move to privatize the lottery is raising concern from public advocates.
Prior to the 20th century, almost all lotteries in the United States were operated privately. But a series of scandals involving political corruption rendered private lotteries illegal for nearly 100 years. State lotteries began to come back in the mid 1970s, and in 2005 they took in more than $52 billion, according to the North American Association of State and Provincial Lotteries.
Taking lotteries out of state hands could raise tricky social policy issues, as private operators will be interested in maximizing revenue without the sensitivity publicly elected officials face.
?As a government agency, lotteries are bound by the duty of care that a government has to its citizens,? said Rachel Volberg, director of Gemini Research. ?A private operator is not bound by any duty of care, just payments to the government. My concern would be that a private operator would be much more aggressive with advertising, with introducing new products that have addictive potential, and there?s not that responsibility on a private operator to protect private citizens.?
While Illinois officials expect the sale will attract investors, experts say that lotteries are fairly uncertain businesses.
In 2005, executives at the Multi-State Lottery Association, which runs the Powerball lottery, saw revenue drop by more than 15 percent after a record-setting run of winners kept jackpots small. The number of tickets sold increases as jackpots grow progressively bigger.
?Lottery revenues go through a lot of ups and downs, so there?s a lot risk there,? said Russell Sobel, a professor of economics at West Virginia University who has studied the industry. Some lotteries offer fixed prizes, regardless of how many ticketholders win. When popular combinations of numbers become winners ? such as 1234, 8888 or 122500, the supposed date of the first Christmas ? the number of winning tickets can spiral upwards, said Professor Sobel, reducing a lottery?s profits.
Illinois Governor Rod R. Blagojevich first floated the idea of privatizing the state?s lottery last May, while seeking re-election. At the time, Blagojevich estimated that the sale?s would generate $10 billion, which would fund a four-year school building and education plan. Under his proposal, $6 billion would be set aside to provide the state?s schools with $650 million a year for the next 18 years, roughly equal to what the schools received in lottery income.
At the time, Illinois Republicans charged that the real motivation behind Blagojevich?s proposal was to keep independent state Sen. James Meeks of Chicago from entering the gubernatorial race. Meeks, an influential black leader, had threatened to challenge Blagojevich if education funding wasn?t increased. Following the lottery proposal, Meeks announced he would not run.
Goldman Sachs and UBS are advising the state of Illinois. Mark Florian, a managing director in Goldman Sachs? municipal finance and infrastructure group, said demand would come from strategic bidders as well as infrastructure funds and private equity funds flush with cash.
Goldman Sachs, which has a $6.5 billion infrastructure fund, will not bid, said Mr. Filan.
January 22, 2007
Illinois Seeks to Privatize Its State Lottery
By JENNY ANDERSON and CHARLES DUHIGG
The State of Illinois is seeking to privatize its state lottery system, hoping to attract as much as $10 billion from private investors interested in an operation with 800 retail outlets and 2005 revenue of about $650 million.
John Filan, Illinois? chief operating officer and until recently its chief budget officer, said private operators would bring a technological and marketing expertise to the lottery system that the government cannot provide.
?This is fundamentally a retail business, and governments are not equipped to manage retail businesses,? said Filan. ?Gaming is getting so competitive around the world that we?re worried our revenues could go down unless there is retail expertise to run the lottery.?
The deadline for bids is Feb. 20. Since 1974, according to the state, the lottery has contributed $13 billion to Illinois schools.
But the move to privatize the lottery is raising concern from public advocates.
Prior to the 20th century, almost all lotteries in the United States were operated privately. But a series of scandals involving political corruption rendered private lotteries illegal for nearly 100 years. State lotteries began to come back in the mid 1970s, and in 2005 they took in more than $52 billion, according to the North American Association of State and Provincial Lotteries.
Taking lotteries out of state hands could raise tricky social policy issues, as private operators will be interested in maximizing revenue without the sensitivity publicly elected officials face.
?As a government agency, lotteries are bound by the duty of care that a government has to its citizens,? said Rachel Volberg, director of Gemini Research. ?A private operator is not bound by any duty of care, just payments to the government. My concern would be that a private operator would be much more aggressive with advertising, with introducing new products that have addictive potential, and there?s not that responsibility on a private operator to protect private citizens.?
While Illinois officials expect the sale will attract investors, experts say that lotteries are fairly uncertain businesses.
In 2005, executives at the Multi-State Lottery Association, which runs the Powerball lottery, saw revenue drop by more than 15 percent after a record-setting run of winners kept jackpots small. The number of tickets sold increases as jackpots grow progressively bigger.
?Lottery revenues go through a lot of ups and downs, so there?s a lot risk there,? said Russell Sobel, a professor of economics at West Virginia University who has studied the industry. Some lotteries offer fixed prizes, regardless of how many ticketholders win. When popular combinations of numbers become winners ? such as 1234, 8888 or 122500, the supposed date of the first Christmas ? the number of winning tickets can spiral upwards, said Professor Sobel, reducing a lottery?s profits.
Illinois Governor Rod R. Blagojevich first floated the idea of privatizing the state?s lottery last May, while seeking re-election. At the time, Blagojevich estimated that the sale?s would generate $10 billion, which would fund a four-year school building and education plan. Under his proposal, $6 billion would be set aside to provide the state?s schools with $650 million a year for the next 18 years, roughly equal to what the schools received in lottery income.
At the time, Illinois Republicans charged that the real motivation behind Blagojevich?s proposal was to keep independent state Sen. James Meeks of Chicago from entering the gubernatorial race. Meeks, an influential black leader, had threatened to challenge Blagojevich if education funding wasn?t increased. Following the lottery proposal, Meeks announced he would not run.
Goldman Sachs and UBS are advising the state of Illinois. Mark Florian, a managing director in Goldman Sachs? municipal finance and infrastructure group, said demand would come from strategic bidders as well as infrastructure funds and private equity funds flush with cash.
Goldman Sachs, which has a $6.5 billion infrastructure fund, will not bid, said Mr. Filan.
Comments
Huh
Let's privatize the idiot tax!
Huh
It just struck me as funny. Generally, gambling and lotteries are illegal in states. But then the government itself initiates a lottery, solely so that they can raise revenues without raising taxes. Now someone comes along and says the private sector ought to run that lottery. Don't you see the bizarreness of it all?
It just struck me as funny. Generally, gambling and lotteries are illegal in states. But then the government itself initiates a lottery, solely so that they can raise revenues without raising taxes. Now someone comes along and says the private sector ought to run that lottery. Don't you see the bizarreness of it all?
I guess so. But why do you think gambling and lotteries (and for that matter, drugs and prostitution) are illegal? Because its only "legal" when your government can take money from it.
I say get government out of all of these activities and you'd automatically reduce entrenched layers of government, police and unnecessary jails by half.
That is so wrong it isn't even right.
www.lp.org
Anyone unfamiliar with these concepts would do well to learn.
www.lp.org
You seriously don't know what you are talking about.
You illustrate this three ways:
1) You post a link to a party website to 'learn' us some lessons.
2) You fail to recognise that the government could tax legalized everything.
3) You fail to understand that the government cannot make something illegal unless elected officials vote for such action...