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California looks to British lottery model

California LotteryCalifornia Lottery: California looks to British lottery model

California is seeking to become the first US state to privatize its lottery to raise as much as $37 billion (£18 billion, €26 billion), with some of the funds used to finance governor Arnold Schwarzeneg­ger's sweeping health care reforms.

Some of Wall Street's biggest investment banks have made unsolicited approaches to the state to convince it of the merits of privatization.

Goldman Sachs, Lehman Bros, JP Morgan, Bear Stearns, Citi, Merrill Lynch, Morgan Stanley and UBS have all made pitches.

Other US states are closely monitoring California's lottery plans, with Texas, Illinois and Florida considering their own privatizations.

The California move would see the state adopt a model similar to Britain's national lottery, which is run by Camelot, and is the "classic example of a privatized lottery", according to Kevin Klowden, managing economist with the Milken Institute think-tank.

Rather than sell the lottery outright, Mr Schwarze­negger is considering leasing it to a private operator for 40 years in exchange for a huge upfront payment, with the state continuing to regulate the game.

Under the Schwarzenegger plan, any money generated by the lease would be paid into an annuity. About $2 billion would then be spent annually on his universal health care proposal, which aims to ensure that every person in California has adequate health insurance. His plan has a projected cost of $14 billion a year.

The new lottery money would cover a funding shortfall in the health care plan, which has been adjusted and revised since it was first proposed last January.

In the pitch from Lehman Bros, which has been seen by the Financial Times, California's lottery revenues would be boosted by expanding the network of retailers selling tickets, better marketing and selling advertising space on lottery tickets.

"The California lottery significantly underperforms its peers, with per capita sales barely reaching half the national average," the Lehman pitch document says.

Selling or leasing the lottery would be beneficial to the state, Mr Schwarzenegger said recently. "There is someone who will do a better job, who will get more money for the taxpayers."

Revenues from the lottery would also be used by California to write down "economic recovery bonds", which the state sold at the start of Mr Schwarzenegger's first term as governor.

The bond program was launched four years ago because California was in dire financial straits. Redeeming the bonds in 2008-09 would, under Mr Schwarzenegger's proposal, cost $6.4 billion.

The privatization, which would have to be ratified in a public ballot, has already attracted criticism. The California Teachers Union says a privatization would jeopardize the $1 billion in annual funding the state education system presently receives from the lottery.

Mr Schwarzenegger is proposing use the state's general budget to replace the lottery funding for education. "To add more general fund pressure on education is a big issue," said Estelle Lemieux of the CTA.

Financial Times

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4 comments. Last comment 9 years ago by savagegoose.
Page 1 of 1
dvdiva's avatar - 8ball

United States
Member #2338
September 17, 2003
2063 Posts
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Posted: October 20, 2007, 11:48 pm - IP Logged

If they are really looking than look at the fact that in the UK lottery jackpots are paid in tax-free cash. Otherwise Vegas has a better dollar spent vs. post tax dollar won ratio.

    time*treat's avatar - radar

    United States
    Member #13130
    March 30, 2005
    2171 Posts
    Offline
    Posted: October 21, 2007, 12:23 am - IP Logged

    "California is seeking to become the first US state to privatize its lottery to raise as much as $37 billion (£18 billion, €26 billion)"...

    which they will promptly p!$$ away, then be back.

    Some of Wall Street's biggest investment banks have made unsolicited approaches to the state to convince it of the merits of privatization...

    'cause there'z underwritin' fees in that thar idiocy.

    California was in dire financial straits...

    which wouldn't have anything to do with their high taxes, onerous regulations, and the fact that so many businesses (and individuals) are fed up and have moved to Nevada.

      four4me's avatar - gate1
      MD
      United States
      Member #1701
      June 18, 2003
      8363 Posts
      Offline
      Posted: October 21, 2007, 1:20 am - IP Logged

      If California lottery is having problems with it sales then they should revamp the lotteries operations, and prize payouts and push the sales department to run a better ad campaign.

      Selling the state lottery would only be a short term fix for the state budget. In a year or so they would still be in the money hole, looking for more ways to make money from selling state assets.

      The lottery is a cash cow why would anyone want to sell a money maker.

      Lets revise the lottery not sell it.

        savagegoose's avatar - ProfilePho
        adelaide sa
        Australia
        Member #37136
        April 11, 2006
        3300 Posts
        Offline
        Posted: October 22, 2007, 11:11 am - IP Logged

        why not cut out the middle man, run a lottery where if u win u get that much needed hoaspital admission.

         

        woo hoo i won a hip replacement,

         

        i got a heart bypass, looks like ill have to take up smoking!

        2014 = -1016; 2015= -1409; 2016 JAN = -106; FEB= -81; MAR= -131; APR= - 87: MAY= -91; JUN= -39; JUL=-134; AUG= -124; SEP = -123; OCT= -84  NOV=- 73 TOT= -3498

        keno historic = -2291 ; 2015= -603; 2016= JAN=-32, FEB= +12 , MAR= -86, APR = -77. MAY= -48, JUN= -29, JUL=-71; AUG = -52; SEPT= -43; OCT = +56 NOV = -33 TOT= -3297