February 21, 2007
One, two, three, what are we selling the Lottery for?

I've got to give the Senate Finance Committee credit here - they asked some pretty good questions about the proposed Lottery sell-off.

Sen. Troy Fraser, R-Horseshoe Bay, wondered whether a private company operating the lottery might view slot machines as a form of gambling similar to the lottery.

"My concern is is that this is opening the door to the mentality of slots in 7-Elevens," Fraser said. "I don't want slot machines in 7-Elevens."


Sen. Jane Nelson, a Lewisville Republican and a past ardent opponent of attempts to legalize video slot machines, asked Lottery Commissioner James Cox in his appearance before the committee whether he envisions a private company trying to expand the scope of games.

"I'm very concerned about this proposal of selling the lottery if it would lead to an expansion ... of allowed games, and who would make that decision," Nelson said.

Cox, though he said lottery officials aren't part of the governor's office discussions with financial consultants, said there are a number of ways a sale could be structured. He said state laws and the sales contract would determine what gambling activities would be condoned.

The potential price of the lottery also raised questions from senators.

"The price tag seems to change daily, by billions," said Sen. Kevin Eltife, a Tyler Republican.

Perry has said $14 billion is a conservative estimate. Consulting firms that prepared documents for Perry's office said it could go as high as $28 billion.

"I read somewhere that someone said, you know, the private sector, if they buy it, they're very smart. They'll know how to maximize the return on the investment. Are we not smart enough to run the lottery?" Eltife said.

Perry said last week that a private company run by "smart people" would make "substantially more money" off of the lottery than the state does.

Lottery officials said that the state operates the lottery under constraints set by the Legislature. Its advertising budget is capped and tied to the amount of payouts.

Eltife suggested the state could find ways to change the lottery to make it more profitable under state ownership.

This is a good point, though it's always interesting to see it raised in a context like this and not one that isn't strictly about profit but generally about managing state issues and resources. You know, like with the Health and Human Resources Commission, where we proved pretty conclusively that "privately managed" != "better managed". In this case, maybe there are some tweaks the Lege can make to the Lottery's charter that will allow them to run things better and generate more money. (Whether that's a good thing or not is a separate issue.) Point is, it's not like there aren't other options.

The lottery was created under the Texas Constitution, Sen. Florence Shapiro, a Plano Republican, noted as she asked whether the sale would require a constitutional amendment. Shapiro also questioned what role the state would have in oversight if the lottery were sold.

Lottery Executive Director Anthony Sadberry said it's possible it would require a constitutional amendment, or at least legislative action, to sell the lottery to a private firm. He and Cox also said under the current setup the lottery commission has the responsibility of overseeing and regulating the lottery.

"Possible"? You could maybe convince me that a simple bill signed into law by Governor Perry would suffice, but I say there's no way this can be done without some legislative input. Surely there's some limit to executive orders. Right? Eye on Williamson has more.

Posted by Charles Kuffner on February 21, 2007 to Jackpot! | TrackBack