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Nowhere Fast: Guv's Lottery Lease Plan May Not Clear GOP-Dominated Senate

Hoosierlottery_22Associated Press Statehouse reporter Mike Smith pens his weekly column on the Guv's Lottery privatization plan -- and the tough road it continues to face on both sides of the aisle. You know things aren't looking too promising when folks say the bill might not even clear the overwhelmingly Republican Senate.

"Republican state Sen. James Merritt acknowledged he had a tough sell ahead when he introduced a bill that would give GOP Gov. Mitch Daniels authority to outsource the Hoosier Lottery to a private venture.

"There was 'perceived privatization fatigue' in the Legislature, he said, but the plan had merit and he would do his best to steer a version of it to passage.

"Monumental challenge is probably a more accurate description of what proponents of a lottery privatization plan face. Even if one gets out of the Republican-controlled Senate, it is sure to face a very rough road in the Democrat-controlled House.

"Privatization fatigue is especially prevalent among Democrats who have criticized Daniels' Major Moves highway plan and proposals to outsource assets or services that have traditionally been run by the state. They say he's trying to sell off the state to for-profit companies.

"Many are still seething over Daniels' decision to lease the Indiana Toll Road to a foreign, private venture for 75 years in exchange for an upfront payment of $3.8 billion. When House Democrats were in the minority last year, not a single one voted for the bill that gave Daniels authority to make the deal.

"Daniels initially proposed the lottery plan as a way to curb Indiana's so-called 'brain drain.' A private entity would pay the state $1 billion upfront and make annual payments of $200 million in exchange for a 30-year lease of the lottery.

"The $1 billion would be used to provide college 'scholarships' to high-achieving students who would not have to repay the money if they stayed and worked in Indiana for at least three years after graduation. Money also would be used to attract top professors.

"The private venture could still make a profit without expanding gambling by introducing creative new games and implementing efficiencies, Daniels said.

"A revamped version of Daniels' plan gained a foothold when it cleared the Republican-controlled Senate Tax Committee. But even though Republicans have a commanding 33-17 advantage in the Senate, its chances of passing the full Senate appear iffy.

"Under the new plan, the upfront lease money would be used to encourage life sciences research through grants, provide college scholarships and help cities and towns pay for firefighter and police pensions.

"Bill drafters included provisions that would prohibit keno -- computerized drawings available in some states -- in hopes of easing concerns that a private vendor would expand gambling. Video lottery would not be allowed, nor pari-mutuel wagering on horse or dog races.

"But Senate Tax Chairman Luke Kenley said he was unsure if the bill would pass this week. Democrats were generally opposed to it on privatization grounds, he said, and some GOP members were still concerned that the plan could lead to expanded gambling.

"Sen. David Ford, R-Hartford City, is among those who do not think that laudable efforts should be funded by a lottery that is often played by poor residents.

"'I just can't get over the irony of paying for college educations with Hoosiers who too often don't understand eighth-grade math,' he said."


C'mon Folks. Do the Math! If you make $200 dollars a year and I offer you a thousand dollars for THIRTY years while still paying you ONLY $200 dollars, what would make you think this is a good idea? When the thousand is gone (only FIVE years worth of income), you still have TWENTY-FIVE to go and no chance of making more than $200 each year. 30 years ago, the minimum wage was around two bucks, adjusted for inflation it should now be around ten. There's no adjustment for inflation here ... that $200 million might not be worth half that in real dollars 30 years from now. The private company could be pulling in a billion a year. But 200 mil's all the state's going to get. Maybe we need to send the wee one back to middle school math here folks.

They've thought of that, 1:18. These guys are smarter than you think. They have a provision in there requiring the concessionaire to pay us additional royalties if they make more profit. Here's the summary from the bill:

"Specifies that the management agreement may require the manager to pay an additional royalty payment each year if the manager's gross revenues from the sale of lottery tickets in a year exceed the commission's gross revenues from the sale of lottery tickets in the twelve months preceding the date of execution of the management agreement."

My question is this: What leads the Governor to think that anyone will actually pay this much to operate the lottery when Indiana has experienced so many expansions to gaming as evidenced by last Friday's passing of slots at the horse tracks? With the slots at the horse tracks, riverboat casinos, backroom gaming and pea houses, who's going to be buying scratch off tickets from Esther?

Under a lease, that's not our problem, Lauren. If someone offers the cash and doesn't make a profit, so what? If someone doesn't offer enough cash, then we'll turn down the deal. It's that simple.

I think you just answered my question as I question who will pony up the money to "lease" the lottery if there are questions lingering about how much they'll really bring in to even recoup their investment?

And yes, the legislation passed the Senate today but will likely die in the House.

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