SB 577 – Lottery Privatization

Senate Bill 577 Lottery. Senator Merritt.

Authorizes the state lottery commission, the Indiana gaming commission, and the Indiana finance authority to enter into a management agreement for the operation of the lottery. Establishes the Hoosier hope scholarship program. Establishes the world class scholar program. Makes an appropriation.

This bill would authorize completion of a process set in motion by the Governor back in December through an executive order which requires the Indiana Finance Authority to implement Hoosier Lotter privatization and negotiate with potential operators. Specifically, it directs the IFA to use its existing powers to retain consultants, attorneys, and investment bankers in connection with the project. It is further directed to use the resources of other state agencies, in particular the resources of the Indiana Lottery Commission and the Indiana Gaming Commission.

Mary Beth Schneider, writing for the Indianapolis Star, has an article entitled Hoosier Lottery Lease Deadline Passes. Yesterday was the deadline for companies to respond to a Request for Proposals for privatizing the lottery. The Governor’s office did not know how many companies had responded and said that it didn’t think the names of the companies would be made public.

It seems to me there is a lot of secrecy and putting the cart before the horse in this whole process. First we’ll get the ball rolling on privatizing the lottery. Then maybe we’ll dangle a bunch of cash in front of you, but we won’t tell you the all the information we received in the RFP process. Finally, at the end of the process, we’ll have a policy debate about whether we should actually do this and perhaps, almost as an after thought, get some legal authorization for the undertaking.

In any event, the lottery privatization faces “very long odds,” to use Speaker Bauer’s punny assessment.

He believes that the only way a private company could substantially increase lottery revenue in order to make money on the deal is by greatly expanding gambling. Bauer is among numerous lawmakers who have said they oppose that.

. . . [Senator Luke] Kenley, chairman of the Senate Tax and Fiscal Policy Committee, said he doesn’t share some lawmakers’ concerns about putting the lottery under private management, [but] he does have doubts about Daniels’ plan.

Daniels wants to use the money to fund merit-based college scholarships that would not have to be paid back if the recipient stays in Indiana for three years after graduation. He also wants to direct some to a program to attract top professors and researchers.

Kenley, though, said he is not convinced the scholarships would solve Indiana’s “brain drain” problem, as students will leave so long as they receive better job offers in other states.

And the proposal to spend money to attract top professors is “too vague,” he said. “It doesn’t have any accountability in it. They just give the money to presidents of the universities. That’s not going to be good enough.”

Kenley said the legislature needs to debate not only whether the lottery should be privatized, but also whether higher education is the best use of the revenue.

He said full-day kindergarten, police and fire pensions, or property tax relief — at least on a temporary basis until a long-term solution is found — could be better uses for the money.

[tags]SB577-2007, privatization[/tags]