Daniels' and Perry's push to privatize highways & state lotteries more than coincidence

Apparently, these two governors (Mitch Daniels of Indiana and Rick Perry of Texas) are like two peas in a pod in a number of arenas that benefit private corporations rather than the taxpaying public. Seems the establishment Republican Party is all about corporate cronyism and selling off our country to the highest bidder rather than leading, governing, and serving the public!

Rick Perry’s idea of selling the lottery rather than calling it quits or making it better is said to be connected to ex-Senator Phil Gramm’s company who stands to make millions on the sale. Is Daniels taking Indiana down the same special interest road to benefit Gramm as well? The good ol’ boy network us alive and well…and for these guys, everything is for sale, even the public good.

Link to Indiana Star editorial here.

We’re not ready to buy into lottery proposal
Plan sounds sensible, but questions remain

Indianapolis Star
February 11, 2007

As far as Budget Director Chuck Schalliol is concerned, there are plenty of reasons why the state should franchise the Hoosier Lottery to a private operator. The biggest reason? Says Schalliol: “We have no evidence that we’ve ever been good at this.”

Signs of the state’s poor stewardship abound: Nine executive directors in 17 years. A woeful annual surplus growth rate of only 1 percent in the past decade. The lottery’s rank of 25th in the nation in generating surpluses. Its rank of 27th in the nation in per-capita revenue.

So franchising the lottery seems, at least on the surface, like a sensible idea. So does the plan to use proceeds to finance new programs to keep talented Hoosiers from leaving the state.

But many questions remain as to whether leasing the lottery is really the best course to take, especially if it leads to an expansion of gambling. The Daniels administration must do a better job of addressing Hoosiers’ concerns if it hopes to persuade the General Assembly to pursue the lease.

Couldn’t state government improve lottery performance on its own?
Schalliol’s main argument for franchising the lottery — that the state can’t properly manage it — is undercut by operations in New Jersey and Florida.

New Jersey’s lottery is one of the most profitable in the nation. It earned 36 cents out of every dollar gambled by lottery players in fiscal year 2005 versus the 26 cents per dollar earned by the Hoosier Lottery.

Florida’s operation has succeeded in reducing its costs. It shaved operating expenses (other than payments to vendors and stores) by half between the 1998-99 and 2005-06 fiscal years. For the past four years, it’s filled state coffers with more than $1 billion in annual profits.

Will the Daniels administration handle the auction in an open manner?
Daniels needs to show Hoosiers that his administration will provide relevant information about the lease in a timely manner. The administration’s record in this regard isn’t strong. Last year, it wouldn’t reveal the list of firms bidding for the Indiana Toll Road lease until after selecting Macquarie-Cintra’s offer of $3.8 billion.

The administration hasn’t been any more forthcoming this time around. Although Schalliol says the state has received “more than 10” formal responses to the proposed deal, he won’t reveal names or even the exact number of bids. An executive for investment bank Morgan Stanley, which is handling the bid on the state’s behalf, didn’t return a call from The Star Editorial Board.

Such lack of candor is typical of companies in the private sector. But government is obligated to fully disclose its activities to the public. That’s especially true given the conflicts that come with the possibility of bids from two of the state’s existing vendors, Italy’s Lottomatica and Scientific Games. Or the possibility of casino firms, some of which own riverboat operations in the state, expanding their reach.

How can a private buyer make the lottery more profitable — and give the state its cut — without expanding gambling?

A franchisee will have to figure out how to eke out more profit from the lottery while still handing over $200 million in annual profit to the state. Tripling annual profit growth, as Schalliol suggests, wouldn’t be enough because the franchisee likely would finance at least part of the deal with debt. Interest payments would cut into the extra income generated.

Running the lottery more efficiently could be a key; simply eliminating the state’s costly procurement rules could yield savings. But given that low investment in marketing and developing new games is a reason behind the lottery’s stagnant growth, an operator would have to spend more on that part of the operation.

Expanding games to include keno and video lottery terminals is precluded by Senate Bill 577, which carries the privatization plan. Those restrictions, although warranted, shut off opportunities for a private operator to grow revenues.

The goals behind lottery franchising — attracting highly sought after university professors and providing merit scholarships for top students — are laudable. But the Daniels administration must do more to persuade Hoosiers that spinning off the lottery is the best course for achieving those initiatives.