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West Virginia resisting trend to privatize Lottery

West Virginia LotteryWest Virginia Lottery: West Virginia resisting trend to privatize Lottery

About a dozen states are flirting with the idea of selling their lotteries to private companies to help plug financial gaps in their budgets.

But West Virginia officials say they so far have not seriously considered such an initiative, which would privatize the state lottery in exchange for quick cash.

California Gov. Arnold Schwarzenegger, for instance, wants to sell the Golden State's lottery to bring in as much as $37 billion. Under Schwarzenegger's plan, the state lottery would be leased to a private company for up to 40 years in exchange for a lump-sum payment or a series of payments.

In Texas, Gov. Rick Perry wants to sell the Lone Star State's lottery for at least $14 billion — mega jackpot-sized money in itself.

Meanwhile, Indiana and Illinois are collecting bids for their respective lotteries even though neither state has yet to pass laws authorizing privatization.

West Virginia Lottery Director John Musgrave said nobody in the Mountain State has ever officially discussed the possibility.

"I understand a number of states are trying to retire debt and take care of the liabilities and shortfalls in their budgets," Musgrave said. "They're looking at different approaches, like privatizing turnpikes and the state lottery, to solve those types of issues."

Last year, Indiana leased a 157-mile toll road to foreign investors.

In Texas, Gov. Perry has vowed to fund cancer research, healthcare for the uninsured and public education project with any money obtained the lottery's sale.

Supporters of privatization also say that lotteries would make lucrative investments for buyers. Skeptics say handing them over to private firms could sacrifice a consistent revenue stream for the states.

By the end of the year, the West Virginia Lottery expects to see $1.6 billion in sales, with 80 percent of that revenue coming from the racetracks and video slots, Musgrave said.

Revenues have increased substantially since the Lottery started up in 1986. Within a 10-year period, revenues had gone from $246 million in 1997 to $1.54 billion last year. Net profits came in at more than $600 million.

But as revenues have increased, so have operating expenses. In 1997, the Lottery reported $173 million in operating expenses, compared to a heftier $881 million last year.

"It would be quite a profitable company, considering what we generate for the state," Musgrave said. "I'm sure somebody would be interested. I'm sure the stock would be quite valuable."

But Musgrave said any privatization proposals would need to be analyzed by financial experts and state officials before they're given any serious thought.

It's not likely to happen anytime soon, with the Lottery focused on the table games debate and considering the idea hasn't even been fleshed out by other states.

Lara Ramsburg, spokeswoman for Gov. Joe Manchin, said the governor thinks the Lottery is operating effectively under state government.

"The Lottery's been doing its job and running efficiently," Ramsburg said. "When that's the case, you don't generally need to look outside the realm of what's working.

"If situations would change, we're always open to the discussion," she said. "It's just not something we'd pursue right now."

States such as Texas, Illinois and Indiana are much larger than West Virginia and have a better grasp on how well their lotteries will perform in the future, Musgrave said.

Because those state lotteries can expect a continued large volume of sales they are seen as more lucrative and worthwhile investments by private parties, he said.

"We're probably more limited in the amount of growth we can do for the future," he said.

Musgrave said he couldn't speculate how much the West Virginia Lottery might sell for if it happened to be put on the market today.

Sen. Vic Sprouse, R-Kanawha, estimates it could sell for $4 billion, based on rough comparisons with Texas.

Sprouse wrote on his blog earlier this year that the state should consider privatizing the Lottery in order to fix the teachers' retirement system. He suggested plugging $2 billion into the pension fund and investing the rest.

Annual payments into the state's struggling teachers' pension fund are expected to reach $724 million by 2034.

On Wednesday, Sprouse said he wouldn't sign off on privatizing the Lottery until proper research had been conducted.

"If a state like Texas is successful, then I think every state should at least explore it," he said. "If we do it right, we could get a lump payment, invest it properly, fix our pending pension problems and get out of the gambling business."

Sprouse said handing the Lottery off to a private company would also free up a significant amount of time for legislators to debate other issues.

"It would be nice to go to the Legislature and talk about something other than gambling," he said. "People will be wondering what to argue about.

"Legislators will have time to worry about economic development versus whether someone should have a roulette wheel in their mini-casino," he said. "Imagine that."

While Republicans in other states are throwing more support toward privatization efforts than Democrats, GOP leaders in West Virginia are holding back on advocating any potential Lottery sale here.

Delegate Ron Walters, R- Kanawha, said the state must somehow maintain the Lottery's intellectual property if it ever privatized the entity. He said the state should also keep authority over how the games are operated.

"You'd need to have the ability to do random inspections to make sure someone's not gaming the system," Walters said. "You also need to maintain Lottery employees and their benefits."

Sen. John Yoder, R-Jefferson, said the state also would need to take care of any legal or Constitutional issues that might arise regarding the state's operation of the Lottery.

Charleston Daily Mail

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7 comments. Last comment 10 years ago by LckyLary.
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dartiger's avatar - teddy simple.png
Elkins Park PA
United States
Member #942
December 22, 2002
1441 Posts
Offline
Posted: May 10, 2007, 7:39 pm - IP Logged

if that is true it would be a great investment for a group of dedicated lottery players, maybe than ???

    Avatar

    Honduras
    Member #20982
    August 29, 2005
    4715 Posts
    Offline
    Posted: May 10, 2007, 8:23 pm - IP Logged

    Does this mean that if they privatize WVa lottery does Cash25 is going to get better or worse? Are they going to increase the numbers matrix for WVA CAsh25? ARe the payouts going to be less or more? Can someone help out here?

      Avatar
      Delaware
      United States
      Member #30273
      January 14, 2006
      494 Posts
      Offline
      Posted: May 10, 2007, 8:45 pm - IP Logged

      Selling the lotteries is resulting in a new series of monopolies. Delaware is realizing that right now with its three slots casinos. They weild too much power and the state can't expand gambling because of it special interests in those 3 places.

      I avoid the slots like the plague.

        Badger's avatar - adu50016 NorthAmericanBadger.jpg
        Wisconsin
        United States
        Member #1303
        March 27, 2003
        1508 Posts
        Offline
        Posted: May 11, 2007, 7:55 am - IP Logged

        "About a dozen states are flirting with the idea of selling their lotteries to private companies to help plug financial gaps in their budgets."

        And after they do this, and they have the money, and the blow it like they always do, they will be right back where they started, and looking to sell somethng else, rather than be fiscally responsible with the money they had....

        Maybe we'll be real lucky, and the  politicians will eventually get the point when they have to live in their cars.

        ============

        How can you tell if a politician is lying?

        Answer: His lips are moving.

          Avatar
          NASHVILLE, TENN
          United States
          Member #33372
          February 20, 2006
          1044 Posts
          Offline
          Posted: May 11, 2007, 4:54 pm - IP Logged

              Talk about spending your grandchildren's money!!! 

              I know elected officials like to spend money.  It seems that every state in the Union has a government like that.  Here in Tennessee, the legislature would not approve the lottory until how the money was to be spent was decided first. 

              Now the policticians want to spend money today with money they wouldn't recieve for 30 or 40 years from now.  Why not require every land owner to pre-pay their property taxes, say, 20 years in advance?  Or car tags five years in advance?  Look how much money the legislature would have to spend!! 

              Of course no one is thinking past the end of their nose.  What will the legislature do for money 20 years from now?  Answer: What they always do; raise taxes, create a new tax ( income tax here in Tennessee.  We don't have one.....yet!)

              When will the citizens of this great country vote for responsible people instead of these....these....these....I can't think of a word demeaning enough for these people!!!!

            Avatar
            Kentucky
            United States
            Member #32652
            February 14, 2006
            7302 Posts
            Offline
            Posted: May 11, 2007, 7:17 pm - IP Logged

            Does this mean that if they privatize WVa lottery does Cash25 is going to get better or worse? Are they going to increase the numbers matrix for WVA CAsh25? ARe the payouts going to be less or more? Can someone help out here?

            "West Virginia officials say they so far have not seriously considered such an initiative, which would privatize the state lottery in exchange for quick cash."

              Avatar

              United States
              Member #10720
              January 23, 2005
              933 Posts
              Offline
              Posted: May 13, 2007, 10:05 am - IP Logged

              The Cash25 question was probably meant not just for WV but for any State considering privatization. I don't know what all the implications are and it may vary from State to State. If the Cash25 were not making money for them they might change it in some way, or any game in any State, because the private company would need to make enough money for their profit and to pay the vig to the State and to pay the winners. I don't know what happens if they come up short. My concern is that they may change a lot of the games to add balls or go RNG or forced QP or to suddenly decide to cease operations. On the upside they might do the opposite and eliminate RNG games knowing people don't like them. Wondering though, could one buy stock in these companies?