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As states ponder selling their lotteries, wariness mounts

SPOKANE, Wash. (BP)–Multiple states are considering proposals to privatize their lotteries, which proves that education benefits have yielded to concerns over how much money they can produce for government, a leading anti-gambling activist says.

Tom Grey, executive director of the National Coalition Against Legalized Gambling, sees an immediate threat of expanded gambling as companies that spend billions of dollars acquiring lotteries seek to recoup that investment.

Two of the leading gaming companies, he noted, are based in Greece and Italy.

“Obviously the evolving practice of this is it no longer has anything to do with the future of children,” said Grey, referring to various pro-education statements that were used to advance the creation of lotteries in many of the 42 states that have them. “It has to do with state control of gambling being rented to foreign companies.”

Grey said Illinois, Indiana and Texas are the “hot spots” for such proposals, although lately Michigan and New Jersey legislators also have discussed the possibilities of selling their state lotteries to help cover budget gaps.

In the past, proposals to sell portions of lotteries in Wisconsin and Maine failed to pass, according to Alicia Hansen of the Tax Foundation in Washington, D.C.

A 30-day bidding period to operate Illinois’ $2 billion-a-year lottery ended Feb. 20. A spokesman for Gov. Rod Blagojevich said the state was pleased with the “robust” response, but no date has been set for selecting the operator.

Meanwhile, legislation in Indiana passed the state Senate Feb. 27. The state’s House of Representatives is expected to consider it in the near future, said Dan Gangler, director of communication for the Indiana area of the United Methodist Church.

In Texas, the Houston Chronicle reported Feb. 24 that Gov. Rick Perry has little support among fellow Republicans for his idea to sell the lottery for $14 billion.

Still, these proposals demonstrate the folly of proponents’ claims that lotteries would foster fiscal solvency, said the vice president of the Southern Baptist Convention’s Ethics & Religious Liberty Commission.

“The typical selling feature was that lottery income would bridge state budget gaps, provide college educations for [everyone] and create significant cash infusions,” Barrett Duke said.

“The results are much less rosy,” Duke added. “Lottery states have found it necessary to offer greater incentives to keep people buying lottery tickets.”

Among his objections to privatization are eliminating state control of gambling, which Duke said goes against the original justification for lotteries — that state oversight would eliminate the possibility of corruption.

Duke also forecast future voter rebellion against lotteries.

“When the public has finally had their fill of unrestrained marketing by the private lottery purveyors, we will likely see a political bloodbath,” Duke said. “While privatization may make it difficult for citizens to rid their communities of lottery gambling, it will not prevent the inevitable backlash.”

Among others who have been critical of privatization proposals:

— Melissa Kearney, an economics professor at the University of Maryland, who told The New York Times lotteries are healthy: “It’s unclear exactly what is gained by selling a lottery, except for a huge pot of money that legislators can start spending right away.”

— Earl Grinols, professor of economics at Baylor University, who described the proposed sales as a reminder that lotteries and gambling are poor methods of collecting tax revenue.

“It’s bad government,” said Grinols, author of “Gambling in America.” “If government needs tax money, it should use the least damaging method of collecting revenue and that’s a conventional tax.”

— The dean of the University of Chicago Law School, who warned against setting public policy in a way that binds future electorates and leaders.

“It seems unlikely that we want a government to lock in future governments,” Saul Levmore wrote in a Chicago Tribune column. “Strange as it may sound, privatization should probably be reversible, especially when there is grave doubt as to whether the government should have been in the business in the first place.”

— Duke University professor Charles Clotfelter, co-author of “Selling Hope: State Lotteries in America,” who was quoted by an Indianapolis Star columnist as saying privatization means surrendering policy-making to a private entity.

In addition, Clotfelter said states are borrowing from the next generation: “If you take all the money now, why should today’s taxpayer get the benefit?” he told the columnist, Andrea Neal. “Why not space it out?”

— Chad Hills, analyst for gambling research at Focus on the Family, who echoed Gray’s concern, saying among the negative repercussions are losses of revenue to foreign-owned businesses.

When Congress passed a law last year outlawing Internet gambling, it caused a huge crash overseas and cost those businesses an estimated $6 billion, Hills said.

“We know there are a lot of foreign companies that would love to get a profit from lotteries,” Hills said.

Hills also questioned whether selling to foreign-owned entities would result in a lack of information about lottery operations.

“If those companies aren’t publicly owned and traded, how much information can we get from them?” Hills asked. “Right now we have full accessibility to information because it’s government-operated.”

However, Hills said the debate over selling state lotteries ignores the underlying question of why states are even trying to keep them alive.

Historically lotteries ended after funding specific projects, but states have become dependent on them, primarily because legislators lack the backbone to raise taxes for such necessary expenditures as schools and roads, Hills said.

“This is a symptom of state governments’ problems and lack of courage,” Hills said. “People are more concerned about keeping their place in office than working to set policy. People have asked, ‘Is privatization the lesser of two evils?’ My question is, Why are we legislating evil in the first place?”

Grey said research has shown that 5 percent of the people in American buy 51 percent of lottery tickets, many of which are sold in low-income neighborhoods where residents can’t afford to gamble.

“All we can do is increase that pathology,” Grey said of the prospect of private operators increasing lottery advertising. “People are being preyed upon by governments that ought to help them make wise decisions with their money.”

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  • Ken Walker