Many upset over Governor's plan to 'sell the Lottery'
A bill that would allow Gov. Mitch Daniels to outsource the Hoosier Lottery would prohibit a private operator from offering keno, video lottery games, pari-mutuel wagering on horses or dogs and games based on winners of races or other sporting events.
Sen. James Merritt, R-Indianapolis, filed the bill Thursday on behalf of the administration but said he was allowed to put his own principles in it and was not in favor of such gambling expansions. Daniels also has said he was opposed to his proposal resulting in additional forms of gambling.
"The governor still believes we will get quality bids for the lottery franchise," said Merritt.
The bill reflects Daniels' proposal to lease the lottery for 30 years to a private company, which would run it and collect the profits. In exchange, the company would make an upfront payment of at least $1 billion and make annual payments the state now uses to fund public pensions and pay for a cut in auto excise taxes enacted in the mid-1990s.
The upfront payment of $1 billion or more would be used to fund college scholarships for high-achieving students and attract top faculty in hopes of stemming the so-called brain drain of bright graduates leaving Indiana. Students who received the scholarships and stayed and worked in Indiana for at least three years would not have to pay back the scholarship money.
Under the bill, 60 percent of the upfront money would go into a trust fund for the scholarships and 40 percent would be placed in a trust fund to attract top faculty.
The Daniels administration says private ventures may be interested in such a deal because they could profit by introducing creative new games, improve technology in the system and find efficiencies. The state would benefit from the upfront money used for education initiatives and by receiving annual shares of the lottery revenue.
Daniels also has said that lottery revenue can fluctuate drastically, but by negotiating a share of the proceeds, the state does not have to take that gamble.
Under the bill, any private operator would be regulated by the Indiana Gaming Commission, just as it regulates riverboat casinos now. The bill calls for audits of any private lottery's operator, a program by the company to curb compulsive gambling by those who play the lottery, and "advertising consistent with the dignity of the state."
There has been considerable skepticism in the General Assembly about the proposal, in part because some lawmakers believe a private operator would seek higher profits by offering new games such as keno — computerized drawings available in some states.
But the Hoosier Lottery has the authority to offer that now, and Merritt's bill would prohibit it.
Other critics say the lottery is one of the few major public assets the state has that makes a profit and it should not be turned over to a private entity.
No state has outsourced its lottery, although some countries have and at least two U.S. states, Illinois and New Jersey, have considered it.
The Indiana Finance Authority already is seeking potential bidders through so-called "requests for qualifications" — broad criteria companies would have to meet to be eligible to bid on any final contract. The documents seek assurances of financial viability, technical capabilities and high ethical standards.
Companies have until Jan. 29 to respond.
Last year, requests for final bids for leasing the Indiana Toll Road were issued before the session began and the Daniels administration had negotiated a contract and chosen a vendor before legislation authorizing the deal was approved.
This year the administration will not ask for final contract bids unless and until legislation authorizing them is enacted, state Budget Director Chuck Schalliol said.
Many lawmakers were upset about the toll lease because they were not involved upfront, Schalliol said, so the administration is doing that this time.
"The governor has expressed a great deal of flexibility into how this is structured," he said.
But House Speaker Patrick Bauer, D-South Bend, said the Daniels administration had still skirted the Legislature by even seeking potential vendors before lawmakers had acted on the proposal.
"It's troubling that he (Daniels) doesn't think he has to clear the legal hurdles," Bauer said. "I guess it's jumping the law, basically."