You have to hand it to Governor Perry. He never gives up, no matter how bad the idea is.
Texans could buy lottery tickets at the checkout lines in supermarkets and big-box department stores, at coffee shops and cabarets. They could pay with credit cards or personal checks and play online or the old-fashioned way with a ticket that's also a tiny ad for anything from soft drinks to sporting events.Those are just some of the proposals offered to state officials by some of the nation's largest financial firms that have an interest in remaking the 16-year-old government-run Texas Lottery Commission into a market-driven enterprise operated by companies motivated more by the prospect of profits than the vagaries of politics.
Although the prospect of turning over Texas' $1 billion-a-year lottery to the private sector received the coldest of shoulders when Gov. Rick Perry first suggested it, a year ago, proponents have been busy laying the groundwork for a second, more concentrated push when lawmakers return to Austin in January for the 2009 legislative session.
"I seriously doubt at this point that they have one vote, much less the 100 they'll need [in the 150-member House], but they're already here visiting with folks to lay out their case," said state Rep. Warren Chisum, a Pampa Republican who heads the powerful House Appropriations Committee.
Chisum, whose committee is among at least three legislative panels to be tasked with at least looking at the feasibility of a closer partnership between the lottery and private enterprise, describes himself as very much a skeptic. He questioned whether lottery ticket sales could generate the billions of dollars that the investment firms say are out there and whether the capital markets want to take chances on state lotteries.
"It sounds very pie-in-the-sky -- to me, anyway," Chisum said.
According to a demographic study released in December by the University of Houston, fewer and fewer Texans are playing the lottery. And those who do play most tend to be lower wage earners with less education.The study found that people without a high school diploma are likely to spend more than $60 a month on lottery games. People with a four-year college degree are likely to spend about $5 a month. People who earn $20,000 to $50,000 a year spend twice as much on lottery games as people who earn $100,000 a year or more.
The privatization proposals say the lottery needs to end its reliance on a ticket-buying base of low-income earners by marketing the games to people with college educations and more disposable income.
One suggestion is allowing ticket sales at grocery store and department store cash registers, where the price of the ticket would be rolled into the overall outlay. The same strategy could be used in cafes under some of the proposals.
Gerald Busald, a mathematics professor at San Antonio College who has conducted several studies of the Texas lottery operations and its players, questioned whether the pool of lottery ticket buyers can be significantly expanded.
"I don't think those players are out there," Busald said. "If people [with more disposable income] want to gamble, they can drive to one of the casinos across the state line."
Starbucks is giving away 8 oz cups of its new "everyday" coffee at all its locations at 11 a.m. CDT today. This freebie only lasts 30 minutes, so don't be late or you'll turn into a pumpkin latte.
There has apparently been a constant drumbeat of requests for a consistent, everyday brew rather than Sumatra one day and Gold Coast another and so on. Me, I like the variety. I always get a tall cup of their "bold" coffee of the day with room for cream and then I'm well into one of my "I don't require much to be happy" moods. But, if it's free, I'm willing to try the everyday stuff.
More details:
New brew will be called Pike Place
bold, robust flavor with smooth, buttery finish
freshly roasted, freshly ground
baristas will throw out any that has not been used after 30 minutes
$9.95/lb
This caught my attention:
The company has also promised to start grinding all its brewed coffee in stores, which will bring back the pungent aroma many customers have missed since the company started using flavor-locked bags of pre-ground coffee years ago.
Love that. I wanna walk into Starbucks and smell that smell.
There's lots in the article about Starbuck's business model, but who really cares. The world stops for me at 11 a.m. today when I'll be at Starbucks getting my free cuppa Pike Place.
I thought the idea of privatizing the Lottery was pretty much dead after it went over with such a thud last year, but apparently some bad ideas never truly go away.
Texas would have to expand gambling to see the multibillion-dollar profits Gov. Rick Perry promised last year when he proposed selling the state lottery, according to a report an Austin watchdog group plans to release today.
Texans for Public Justice, which monitors money in politics, obtained Texas Lottery sales projections by three private companies compiled for Perry from 2006 through 2007.The Public Justice report indicates that to generate the $14 billion or more Perry said the lottery would yield, Texas would have to allow more gambling and more-addictive games.
"If Texans oppose such a gambling expansion, then these documents suggest what they should play with the Texas Lottery games is Texas Hold 'Em," the report concludes.
Today, more than a dozen states are studying lottery privatization. California Governor Arnold Schwarzenegger said last year that his state's lottery could be auctioned off for as much as $37 billion. Yet the Associated Press reported this February that seven Wall Street banks privately priced the deal for Schwarzenegger, who publicly touted the most "wildly optimistic" quote. Significantly, to reach its highest valuations, Wall Street said that the state would have to "allow a significant expansion of gambling in California."Lottery privatization is not dead in Austin, either. Lieutenant Governor David Dewhurst has directed two interim Senate committees to assess the merits of lottery privatization. Meanwhile, gambling interests continue to ply Governor Perry with lottery-privatization schemes.
As in California, many of the documents that the Texas governor's office has released thus far to Watch Your Assets suggest that the payout that Governor Perry has touted is unrealistic unless Texas aggressively expands into new games and widens the venues in which gambling occurs. Texas Attorney General Greg Abbott has issued non-binding opinions indicating that many of the new kinds of games that the gambling industry is pushing require a constitutional amendment. Yet the Dallas company Aces Wired now openly operates electronic gaming machines in selected Texas markets that already cross some legal lines drawn by the Attorney General. Aces Wired, which spearheads a business consortium interested in running the Texas Lottery, has flooded the governor's office with advice on how to go about making this happen.
You may need to sit down for this one: Those fifty-dollar scratch-off games that the Texas Lottery pushes on the public in the hope of luring richer people to play, are instead mostly bought by not so rich folks.
The Chronicle looked at each of the state's ZIP codes with at least 1,000 adult residents, dividing them into groups based on their median household income in the 2000 census.The analysis found that sales of the $50 Spectacular surged across middle-income ZIP codes, seeing strong per-capita sales in areas both with incomes of just more than $30,000 and in those with earnings upwards of $50,000 and $60,000.
Sales figures dropped off in both rich and poor areas, although the state's poorest ZIP codes -- those with median incomes of $20,000 or less -- saw stronger per-capita sales than the richest, with incomes of $90,000 or more.
While the analysis is imperfect because it does not account for people who may buy lottery tickets in a ZIP code where they don't live, and whose incomes may differ from the median there, it bolsters numerous other studies indicating that lottery games tend to be most popular among the non-affluent.
"The $50 ticket salvaged our entire fiscal year last year," said Robert Tirloni, projects manager for the Texas Lottery Commission, bringing $137 million to state coffers since the game's debut in May and helping the commission close a $93 million gap in revenue between 2006 and 2007.Texas lottery commission spokesman Robert Heith said the games are voluntary and are designed to entertain. He added that his agency has one overriding mission: to generate revenue for Texas public schools. Last year, more than $1 billion of the $3.8 billion raised from lottery sales went to public education.
The $50 scratch-off game did so well in Texas that the state, without fanfare, launched in November a second $50 game called $130 Million Payout Bonanza. Together, the two games have generated $158 million in revenue.
[...]
The state has pondered introducing a $100 ticket and last year ordered up a study to determine whether enough Texans would embrace it. Tirloni called a $100 ticket "the next step, though we're not there yet."
He added, "Whenever we put out a (higher-priced ticket), it's been successful."
This is one of the more disturbing political stories I've seen lately, both for its lack of concrete information and its far-reaching implications.
Texas' ailing racing industry is planning an expensive gamble for survival -- a $3 million campaign and lobbying effort to bring slot machines to the state's horse and dog tracks.Texans for Economic Development, the umbrella group for track owners, breeders and other segments of the racing industry, has budgeted $1 million to contribute to campaigns in the 2008 legislative elections and $2 million for a lobbying effort to convince lawmakers that the tracks need slot machines to survive, the Austin American-Statesman reported Wednesday.
It's a tough sell. State lawmakers have brought up the possibility of slots at tracks in the past, but all efforts have failed under opposition to expanding gambling in Texas. Proponents want Texas voters to decide.
Group President Tommy Azopardi said the $1 million will be targeted on about a dozen races in the state House of Representatives.
"It's not about Democrats and Republicans, it's not about the speaker's race," Azopardi said. "It's not about anything other than, 'Are you for VLTs (slot machines) or not?'"
I agree it's not about Democrats or Republicans, as there are supporters and opponents of slot machines on both sides of the aisle. As for the Speaker's race, certain key Craddick lieutenants, such as Kino Flores, are both supporters of expanded gambling and involved in hot races. I don't care what Azopardi says, if they are supporting Flores (I'm just hypothesizing here), they are supporting Craddick. Perhaps they will balance their support fairly evenly among the Craddickites and the anti-Craddickites, but the bottom line is that almost any contested race this year is to some extent is about the Speaker's race. It can't be avoided.
It's a shame that there's no indication of what the pro-gambling forces intend to do with their million bucks. We ought to know more when the next round of campaign finance reports come out, but still. This is a big deal, and it deserves a lot more scrutiny.
I've expressed my ambivalence about state-sanctioned gambling before. On the one hand, I've got enough civil libertarian in me to be wary of outlawing clearly popular activities like gambling. On the other hand, the gambling industry, especially the state lottery industry is such a sleazy combination of oligopoly and influence peddling that it's hard to see anything good in its expansion.
Over the last three decades, Gtech and Scientific Games have jointly generated several billion dollars in revenue as vendors to lotteries -- a business that flourishes at the crossroads of capitalism and public policy. In the process, the companies have steadily -- and often controversially -- evolved from minor suppliers into an influential oligopoly with a hammerlock on lottery operations.Every business has its titans, of course. But according to analysts, lottery officials and public documents, Gtech and Scientific Games have done more than just ride the gambling boom -- they have strong-armed their way to the top of a publicly sponsored industry that they now dominate. And with the domestic lottery market plateauing, both companies are focused on securing new footholds overseas.
Gtech, in particular, has been heavy-handed at times. According to court papers and regulatory filings, the company's representatives have drawn persistent allegations of bribing their way into contracts. Gtech officials acknowledge questionable practices by some employees, but say the problems are a thing of the past.
[...]
To protect and expand their turf, Gtech and Scientific Games have tightly woven their interests into the nation's political fabric. Through the years, both companies have spent millions of dollars lobbying legislators and bankrolling lottery referendum proposals that have led to the establishment of lotteries. For example, Scientific Games spent about $1 million in 1984 supporting Proposition 37, which authorized the creation of a state lottery in California.
Often, the companies have also helped draft the very language used in lottery legislation. Some rivals complain that Gtech and Scientific Games have leveraged their political ties not only to win lottery bids, but also to ensure that contracts themselves are written in ways that discourage competition.
I'll never understand it, but plenty of people are snapping up those fifty-dollar scratch-off Lottery tickets.
For all the naysayers who couldn't imagine folks gambling on $50 on a single lottery ticket....Turns out, the state is making out like a bandit on its high-priced $130 Million Spectacular. Players have forked over close to $49 million dollars in the game's first six weeks. Or $1.2 million a day.Robust sales of the $50 game, amongst the priciest in the nation, are reversing what had been declining overall lottery sales. Total sales this year for all games are down 2.3 percent over last year, but they were down nearly 5 percent before the $50 game was introduced, on May 7. "The $50 game has had a definite impact on instant and overall sales," Texas Lottery Commission projects manager Robert Tirloni told agency commissioners at their monthly meeting this morning.
The $50 game now accounts for 2 percent of all scratch-off sales. The most popular games are those selling for $5. They accounted for nearly 28 percent of all scratch-off sales, followed by the $2 tickets (20 percent of all scratch-off sales) and the $10 tickets (14 percent of all scratch-off sales).
The good news is that rich folks do seem to be buying those new fifty-dollar scratch-off Lottery tickets, as the Texas Lottery Commission thought they would. The bad news is that they're not buying any of the other pricey scratch-off games, at least in comparison to poor folks.
Several months ago, when the Texas Lottery Commission introduced a $50 scratch-off game, agency officials expressed confidence it would draw affluent customers. But they had little to base that assumption on.As it turns out, they were right for the first 10 days of sales, at least.
But had they mapped ticket sales of their pricier tickets for the past 12 months -- the $10, $20, $25, $30 and $50 games -- they might have discovered retailers in the state's 10 poorest ZIP codes sold $2.4 million of them, some 50 percent more than retailers in the state's 10 wealthiest ZIP codes.
Per-capita spending on the high-dollar tickets was $25 in the 10 poorest ZIP codes versus $18 in the 10 wealthiest.
That's counting the early sales data from the new $50 game, which went on sale May 7, and not including ZIP codes with a population of less than 100.
By itself, the new $50 ticket sold faster in more affluent ZIP codes.
[...]
State officials dismiss suggestions that the poor are more apt to wager money on high-dollar lottery scratch-offs.
"Because it's a poor neighborhood doesn't mean that the poor are buying the tickets," maintains Rep. Ismael "Kino" Flores, D-Palmview, who oversees the Lottery Commission as chairman of the House Licensing and Administrative Procedures Committee.
"Before, what used to be neighborhood stores now cater to people moving through the neighborhood. I've seen it. People stop at different stores and buy their tickets," he said.
For the life of me, I cannot comprehend why anyone would think that rich folks would blow their spare change on high-dollar lottery tickets. Forget the value proposition, there's much better thrills available for that kind of money. And if it's the gambling aspect that's supposed to be the draw, well, that's why we have Las Vegas. I just don't get it.
One more thing:
Robert Heith, the Lottery Commission's spokesman, said the only real way to determine who is buying big-dollar tickets would be to stand "at the door (of each retailer) and ask everybody who bought a lottery ticket where they lived."By having a lottery, Flores said, the state gives folks a product they willingly line up to buy and at the same time raises more than a billion dollars a year in revenue for public schools.
"It's like cigarettes," Flores said. "If that's what people want, let them buy it."
Critics say state-sponsored gambling wasn't as problematic when most games cost a dollar. ("Oh rats!" Gov. Ann Richards exclaimed 15 years ago when she purchased the first ticket and discovered she'd become the first lottery loser.)
"They always argued it was a harmless, little game. Spend a buck. 'Oh, I lost. Big deal,' " said David Hudson, a former Democratic state representative from Tyler who waged a bitter campaign against attempts to introduce a lottery to Texas.
Lawmakers, then voters, approved the lottery the year Hudson left office, in 1991.
The state spent $2 million the first year on programs to help problem gamblers. The state now spends zero dollars on programs for problem gamblers even as ticket prices hit the stratosphere.
"We don't encourage people to buy cigarettes," Hudson said. "We don't go out and buy billboards advertising cigarettes. But we do advertise lottery tickets. Is this the kind of thing the government ought to be engaged in?"
You know what I was thinking? I was thinking that what our great state's watering holes really needed was the ability to sell lottery tickets. And now, they may just get it.
The House gave final approval this afternoon to a bill by Rep. Chente Quintanilla, D-Tornillo, that would OK the sale of lottery tickets in bars. Plenty of people might wonder whether hawking lottery tickets around inebriated people is good public policy, but few in the House were asking any questions.The bill passed with no debate, either last night on second reading or today, when it passed 116-21. One legislative aide explained that when the House took up the measure last night, the House's most ardent gambling opponents were stuck in some committee.
The commission estimated that it could raise $20 million over two years by expanding ticket sales to certain drinking establishments.
"If a person is going to consume liquor, maybe they will consume less if they can sit there and buy lottery tickets," Quintanilla said.Plus, he said, hopefully it will bring in more lottery money to send to schools.
Anyway. Grissom also cited the $64 million figure, for what it's worth. Rep. Quintanilla is apparently looking for a Senate sponsor, so we'll see what happens.
Remember Rick Perry's grand idea to sell the Lottery? Perhaps you've forgotten, since the last I can recall hearing about it was in February, and as far as I can tell it's deader than Generalissimo Franco. But just to prove that no idea in politics is too stupid to be universally rejected, here comes California with the same dollar signs dancing around their heads.
Gov. Arnold Schwarzenegger is poised to call for privatizing the state lottery, a move that would bring California a cash infusion of as much as $37 billion to help solve pressing budget problems but also could sacrifice a major revenue source for decades to come.The lottery would be leased to a private company for up to 40 years in exchange for a lump-sum payment or series of payments, according to documents from the governor's budget office that were provided to legislative staff and obtained by The Times. If lawmakers were to sign off on such a plan, California could become the first state to privatize its lottery.
Schwarzenegger will issue a revised budget proposal Monday that is expected to contain the lottery plan.
Adam Mendelsohn, Schwarzenegger's communications director, confirmed that the governor's staff had been working with investment banks on the plan. He said private companies could do a better job of running the lottery than the state, resulting in more Californians playing and the largest possible cash infusion.
"California has one of the lowest-performing lotteries in the country," he said. "Taxpayers could see two to three times more money go into state coffers."
[...]
The plan is certain to be controversial, with opposition likely from activists who are seeking to stop further expansion of gaming in the state, as well as fiscal conservatives who are uneasy with trading off future revenue for easy cash now. But it also is likely to entice both Democrats and Republicans desperate to find funding for programs they support without having to resort to a tax hike.
(Yes, I see that Illinois' Democratic Governor has the same idea as well. At least he has a specific immediate need for the cash infusion - fixing the state's pension fund. That doesn't make this not a bad idea, however.)
There are things in this life whose appeal completely eludes me. Things like broccoli. Kenny Chesney. Fifty-dollar lottery tickets.
That's the price of the state's newest scratch-off game, dubbed $130 Million Spectacular, which goes on sale Monday and offers nearly $134 million in prizes, including three grand prizes of $5 million.A $50 game is the highest price for a scratch-off in the nation, according to lottery data. Kansas introduced the first $50 ticket two years ago and Michigan also will launch one on Monday. Compare that to California, where the most expensive scratch-off ticket is $5. In New York, it's $20.
Officials in Texas evidently believe their new game will do well; they're printing 3.7 million of the $50 tickets and are planning to soon introduce a second $50 game.
[...]
The [Texas Lottery] offered its first $3 scratch-off in 1997. By 2000, it had a $10 game; a $20 game in 2002 and a $30 game in 2004. Last year, $1 scratch-off tickets accounted for just 11 percent of all scratch-off sales, while nearly a third came from tickets priced between $10 and $30.
The $50 game comes with a 63 percent chance of losing.
Those odds won't deter Mike Swain, 44, a driver for a moving company who picked up $4 worth of scratch-offs in East Austin this week.
"I'll try it. I definitely could try it once. Sometimes I have $50 extra," he said.
Gerald Busald, a math professor at San Antonio College who analyzes lottery practices, had this advice for those itching to wager 50 bucks on a single ticket: Don't."You can have the same dream for $1 that you can for $20 or $30 or $50," he said. "You're not going to win."
One last thing:
William Scott, 64, a custodian in Austin who works two jobs and said he often spends $120 a day on lottery games, is eager to try his luck on the $50 game. "I play all of them."
In February, the Chron printed a story about how the Lottery would continue to sell scratch-off games long past the point where all of the top prizes had been claimed. After the predictable outrage, the Texas Lottery Commission has changed its policies to prevent such ripoffs in the future.
Texas Lottery officials announced Friday they will order all scratch-off tickets pulled as soon as the games' top-tier prizes have been claimed.The move comes just a month after a Houston Chronicle story highlighted the fact that the agency continued to sell games long after players had virtually no chance of winning the significant prizes advertised.
Agency spokesman Bobby Heith said "public concern" about the games had prompted the decision.
"I don't know that the public has lost faith, but it goes to us wanting to reassure it that our games are the best in the land," Heith said.
Lottery watchdog Gerald Busald hailed the move.
"I'm thrilled. This is one of the things they were adamant about not doing," said Busald, a mathematics professor at San Antonio College who brought the issue to the attention of the agency's commissioners at a public hearing in January.
[A]nyone spending $5 on a Deal or No Deal scratch-off Friday might entertain hopes of winning the $1 million top prize advertised on the ticket.But it'd be pure fantasy.
All three of the top prizes have been claimed. So have all four of the $100,000 prizes. And all 10 of the $50,000 prizes. They've been gone since Dec. 9.
"It's an unfair game," said Dawn Nettles, an unofficial, unpaid watchdog of the lottery commission.
In fact, of the 52 $10,000 prizes that were offered for that game, only one remained unclaimed Friday. Taken as a whole, more than 96 percent of the prizes and 99 percent of the money for Deal or No Deal is no longer available -- yet the game continues to be sold statewide.
Sen. Dan Patrick, R-Houston, said: "No longer is the public going to be spending money on a fixed game."
Patrick said he met with agency officials a month ago and demanded they change their policy on pulling games, and he filed Senate Bill 1200 that would do as much to show them he meant business.[...]
Patrick said despite Friday's development, he will continue to push his bill.
"I want to be sure it is law, just in case," he said.
Side note:
The change comes just weeks before lottery officials plan to introduce a $50 scratch-off game.
Last but not least, some background info on Gerald Busald and the effect he and his students have had on the TLC. Check it out.
As someone once said, "Of course the game is rigged. Don't let that stop you--if you don't play, you can't win." Except that with scratch-off games, you might not be able to win anyway.
anyone spending $5 on a Deal or No Deal scratch-off Friday might entertain hopes of winning the $1 million top prize advertised on the ticket.But it'd be pure fantasy.
All three of the top prizes have been claimed. So have all four of the $100,000 prizes. And all 10 of the $50,000 prizes. They've been gone since Dec. 9.
"It's an unfair game," said Dawn Nettles, an unofficial, unpaid watchdog of the lottery commission.
In fact, of the 52 $10,000 prizes that were offered for that game, only one remained unclaimed Friday. Taken as a whole, more than 96 percent of the prizes and 99 percent of the money for Deal or No Deal is no longer available -- yet the game continues to be sold statewide.
"It's deceptive," said Gerald Busald, a mathematics professor at San Antonio College who also monitors the commission's practices. "Just because someone will buy it doesn't mean it's morally right for them to sell it."
The lottery's loophole comes in a one-sentence disclaimer printed on the back of each ticket that says: A scratch-off game may continue to be sold even when all the top prizes have been claimed.
"Our mission is to generate revenue for the state of Texas and if games are still profitable, they'll continue to be sold. For a lot of the games, there are significant prizes, second- and third-tier prizes," said agency spokesman Robert Heith.
Heith said the agency has no set formula for deciding when to close games. One rule of thumb is to close them when 80 to 90 percent of the prize money has been awarded.
But the Houston Chronicle found that upward of 90 percent of the prizes had been claimed in nine of the 75 or so scratch-off games on sale Friday.
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.
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.
Here's a thought: Could the effort to sell off the Lottery be a back door to expanded gambling?
The Texas Lottery might look quite different under a private operator if the state opens the door to online games, casino-style Keno and video slot machines as suggested by financial firms that have consulted with Gov. Rick Perry's office.Documents prepared by three firms seeking to manage the deal for the state say the sale price would range from $14 billion to $28 billion, depending on the buyers' ability to increase profits by expanding gaming in Texas.
That may mean legalizing video slots or letting people buy tickets at home on their digital televisions, according to the documents reviewed by the Associated Press.
[...]
Perry spokesman Robert Black said the governor is not advocating the expansion of gambling and simply wants the state to get "the most bang for our buck."
"This is not unlike trying to sell your house," he said.
The deal and some new types of games would have to go through the Legislature, which has been reluctant to allow new gaming in recent years.
At first, Black said Friday that introducing some new games that aren't currently legal, such as Keno and video slots, would require a constitutional amendment, and the lottery sale most likely would, too. He said the governor's office thinks the best approach would be through a constitutional amendment.
But later he said "it's unclear" and that an attorney general's opinion may be needed to decide whether those questions would have to go before voters.
I can't even think of a good snarky intro to this, so I'll just say it: Governor Perry's son has been hired by one of the financial consulting outfits involved in the proposed Lottery sell-off.
UBS, one of two large financial firms consulting with the governor's office over the possible sale of the Texas lottery, hired Gov. Rick Perry's son to work in its Dallas office about two weeks ago.The governor's office said that there is no relationship between the two events and that Griffin Perry, 23, is a bright young economist who is pursuing a career on his own merits.
"He stands on his own two feet. And he got this job on his own," press secretary Robert Black said Monday.
[...]
Karina Byrne, a UBS spokeswoman, said that Griffin Perry was hired for a specific program in which about a dozen entry-level employees rotate through various parts of the company. The company has 11 such programs nationwide.
"We have a vigorous interview and application process. He would have been subjected to the same criteria that would have applied to any other young person applying for the associate program," Ms. Byrne said.
She said the fact that his father is governor would not have weighed into the calculation.
Most likely, this won't amount to anything, especially given the cold shoulder that the Lottery sell-off plan has received. And for a lot of officeholders' children, this would be barely worth a passing mention, not an actual news story. But with Governor Perry's deep and abiding commitment to cronyism, how can anyone not be derisive? There is no benefit of the doubt left to be had.
I'm sure you'll be as shocked as I was to learn that Governor Perry's harebrained scheme to sell off the Texas Lottery comes complete with its own cozy lobbyist connections, just like the HPV vaccine order did.
Former U.S. Sen. Phil Gramm, a friend of Perry's, is handling discussions for the proposed lottery sale, a spokesman for Gramm's company acknowledged.Gramm is vice chairman of UBS Investment Bank, which has been advising the governor on the proposed privatization of the state lottery. Gramm was a federally registered lobbyist for UBS last year.
Ray Sullivan, a lobbyist registered with the investment firm in Texas, worked as a spokesman for Perry several years ago. Sullivan is now in business with Michael Toomey, Perry's former chief of staff.
Toomey said he does not represent clients with lottery-related interests, and he added that Sullivan does not work on lottery-related issues for UBS.
A spokesman for the governor dismissed suggestions that Perry's personal friends might profit from a future sale."There have not been any agreements signed. Just conversations," spokesman Ted Royer said.
I see also that Perry appears to have listened to the actual experts about his plan, because the asking price has gone up.
Initially, he said he thought the state could get $14 billion from the sale, but he later raised that estimate to $20 billion. At $14 billion, he said the state could raise $300 million more each year through interest generated by a sale than by keeping the monopoly. That's assuming a 9 percent return on the state's investment.
UPDATE: Burka makes a good point:
Nothing generates more money for less effort than the percentage big financial institutions make from handling transactions of this type.
I've highlighted the logical incongruities of Governor Perry's plan to sell off the Texas Lottery, but as I'm not what I'd consider a financial expert, I wasn't sure if I was missing something obvious. Now, thanks to Vince, I see that some people who are genuine financial experts have the same kind of doubts.
Without additional state money, "there's a high probability that they would run out of money in 20 or 30 years," said Philip Cooley, a professor at Trinity University in San Antonio. Aides to Mr. Perry said their numbers were solid.At the same time, a lottery run by a private company could be more efficient and easier to police than the state-operated system, some analysts and one lottery watchdog said.
Mr. Perry has suggested the state could get $14 billion from the sale of the lottery, and experts interviewed Tuesday said the sale price could be even higher.
"It ought to be a bigger number," said Jerry Love, chairman of the Texas Society of Certified Public Accountants, after performing a rough valuation of the lottery based on public data.
[...]
The 9 percent investment return may be possible, but only if the state is willing to invest aggressively. Stocks have typically returned 10 percent annually over long periods.
"It's optimistic," said David Wyss, chief economist of Standard & Poor's, the Wall Street ratings agency. "Potentially, it's doable, but only if you're willing to invest in a relatively risky portfolio."
Ted Royer, a spokesman for Mr. Perry, called the 9 percent expected annual return conservative for any long-term investment and said the state comptroller had signed off on the projection.
Now that I've seen the plan to sell the Lottery, I just have one question: What in the world are they thinking?
Perry centered his State of the State address on the idea of selling the state lottery for at least $14 billion. The proceeds from the sale would be divided into three trusts: $8.3 billion for public education and $3 billion for cancer research.The remaining $2.7 billion would be used with federal money in a new health insurance program that could cover as many as 600,000 currently uninsured Texas adults, according to Perry staffers.
The lump sum from the lottery sale would be invested, not spent, generating a yearly return of some $1.3 billion, about $300 million more than Texas gets from owning the state lottery, according to estimates from Perry's office.
[...]
Perry's plan assumes that the state will find a buyer willing to fork over $14 billion and that the state's investments will yield a 9 percent annual return.
"If that's true, I'd like to know what they plan to invest in," said Rep. Mike Villarreal, D-San Antonio. "Every investment has a pattern of going up and down. What happens during those years when we're not earning that rate of return?"
Forget the details. Either the money from the Lottery sale can generate more revenue than the Lottery itself, in which case no one will want to buy it, or it can't, in which case we shouldn't want to sell it. The only way that a sale makes sense is if the cash we got for it was slated for a capital investment - say, building a boatload of new schools - for which the money could not otherwise be raised. That's not the case here.
OK, I suppose that the putative Lottery buyer might think they can run it better and improve sales to the point that it can out-earn the Perry Investment Plan. But if that's really the case, why not just let them run it, and split whatever they can earn above the current $1 billion per year? Everyone benefits, at a much lower risk, and the state retains a valuable asset.
I mean, seriously. Am I missing something here? This isn't the real plan, right? Joke's over, fellas. Time to come clean.
UPDATE: McBlogger breaks out the financial terms and comes to the same basic conclusion.
I'll say this about the Perry administration: They're consistent about their desires.
Gov. Rick Perry said Thursday that his State of the State address on Tuesday would include a plan to fully privatize the Texas Lottery by selling it to private interests.Perry said such a sale would raise substantial funds that could be used for health care and research.
[...]
Suzii Paynter, a gambling opponent with the Christian Life Commission, said she would have to study Perry's proposal before taking a position. But she said the timing seemed odd.
"With a $14 billion surplus," she said, "it sees like the last thing we need is a huge infusion of cash."
State officials have said all but $2.5 billion of that $14 billion is committed already.
But there are other considerations besides money.
Many public officials argue that the state should not be in the gambling business. Selling the lottery would remove Texas from that role.
Then again, public lotteries arose because of scandals in privately run lotteries.
Also, the state might lose control over where lottery tickets are sold and how aggressively it is marketed. The state restricts marketing it considers objectionable.
Even if the state tried to require the lottery buyer to follow current state guidelines, the buyer later could lobby to relax the rules.
It's unclear how selling the lottery would affect ongoing efforts by the gaming industry to persuade the Legislature to approve casino gambling or slot machines at dog and race tracks.
Lawmakers are concerned whether expanding gambling opportunities would hurt or help lottery sales.
The article does a pretty decent job of bringing up the main points of concern, but there are a few things to discuss:
1. I realize that this is an obvious point, but it never seems to sink in, so I'll say it again: Whatever private firm we'd sell this or any other asset to (*cough* *cough* toll roads *cough* *cough*) is in the business of making a profit. That means that no matter how much they pay for this, they expect to make more money than that off of it. Now, maybe they're wrong about that, and maybe we'll not be able to agree on a price point so the whole thing falls apart, but never forget that if we make a sale and we don't have a specific use for that money that will make up for the future lost revenues, we lose on this deal.
2. So what are the specific uses for this money that Perry has in mind? I suppose we'll find out when he delivers his speech, but color me skeptical going in. And would any of this money be subject to to constitutional spending cap? If so, what happens if the effort to lift it fails? What happens if the only way to make a deal to lift the cap involves using some of that finite amount of money to help pay for those irresponsible property tax cuts, or the even less responsible rebate scheme? There's a king-sized devil in these details, to say the least.
3. How will this affect the push to allow more legalized gambling in Texas? Will it grease the skids, or will the private lottery owner become a new big-money special interest that will have to be greased as part of any plan to expand gambling? I strongly suspect the latter, which in and of itself is a good argument against the deal.
4. What controls will the state still have if it sells off the Lottery? Will we be on the hook to guarantee future payouts in the event the privatizer goes bellyup? What rights will people who play the privatized lottery have in the event of a grievance?
Lord knows, I'm not going to claim that the Texas Lottery Commission is a well-run organization, or that a private firm can't do a better job than they can. BOR spoke to lottery watchdog Dawn Nettles, who brough that subject up. But however bad the TLC is, I'm not seeing the upside to this, and I have no reason to trust the Governor's acumen. Maybe he can make a convincing case in the SotS address, but I wouldn't bet on it.
Good news! You just won the lottery. Well, not the big prize, but the little one, $3 worth for correctly picking three out of the six numbers. You go to your local Kwik-E-Mart to claim your winnings, and...Well, check out this Local 2 investigation and find out. It's not a pretty picture. Link via Houstonist.
Hey, remember the inflated Texas Lotto jackpot scandal, the one that cost unqualified Perry crony Reagan Greer his job? It was supposed to have been fixed last year. Well, not quite, according to an audit of the Texas Lottery Commission.
Auditors found "a significant number of instances in which agency management did not comply with policies and procedures to review or approve documentation related to jackpot estimations, jackpot prize payment calculations and transfers to the Foundation School Fund."[...]
Lottery officials had asserted that they inflated four jackpot estimates between May 4, 2003, and June 11, 2005, auditors wrote.
But from November to March, auditors found three more instances in which lottery officials knowingly approved jackpots that exceeded the agency's "high-end" estimated sales.
Winners wouldn't have been impacted on those occasions because, as the report notes, they occurred after commissioners agreed to guarantee winners the higher of either the advertised jackpot or percentage of actual sales.
But auditors noted that "failure to accurately advertise Lotto Texas jackpot amounts may contribute to a lack of public confidence in the Lotto Texas game and the Texas Lottery Commission." They also pointed out that if the agency is required to pay jackpots that exceed sales, they may have to be paid with money that would otherwise go to education.
"That is troubling to me because that does take money from the state," said Gerald Busald, a lottery watchdog and math professor at San Antonio College. "The difference is when Reagan Greer did it, if somebody would have won, the player would have been out money. Now if somebody wins, the state is out money."
Busald praised the audit overall and said he had confidence that the agency's newly named Executive Director Anthony Sadberry, a longtime Houston attorney, would continue improving morale and trying to establish a culture of playing by the rules at the lottery.
The much-maligned bonus ball of the Texas Lottery is officially kaput.
Starting in late April, players will choose six numbers between 1 and 54 rather than five numbers between 1 and 44 and one bonus ball from 1 to 44. That will return the odds of winning the jackpot to 1 in 25.8 million, down from 1 in 47.8 million with the bonus ball.Already sluggish sales fell even more after the bonus ball was added, lottery staff said. So far this fiscal year, a higher percentage of ticket sales have gone to the twice-daily Pick 3 game than to Lotto Texas, which once was by far the state's highest-selling online game, commission chairman C. Thomas Clowe said.
"I think the handwriting's on the wall," Clowe said. "We've got to do what we can."
Clowe blamed several factors for the decline in sales, from the growing popularity of Internet gambling to the prevalence of casinos in nearby states. Players also are increasingly drawn to the huge jackpots offered by Mega Millions and Powerball, he said, and are less likely to play for smaller prizes.
In an effort to build big jackpots more quickly — and therefore sell more tickets — the commission will devote a higher percentage of sales to the top prize and pay less to winners matching three, four or five numbers than it did in the old game involving 54 numbers. For example, players matching three of six numbers will win $3 rather than $5.
Lottery watchdog Dawn Nettles opposed the changes adopted Monday, saying that style of play already failed to draw customers and would fail again. She said players aren't as concerned about high jackpots as Clowe maintained, but they won't play for pocket change.
"The people are going to boycott this game, and I'm going to see to it that they do," said Nettles, who also opposes the concept of guaranteed prizes, saying players should instead win a set percentage of sales.
Nettles said that the players who submitted comments to her made clear that even though they might despise the bonus ball; they do not necessarily endorse all aspects of the plan to replace it.She said that under the original configuration, 5.07 percent of every dollar taken in ticket sales went to the prize pool for second-place winners. That meant all of the players who hit five of six numbers shared equally in that prize pool and the payoff was often more than $2,500.
Under the proposed new rule, Nettles added, 2.23 percent of ticket sales would be earmarked for the second-place winners. Therefore, if ticket sales were sufficient to pay $2,500 to the five-of-six winners under the old rule, there would be only enough money to pay about $1,900 under the proposed rule.
The prize amounts for those who match four of six would be cut by about half. Matching three numbers under the old method guaranteed a player $5; that would be cut to $3 under the latest proposal.
The two-man commission discussed the issue for more than four hours, debating a variety of proposals, including the lottery's original form when players chose six numbers from 1 to 50. While that setup would return more money to players, the commissioners said that would happen at the expense of the Foundation School Fund, where revenues from lottery games go."We can't make everybody happy, but the thing I think the commissioners have to protect is that fiduciary responsibility to the state," Clowe said. "That's part of the integrity that we have signed on to discharge."
UPDATE: I drafted this last night when the AP story was on the Chron site. Today they have their own story, which has more detail.
The good news is that under a proposal by the Texas Lottery Commission, your odds of winning the jackpot will increase. The bad news is, the payout for everything else will decline.
Currently, players can win the Lotto Texas jackpot by matching five numbers between 1 and 44 and one bonus ball numbered from 1 to 44. The proposal calls for players to select six numbers between 1 and 54 with no bonus ball.Adding the bonus ball worsened the odds of winning the jackpot from about 1 in 26 million to about 1 in 48 million. The odds will return to 1 in 26 million if the changes are made.
The proposal calls for devoting a larger share of ticket sales to the jackpot, which starts at $4 million and traditionally grows by at least $1 million each time no tickets match all six numbers.
That is expected to help the jackpot climb faster, and Lottery Commission spokesman Bobby Heith said research shows more players buy tickets as the grand prize grows.
But to keep the game profitable, smaller shares of ticket sales would be earmarked for prizes when players match three, four or five numbers.
Lottery watchdog Dawn Nettles said that will upset loyal ticket buyers who have come to expect a formidable payday anytime they match four or five of the six numbers.
An old, familiar name has surfaced as a candidate for the top job at the Texas Lottery Commission: Talmadge Heflin.
Heflin, a Houston Republican who served 22 years in the Texas House before being defeated in 2004, said Wednesday that he was asked to apply by C. Tom Clowe, chairman of the Texas Lottery Commission.He said he applied Monday.
"I honored his request and turned an application in. I'll see what they do with it," said Heflin, a management consultant.
[...]
Clowe was not available for comment, but confirmed through Heith that he did ask Heflin to apply.
[...]
The executive director job description calls for a four-year college degree or management experience. Heflin does not have a degree.
Clowe had set up the search committee in July, saying that he wanted to "cast a wide net" with the goal to "find someone who is qualified, experienced and will do an outstanding job."
[...]
Heflin said he became familiar with the lottery's operation as a member of the House Appropriations Committee.
"I didn't vote to put (the lottery) in. But when the people voted to have it, I wanted it to be effective," said Heflin. "I haven't tried to undo what the people said they wanted done."
Heflin said he is mindful that several previous lottery directors have been fired or resigned over various controversies.
"It is a hot-seat job," he said, adding that he knows many of the staff members at the lottery. "I'm pretty familiar with their operation. It's not like it's something brand new to me."
[...]
The former lawmaker also has a part-time job with an influential think tank, the Texas Public Policy Foundation. The group, which advocates for limited government, has contracted with Heflin to lead a study of the state's budget.
Heflin and Byron Schlomach, chief economist for the foundation, are reviewing the budget in an effort to recommend cost savings in the next legislative session.
Heflin was chairman of the Appropriations Committee during the 2003 session when lawmakers were forced to cut $10 billion from the budget.
Schlomach said Wednesday that if Heflin were to get the lottery job, the foundation would need to take a look at conflict-of-interest issues.
"I hate to say flat out it would be a conflict, but it's something we'd definitely have to look at. My first instinct is it probably would be. There wouldn't be the objectivity there," he said.
He added it's not impossible that Heflin could continue, however, since there are always exceptions.
First, there's his lack of a college degree. Despite the follies of the previous head honcho, the also-degreeless Reagan Greer, this isn't that big a deal, especially if Heflin's management consulting experience meets the alternate criterion. It's important to remember, though, that one reason why college degrees are required for positions like this is to make it a little harder for unqualified cronies like Greer to get installed as a reward for political work. It would therefore be at the least a little unseemly to succeed Greer with another well-connected Republican insider whose resume also happens to not fully measure up to standard. The fact that Heflin was solicited to apply this late in the process doesn't enhance one's faith in the TLC's originally-stated desire to go a new direction.
Heflin may have been a critic of the Lottery's creation, but that's not the same as being a critic of its operations and culture. It's a little hard to picture a good ol' boy like him really making changes to put this dysfunctional agency on more solid ground. Obviously, I don't know what he's said in his interviews so far, but it would be nice to know what he thinks, even in just general big-picture terms, of the complaints made by current and ex-staffers about how things are run there. We have a pretty good idea what Dawn Nettles' top priorities at the TLC would be. What are Heflin's?
It goes without saying (I hope!) that Heflin would have to resign from the TPPF if he gets this job, but potential conflict of interest questions don't stop there. Has he ever taken campaign contributions from any Lottery-related vendor or contracter? Have any of his former staffers gone to work for any Lottery-related firms? It shouldn't be that hard to get the answers to this stuff, so let's clear it up now.
I keep coming back to Commissioner Clowe asking Heflin to apply. Have no other acceptable candidates come forward, or is it just that Clowe doesn't like the choices he now has? Did Clowe encourage anyone else to apply at the beginning of this process? I'm always suspicious of this kind of last-minute change.
Finally, there is one good reason to hope Heflin does not get this job:
Heflin said, if he doesn't get the job, he is considering a race to try and regain the southwest Houston seat in the House that he lost to Democrat Hubert Vo.
Anybody wanna buy a lottery vendor? No felons or other people of low moral character need apply.
The Rhode Island company that operates many of the Texas lottery's most popular games is up for sale, and state officials are looking to hire an independent law firm to help them ensure that any potential buyer is committed to upholding the company's contractual commitments.Lottery officials told a legislative oversight panel this week that Gtech Corp., which has been under contract to the state agency since the lottery was established in 1992, has received an acquisition offer from an unnamed group. The transaction could be worth as much as $4 billion, officials said.
"Realistically, we will want to know about this ownership change prior to the [sale] going through," said Gary Grief, the lottery's acting director. "And we will want to put Gtech on notice [if] we have a problem with potential owners."
Under state law, the lottery cannot enter into a contract with anyone who in the past 10 years "has been convicted of a felony, criminal fraud, gambling or a gambling-related offense, or a misdemeanor involving moral turpitude."
[...]
Grief and lottery lawyer Kim Kipling told the House Licensing and Administrative Procedures Committee that the state agency needs the expertise of an outside lawyer to monitor activities surrounding the proposed sale to ensure that Texas' interests are safeguarded. Because Gtech provides such a specialized service, Texas lottery officials would be hard-pressed to find a new game operator if Gtech were acquired by someone who could not meet standards covered under state law, they said.
"We'd be scared to death," Grief said, adding that Gtech's few competitors are experienced running games in smaller states. "Running Oklahoma is a lot different than running Texas," Grief said. "We know Gtech is an industry leader in being a lottery operator. They're the 500-pound gorilla."
Kipling said that the Texas attorney general's office has identified four Texas law firms that have the expertise to monitor the proposed sale.
[Gtech spokesman Bob] Vincent said he could not disclose any specific information regarding the proposed sale or on Texas' concerns.
"Needless to say, Texas is one of our largest clients and an essential part of our profitability," Vincent said.
Meanwhile, hearings about that disaster recovery center took place on Monday.
The Texas Lottery Commission would not be able to resume critical functions in a timely manner if its headquarters were destroyed because its disaster recovery site lacks important equipment, a former lottery employee told lawmakers Monday.Shelton Charles, a senior lottery systems analyst who was fired Nov. 4, told the House Licensing and Administrative Procedures Committee that he warned his bosses that backing up data was useless if the agency didn't have the equipment to access it. He said his managers told him they didn't have enough money to buy the hardware.
[...]
Lottery Commission Chairman C. Thomas Clowe and Gary Grief, the agency's acting executive director, told the committee the site has been fully functional for years. But none of the half dozen lottery employees who testified knew the exact date it became operational.
Grief said creating the disaster recovery site was a massive undertaking done over a span of many months with different systems being brought online at different times.
"I think it would be disingenuous of me to try to tell you that on X date everything was done," he said. "I don't think I could do that and feel good about it."
He insisted, however, that lottery employees could quickly resume their duties at the disaster recovery site if necessary, and he invited the committee members to tour the facility.
Lawmakers plan to tour the facility after Thanksgiving.
Grief also pointed out that GTECH Corp., the contractor that runs the lottery's gaming operation, backs up its information in four places. He said that means a problem at lottery headquarters wouldn't affect wagering and prize claiming.
But Charles said there isn't enough bandwidth at the emergency facility for lottery employees to electronically communicate with either GTECH or retailers.
"If you get an analyst, a third party to review that, you're going to find out that I'm right on the money - no ifs, no ands, no buts," Charles said.
What the heck. It's been a few months. Let's have some more State House hearings on bad mojo at the Texas Lottery Commission.
Texas Lottery officials were summoned Tuesday to testify before a legislative committee for the second time in five months, this time over allegations of mismanagement brought by a lottery systems analyst who was fired the same day the Houston Chronicle reported his concerns.Shelton Charles, who oversaw much of the lottery's technical operations before his firing Friday, planned to testify Monday at a hearing of the House Licensing and Regulation Committee, which oversees the lottery.
The committee's chairman, Rep. Kino Flores, called the hearing after receiving e-mail from Charles last week accusing top lottery management of misleading lawmakers about an emergency control center that he said doesn't work, blocking open-records requests and bullying employees into keeping quiet about problems at the $3.5 billion agency.
"If this is the case, we'll get to find out and hopefully, we can try to come up with some remedies to fix the problems," said Flores, D-Palmview.
Flores said he felt he owed it to the state to air the concerns in public and to give lottery officials a chance to defend themselves against the claims.
[...]
Charles wasn't sure how much a hearing would accomplish.
"A hearing is a great thing, but unless they have some ability to do something, what good is a hearing?" he said. "You need a major investigation to clean up the Texas lottery."
Seriously, though I doubt anything will come of it, firing Shelton Charles was another egregious act in a long string of them at the TLC, and getting the facts of that firing into the public record is a good thing in and of itself. So gavel it to order and let's get going.
UPDATE: Well, maybe this hearing could be interesting after all.
Wednesday, the committee received a letter from the lottery's acting executive director, Gary Grief, pointing out the limits to what information could be disclosed publicly.The letter was sent a day after Bobby Heith, the lottery's spokesman, said that Grief and other officials welcomed the chance to explain their side to lawmakers.
In the letter, a copy of which was obtained by the Chronicle, Grief agrees to provide information the committee has requested, but warns of the criminal penalties associated with disclosing information the commission deems "confidential."
"Please note that we have labeled the requested information 'confidential' and request that you keep it secure and that any copies which may be made or any notes taken will be destroyed at the end of their use," Grief wrote.
He also cites a section of the State Lottery Act that makes confidential "security plans and procedures of the commission designed to ensure the integrity and security of the operation of the lottery."
Milda Mora, the House committee's chief clerk, said lawmakers certainly respect security concerns but she wondered if the broad warning would restrict lawmakers' ability to discuss the matter publicly.
"It seems like they're trying to put some roadblocks up there and put some fear into the employees," Mora said. "We want to get to the bottom of it, but I don't know how much you're going to be able to talk about it if everything is confidential. I don't know if that's their way of hiding things."
Mora said she didn't think the secrecy would inhibit the committee from eventually getting to the truth, but that it would complicate the process and force lawmakers to speak in general terms during the hearing.
Today is apparently Release Embarrassing Emails Day. Next up, the Texas Lottery Commission, an agency that ought to be pretty accustomed to embarrassing revelations these days.
The House committee that oversees the Texas Lottery is investigating claims by a senior lottery systems analyst that agency management misled lawmakers about an emergency control center that doesn't work, blocked open record requests and bullied employees into secrecy at the $3.5 billion agency.Shelton Charles, a network analyst who oversees much of the lottery's technical operations, made his claims in an e-mail he sent Wednesday to state Reps. Corbin Van Arsdale and Kino Flores, who chairs the House Licensing and Regulation Committee.
"I have been at the lottery for almost 10 years," Charles wrote. "I have reached the point where I want to speak out on these issues. I hope that there are still people who want to give the Texas Lottery back to the PEOPLE of Texas."
[...]
Charles' first accusation is that the lottery's disaster recovery or business resumption site — a concrete bunker — which the Legislature required state agencies to develop in the mid-1990s, "has never been operational."
"Management has been hiding this fact through their lies and manipulation of information," Charles wrote. "Employees have been threatened with their jobs if (they) spoke about this to anyone."
Charles' comments on the site echo those of several former employees interviewed by the Chronicle in the past few months.
The Austin site, which cost more than $1.3 million to build and maintain, includes a steel-reinforced concrete bunker-like structure with walls 3 feet thick, according to several employees who have seen or helped develop the site.
"It could probably take a nuclear blast," said Bill Hensler, a former network services manager for the lottery. "It was overkill. It was purely overkill."
Hensler and Charles both say computer equipment was installed at the site, but it didn't properly receive data that would have enabled lottery employees to carry out their duties if a disaster destroyed the lottery's downtown Austin headquarters.
"Millions have been spent on the site and the cover-up continues," Charles wrote.
Charles said he hopes his letter will inspire an "open investigation" into his claims.He wrote that he made the assertions at the risk of losing his job, but that he decided to go public when he received a negative evaluation, which he took to mean that that the agency was going to fire him.
UPDATE: This should come as no shock at all.
Shelton Charles told The Associated Press he was fired this afternoon for insubordination after he refused to answer lottery officials' questions about the emergency operations center unless they put them in writing.Lottery spokesman Bobby Heith said he couldn't discuss Charles' allegations and couldn't confirm or deny his firing because both are personnel issues.
Charles' Wednesday e-mail to state Reps. Corbin Van Arsdale and Ismael "Kino" Flores, chairman of the House Licensing and Regulation Committee, was made public in today's editions of the Chronicle.
[...]
Charles said he wasn't surprised he was fired, adding that he decided to go public with his concerns when he received a negative job performance evaluation, which led him to believe he was going to be fired anyway.
"When I made the decision, I made it with the understanding that this could happen," he said.
Charles, who is black, said he recently filed an employee discrimination lawsuit with the Equal Employment Opportunity Commission, citing unequal salary, treatment and advancement opportunities at the lottery.
[Lottery Commission Human Resources Director Diane] Morris defended her right to fire employees without warning or reason, saying due process was unnecessary. She acknowledged that the agency doesn't document employee problems in some cases.That shocked Rep. Corbin Van Arsdale, R-Tomball, who asked how the agency might defend itself against a discrimination lawsuit.
Sworn testimony, Morris replied.
"So," Van Arsdale continued, "he-said, she-said and you just hope the jury sides with you?"
Morris paused, then nodded.
"Wow," Van Arsdale said.
Oh, and to answer Nick's question in the comments: Hey, we'll need some kind of revenue stream in the event of a disaster.
UPDATE: Fuller story on the firing is now up.
The Texas Lottery Commission is set to take action on the recent sore spot of overinflated jackpots by passing a rule to guarantee prize amounts.
If the proposed rule is adopted, the grand prize winner will be paid either the advertised jackpot or the jackpot based on sales, whichever is greater. The guarantees would apply to jackpots paid with the 25-year annuity, not to winners who choose the immediate cash-option payment.The proposed rule also would require lottery officials to make a "fair and reasonable" estimation of potential jackpots. If the jackpot falls short of the estimate and ticket sales, the lottery would be allowed to pull money from other lottery funds to cover the difference.
In all seriousness, I think this is a good and necessary step for the TLC to take. If we're going to have a lottery, we may as well be able to have faith in the fantasies that it's selling. As long as they're sufficiently conservative in their sales estimates and thus in their advertised prizes, this ought to go a long way towards fixing the problem.
There are nine finalists, including one familiar name, for the job of Texas Lottery Director.
A special search committee will begin Friday to interview nine finalists for the position, whittled down from 126 applicants. Only one of the nine people has experience working at a state lottery.The diverse pool includes several candidates with extensive military experience, one with management experience at another state agency, two lawyers and the president of a lottery consulting company.
[...]
the one applicant getting the most publicity, who may have the most understanding of the Texas Lottery, is Dawn Nettles, the lottery's most vocal critic.
Nettles publishes the online lottery newsletter The Lotto Report and has spent several years criticizing the Texas Lottery for inflating jackpot estimates and bad management decisions that led to dwindling sales.
She is responsible for revealing the $1.3 million discrepancy that resulted in Greer's resignation.
"It took me a long time to make the decision to apply," Nettles said. "I know I've been a thorn in their side for so very long. I know I'm not their favorite person because I've caused them a lot of grief.
"But the players know I'm honest," she said, "and I know I'm more than qualified."
The question of honesty may arise more in this search process than it has before.
Lottery officials say the recent problems with the jackpot estimates have brought more attention to trustworthiness than experience.
"It is my intent to examine carefully each person's reputation," said Texas Lottery Commission Chairman Tom Clowe, the only commissioner who is a member of the search committee, "to look closely in regard to their understanding of integrity and honesty."
[...]
Lottery officials won't say if there is a clear front-runner.
Speaking of Dawn Nettles, the Morning News has a feature on her and her assessment of her chances of getting the job.
"They're not going to hire me," the 54-year-old Garland woman said. "They hate me with a passion."
Lottery Commission spokesman Bobby Heith says Ms. Nettles is a serious candidate for the job, one of only eight of the more than 110 applicants to get this far."I guess you could consider her a critic, but she has been helpful with some of her criticism," Mr. Heith said. "She calls things to our attention."
Like minor errors on the commission's Web site. And that letter she wrote to the attorney general in June about the inflated jackpot estimates.
"It's something we discovered first. But her letter brought media attention to the situation," Mr. Heith said. "The resignation of Executive Director Greer followed about a month after that. That was one of the things going on at that time. Whether it was a direct cause, I'm not sure."
It's a good piece, and without knowing much if anything about the other candidates, I'm rooting for her. Read it and see if you agree.
We know that changes are coming at the Texas Lottery Commission after its summer of scandal. Now there will also be changes to the Lottery itself as the TLC struggles to reverse bad sales trends.
The Texas Lottery is on track to contribute $13.8 million less to the public school fund this year because of sluggish revenue from jackpot games, according to an analysis presented Monday that frustrated commissioners and led one to demand "decisive action" to reverse the trend.Early estimates presented to the three-member lottery commission showed sales increasing slightly over the past year, from about $3.3 billion to $3.4 billion. Final numbers were due at the end of the month.
But net revenue to the state is expected to drop from $930 million to $916 million, largely because players prefer instant ticket games, which pay back a larger percentage than Lotto Texas and Mega Millions. Those jackpot games produce a higher return for the state.
"If I was the sole shareholder, I wouldn't like the way I see this going," said commission Chairman C. Tom Clowe. "We're working hard, we're wearing out our equipment and our people. We're selling a lot and we're moving a lot of dollars, but the bottom line is receding."
[...]
On revenue woes, Clowe said he feared lottery executives were "asleep at the switch" when it came to developing innovative sales and marketing ideas that would draw new players.
"My concern is we keep going back to the same players and asking them to spend more money," Clowe said. "I don't think that's a healthy trend."
About 74 percent of the lottery's total $3.4 billion sales came from instant ticket games this past year, according to the early figures for 49 weeks of the current fiscal year, ending Aug. 6.
Only 8.4 percent of sales came from Lotto, 7.8 percent from Pick 3 and 4.8 percent from Mega Millions. Cash Five and Texas Two-Step made up the rest.
[...]
About one-third to one-half of Texans don't play the lottery, Clowe said, and he estimated that about a quarter of Texans aren't too fond of legalized gambling.
"When fewer people buy more tickets, that's not good," Clowe said. "We really got to do a premium, first-class sales and marketing job to see this thing, as it moves through its various maturities, do what the Legislature has told us they want it to do for the schools."
That said, I suppose there isn't any harm in trying to lure the existing customer base from back to the higher margin lottery games. Making a pledge of no monkey business with jackpot amounts is a step in the right direction.
"Full speed ahead for a major overhaul of the game," said Gary Grief, acting director of the Texas Lottery Commission.Under proposed rule changes the three-member commission that oversees the agency must still approve, any jackpot would be guaranteed. If funds from ticket sales and agency reserve funds run shy of covering a jackpot, the commission would now be authorized to tap other sources such as vendor license and application fees and other funds credited to the lottery's main account.
Players "will know the jackpot amount, at a minimum, is the advertised jackpot," a summary states.
Grief said staff are also studying changes centered on changing the mix of numbers that would need to be matched for someone to win a jackpot, though no formal proposal has been made.Jackpot winners must now match five of 44 numbers plus a "bonus ball" from one of 44 numbers. Grief said the agency is looking at suggesting a jackpot requiring players to match six in 52 numbers, six in 59 or six in 54, the mix in place from mid-2000 until May 2003.
He said the bonus ball feature could be eliminated.
Speaking of Nettles, that S-T article has an odd quote from her regarding the jackpot guarantees.
Although commissioners said the proposal, which is now subject to at least 30 days of public review, would help restore players' confidence in lotto, a vocal critic of the lottery called the move unnecessary. Dawn Nettles, who registered a complaint with the Texas Attorney General's Office over the falsified June 8 jackpot, said savvy lotto players understand that jackpots are estimated."I don't think you should ever guarantee something you don't have," Nettles said.
Nettles, whose Lotto Report tracks trends for the Texas lottery and those around the nation along with stating her criticisms of the Texas Lottery Commission's policies, said players might expect the estimate to be off by a few thousand dollars, but not by more than $1 million.
If sales are too low to support the advertised jackpot, the lottery could dip into other funds, including a reserve prize fund, and, if necessary, the lottery's general account appropriated by the Legislature.