New Jersey Becomes Third State to Privatize Lottery

My new article on the New Jersey lottery privatization contract signed yesterday is up. Here’s an excerpt:

On June 21st, New Jersey became the third state—after Illinois and Indiana—to privatize the management of its state lottery. Under the 15-year contact, a private manager will take over the lottery’s marketing and sales functions in exchange for an upfront payment of $120 million and a contractual commitment to generate over $1.42 billion in additional net income for the state, relative to in-house operation.

The agreement was finalized after a state appellate court rejected a request the previous week for a stay of the contract made by a public employee union as part of an appeal filed in hopes of killing the deal.

In April, Gov. Chris Christie’s administration issued a notice of intent to award a 15-year contract to Northstar New Jersey Lottery Group—a joint venture of GTECH Corporation, Scientific Games and the Ontario Municipal Employees Retirement System—to take over the lottery’s marketing and sales functions in exchange for the $120 million upfront payment (the first upfront payment among the three lottery deals thus far) and the commitment to increase net lottery income to the state over the life of the contract. Northstar will take over the lottery’s marketing and sales functions in October, while the state will retain control over security, licensing, auditing, and prize payments. Layoffs are not expected, as state officials have noted that current lottery employees affected by the privatization would either be offered an interview with Northstar—which plans to significantly increase the sales staff—or would be reassigned to other state positions.

Despite such assurances, the Communication Workers of America (CWA)—the largest union representing state government workers in New Jersey—and some legislative Democrats have made several attempts to stop the deal from moving forward.

For more, check out the rest of the article.

Leonard Gilroy is vice president of government reform at Reason Foundation and senior managing director of Reason's Pension Integrity Project.