The only thing worse than state run gambling is leasing out state run gambling

[kinggovernor]

Spitzer willing to take a chance on a big payoff by leasing state's lottery

Leasing future revenuewould supply cash now

By Tom Precious - NEWS ALBANY BUREAU
Updated: 01/14/08 7:52 AM

ALBANY — Teams of Wall Street investment firms over the past year have flocked to state capitals with an intriguing message: Sell us your lottery systems.

Gov. Eliot L. Spitzer has been a willing listener, and last week during his State of the State speech he said he wants to let a private company “lease” New York’s lottery for as long as 40 years.

In return, the state would get a huge upfront payment, as high as $50 billion, that could be used to help fund public schools and universities.

The governor in his sophomore year is facing his first big budget deficit, and he is considering creative ways to raise money.

But the consequences of the lottery leasing plan could have dangerous public policy implications, critics argue.

They question whether turning over the lottery to investors driven by profit motives makes sense in a state that saw its greatest expansion of gambling in history during the past decade.

And they worry that Spitzer is trying to lock the state into a deal lasting up to two generations.

“I am totally against trying to privatize the lottery in any form. I think it’s a state function,” said Assemblyman Gary Pretlow, a Democrat like Spitzer and chairman of a committee with oversight of the lottery.

Others say many problems already exist with the state-run lottery, such as teenagers using unmanned betting machines to gamble.

And they worry oversight will become even more lax if a private firm operates the lottery and tries to persuade more people to gamble on a product that now attracts $7 billion a year in bets.

“There’s been a tremendous amount of movement with the new administration regarding the lottery. We’re very concerned all that’s going to be lost if they give it to somebody else,” said James Maney, executive director of the New York State Council on Problem Gambling.

Wall Street, though, is rushing to push the idea.

It has tried, so far unsuccessfully, to lease the lotteries in California, Illinois and Indiana. At a recent hearing in California, investment firms made clear they would want the state to relax some of the protections designed to control the spread of gambling.

“Restrictions will impact value,” Goldman Sachs’ John Ma told a Senate panel.

Investment could grow

Ma, along with executives at some of the 10 firms pushing the lottery leasing idea in New York, did not return calls to comment.

The Spitzer administration declined to release Wall Street’s lottery plans.

The idea, called monetization, can take many forms. The likeliest envisions the state leasing a share of future revenues from the lottery — it now sells about $7 billion worth of bets and brings in about $2.3 billion for the state that is used for public education.

Private investors would get to keep a certain percentage of revenues, which could grow depending on how successful they are in expanding the lottery’s reach.

The state would get a hefty up-front payment, totaling tens of billions of dollars depending on how it’s structured, according to Paul Francis, a top Spitzer adviser who put the idea together while serving the past year as state budget director.

The state would continue to get the $2.3 billion it now gets in lottery revenues, and that amount would grow over time, with the investors getting anything above that sum, according to Francis, who came to the state after serving as a chief financial officer at several leading companies.

The governor wants to use part of the money to create a $4 billion endowment for the state university system.

Without the lottery plan, administration officials say, they have found no other way to fund the endowment, which will help hire new professors and pay for other programs. A trust fund to help pay future public school costs is also part of the plan.

The idea features a major provision: The state will maintain ultimate control over the lottery, including approval of the types of games, Francis said. Is it legal?

The New York Constitution says only the state can “operate” the lottery.

Pretlow said he believes the governor’s plan violates the provision.

“It raises a question,” added Cornelius Murray, an Albany lawyer who has sued the state several times over gambling expansions.

‘Mother lode’ of one-shots

Any final proposal “will fully comply with the constitutional provision that provides for the lottery to be operated by the state,” said David Nocenti, Spitzer’s counsel. There are other complaints.

Signing away the lottery to Wall Street investors for a generation or more is a big one.

Francis said the term could be shorter than 40 years or include escape clauses if certain benchmarks are not met.

While the Legislature has never shied away from backing one-shot funding streams, critics call the lottery plan a gimmick in a year the state faces at least a $4.3 billion deficit.

“It’s the mother lode of all oneshots that I’ve ever seen in the Legislature,” said Sen. Dean Skelos, the Senate’s deputy majority leader.

Francis responds that the plan is far from a one-shot because Albany will get an annual flow of money from it.

But isn’t there a reason the state should run — and therefore be accountable — for a product that encourages gambling, particularly in lowerincome neighborhoods?

“If you have a private entity, there will be a proliferation of gambling venues in areas that we may not want them,” said Pretlow, a Westchester County Democrat.

Pretlow said he could see investors wanting to spread the Quick Draw game, which treatment experts call video crack, to locations that are now banned.

In California, private firms talked of future technologies for the lottery, in which people could use the Internet to buy lottery games or install slotlike devices to play the lottery.

If the state wants to increase sales, critics say, it can and should do so on its own — without the help of private industry.

But private interests can bring an “improved execution” to the lottery, Francis said. And he downplayed critics who say it will increase the number of gambling addicts.

“I don’t think we view every person who buys a lottery ticket as a gambler and every lottery ticket sold as more gambling,” he said.

More money for treatment

Francis acknowledged that there are problem gamblers who play the lottery and that there could be more money for treatment programs if it’s approved.

“To some degree, it’s an interpretation whether that is gambling or whether that is entertainment,” he said of those buying lottery tickets. “There’s no question excess use of the lottery can become a form of unhealthy gambling.”

tprecious@buffnews.com

So everyone has been wondering how Governor Spitzer was going going to balance the budget while adding more government services without tax increases. Well this is his brilliant plan, we take care of today's education funding problems by selling out for the next 40 years

[motivez]

Why should the government have a monopoly on the lottery?

I'd think allowing a private company to run the show instead of the state would be more in line with libertarian ideas, which it says under your name?

[kinggovernor]

Originally Posted by motivez

Why should the government have a monopoly on the lottery?

I'd think allowing a private company to run the show instead of the state would be more in line with libertarian ideas, which it says under your name?

The state would be granting a monopoly to a private company for the lottery. So state ran gambling is awful but this is even worse.

But it forced to accept state ran gambling, we shouldn't be selling off future profits (which is why Wall Street is attracted, because they will turn a profit of this) to solve our budget problems of today. We should cut spending instead.

[motivez]

Why would it be a monopoly? Don't you think other companies should be allowed to offer gambling to citizens if the citizens want it?

[David Octavius]

Originally Posted by kinggovernor

The state would be granting a monopoly to a private company for the lottery. So state ran gambling is awful but this is even worse.

But it forced to accept state ran gambling, we shouldn't be selling off future profits (which is why Wall Street is attracted, because they will turn a profit of this) to solve our budget problems of today. We should cut spending instead.

The state would continue to get the $2.3 billion it now gets in lottery revenues, and that amount would grow over time, with the investors getting anything above that sum, according to Francis, who came to the state after serving as a chief financial officer at several leading companies.


The state is still getting a huge profit, just not as a big piece of the pie as time goes along so the period of time the state leases it is the critical question

[bheld]

I hate lotteries and the privatization of them is even worse. They already prey on the poor and uneducated and it's only going to get worse with Goldman Sachs running it or whoever the highest bidder is.

I'm not a fan of any sort of government lease, whether it is lotteries or highways.

[kinggovernor]

Originally Posted by motivez

Why would it be a monopoly? Don't you think other companies should be allowed to offer gambling to citizens if the citizens want it?

Because there is only one New York State lotto. State law prevents private gambling, so the state would still have to "operate" it, there will still only be one.

If I had my way, there would be New York State lotto, and there would be a Vegas in every state in America.

[kinggovernor]

Originally Posted by David Octavius

The state would continue to get the $2.3 billion it now gets in lottery revenues, and that amount would grow over time, with the investors getting anything above that sum, according to Francis, who came to the state after serving as a chief financial officer at several leading companies.


The state is still getting a huge profit, just not as a big piece of the pie as time goes along so the period of time the state leases it is the critical question

Think of it as those commercials that run during the day of those guys that want to "buy" your lawsuit settlement to get you cash now. They pony up a large amount of money but in the long run they end up making a profit. This is the same way, Wall Street will end up in the black on this one, which is why they are interested. They are taking advantage of politicians who want to solve today's problems by selling of the future.

[kinggovernor]

Originally Posted by bheld

I hate lotteries and the privatization of them is even worse. They already prey on the poor and uneducated and it's only going to get worse with Goldman Sachs running it or whoever the highest bidder is.

I'm not a fan of any sort of government lease, whether it is lotteries or highways.

I agree, the New York State lotto functions as a tax on the poor.

[David Octavius]

Originally Posted by kinggovernor

Think of it as those commercials that run during the day of those guys that want to "buy" your lawsuit settlement to get you cash now. They pony up a large amount of money but in the long run they end up making a profit. This is the same way, Wall Street will end up in the black on this one, which is why they are interested. They are taking advantage of politicians who want to solve today's problems by selling of the future.

I know that the people on wall street are not dumb, was just pointing out that they are getting money every year also since you implied we were not. I don't agree with them leasing the lottery just as I don't want them to lease roads to private companies

[RMNIXON]

Originally Posted by kinggovernor

I agree, the New York State lotto functions as a tax on the poor.

In California we let the Indians stick it to the poor idiots who lose a paycheck. Then the State gets a cut.

[kinggovernor]

Originally Posted by RMNIXON

In California we let the Indians stick it to the poor idiots who lose a paycheck. Then the State gets a cut.

In New York we take people's houses from them, call it eminent domain, give them to the Indians, and also give them our convention center. Then the State gets pennies on the dollar. What a horrible decision, I refuse to go to Indian casinos.

[hsmith]

Originally Posted by kinggovernor

I agree, the New York State lotto functions as a tax on the poor.

Voluntary tax

[hsmith]

But I agree, "privatization" at its worst

[David Octavius]

Originally Posted by hsmith

Voluntary tax

addiction isn't voluntary

[kinggovernor]

Originally Posted by hsmith

Voluntary tax

Where are the vast majority of lotto tickets sold, in poorer areas of course. And with those slogans of "A dollar and a dream" or "Retirement plan 1. win the lotto 2. retire" they cater to poor people trying to get out of poverty.