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Warnings raised over lottery leases

SPRINGFIELD, Ill. (BP)–It isn’t clear whether the Illinois Senate will tackle a bill to lease the state’s lottery at a special session in November, but regardless of that legislation it is only one of a dozen states contemplating such action.

The prospect of using private companies to operate lotteries violates a basic premise behind their adoption, said Barrett Duke, vice president for public policy and research at the Southern Baptist Ethics and Religious Liberty Commission.

“One way they were able to sell people on lotteries was promising that by operating the lottery themselves the state could assure no corruption could take place,” Duke said.

“Now states look like they are reneging on that promise. All of a sudden, we find these governments are preparing to relinquish some degree of this oversight to a third party. To me, this appears to be a violation of the trust these governments asked their people to place in them.”

Apart from the objections to privatization proposals, the overarching issue with lotteries remains the same — the way they prey on the poor and other vulnerable populations, a national anti-gambling activist noted.

Les Bernal, executive director of StopPredatoryGambling.org, points to one study that showed the top 5 percent of players account for 54 percent of sales, and at least one state, Ohio, schedules its lottery promotions to coincide with the receipt of government benefits, payroll and Social Security payments.

By their very nature, privatization proposals fail to protect the public, Bernal said.

“It’s time we started looking this thing in the eye,” Bernal said. “If we think the advertising for a state lottery is predatory, imagine you have a private entity pushing lottery products in every convenience store, gas station and restaurant in the state. If this was a bank, the government would step in and stop it.”

Illinois’ plan parallels other states that are looking at the possibility of multi-year leases in return for sizable up-front payments. Under the bill passed by its House of Representatives, the lottery would be leased for a minimum of 50 years in return for a minimum $10 billion payment. Illinois also would retain a 20 percent interest in the games’ profits.

However, such proposals don’t add up over the long term, according to a university professor who has coauthored a study of lottery leasing proposals in Illinois, California, Colorado, Indiana, Michigan and Texas.

Robert Purtell, a professor of public administration at the University of Albany, N.Y., said leasing of lotteries or other state-owned assets such as toll roads or bridges is a complex issue with far-reaching ramifications.

“It makes no sense to sell the lottery,” said Purtell, who wrote “Hey You Never Know: Selling State Lotteries in America” with fellow professor James Fossett.

One concern, Purtell noted, is the hidden threat to taxpayers stemming from the underlying guarantee of state ownership.

Because a state will be forced to step in and retake control of the lottery in the case of bankruptcy, a private operator has the incentive to invest its earnings in risky ventures, the professor said.

“They [the state] are almost forced to take it over and they’re forced to make good on all the prizes,” Purtell said. “So why not take the risk? It’s what economists call an agency theory problem, where the agent has an incentive to act in a way that may be detrimental to the principals.”

Gaming expert David Schwartz described privatization proposals as generally lacking long-term benefits.

“You figure that politicians spend whatever they get now and then they’re going to need more money to do stuff and they won’t have the lottery. Then what are they going to sell off?” said Schwartz, director of the Center for Gaming Research at the University of Nevada at Las Vegas.

“Any time you start selling off infrastructure that’s not usually a good sign. It’s like taking out a second mortgage on your house. It’s not really a sign that you’ve got a lot of money coming in,” Schwartz said.

Lottery privatization, said Chad Hills, analyst for gambling research and policy at Focus on the Family, is a short-term fix for states’ budget woes.

One problem is actions taken today will saddle future governors and legislators with consequences that they won’t be able to correct, Hills said.

“I think they’re using a very short perspective of the future, regardless of what it’s going to burden citizens of the state with,” Hills said.

Echoing Bernal, one burden Hills pointed to is the likelihood, under private ownership, of more advertising and more outlets pushing multiple games, akin to the gambling industry’s ongoing effort to get more people to play and thus increase revenue.

“How much control will citizens have over whether this company decides to put this over the Internet?” Hills asked. “You’ve got to look at the motives here. If you privatize, the company who wins this is going to be after one thing, and that’s profit. The public’s well-being will be far down the priority list.”

The possibility of expanded lottery games is among objections to Illinois’ plan that have been raised by Illinois Church Action on Alcohol and Addiction Problems.

Executive Director Anita Bedell asked what company would pay $10 billion to lease 80 percent of the lottery and then operate under the same restrictions as the state.

The proposal also takes away the lottery’s original stated purpose of funding education, Bedell said, pointing that only 30 percent of the leasing payment will go to education and the remainder to state construction projects.

Still, her main objection is to increase games, such as Keno, Internet games, video lottery terminals and other options.

“There would be a huge expansion,” Bedell said. “They would also target certain populations, such as the poor, the elderly, the addicted and the young. You only have to be 18 to play the lottery.”

Baptist Press’ calls seeking comments from the bill’s senate sponsor, Sen. Donne Trotter, and his press office were not returned.

States contemplating lottery leases also need to remember the sad historical record of such ventures, Duke said.

During the 18th century privately operated lotteries flourished across the nation, Duke said, but they became so corrupt that they vanished from the American landscape in the late 1800s because of citizens’ objections.

In addition to the possibility of corruption, proposals to lease lotteries take states in the wrong direction at a time of financial crisis, said Bernal of StopPredatoryGambling.org.

Lotteries symbolize the idea that there is free money available without the bill ever coming due — which Wall Street’s collapse demonstrates is a myth, Bernal said.

Instead, Bernal said, the United States needs to return to a standard of thrift and saving for the future instead of people gambling that they might win enough to take care of their bills.

“We’ve turned from a nation of small savers to a nation of habitual bettors,” Bernal said. “Twenty-one percent of Americans [according to a survey by the Tax Foundation] think the best way to save for retirement is to play the lottery.”
Ken Walker is a freelance writer based in Huntington, W.Va.

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