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Privatize the lottery?

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.

If it doesn’t move, privatize it, I guess.

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.

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  1. d says:

    The state will have no controls if it offloads the Lottery, and the casino and other gambling interests will have a ready-made argument for expanding gaming in Texas. After all, how can one private company be allowed to operate a gambling enterprise (the Lottery) and another be denied a gambling enterprise — say, a Glaveston casino?

    Ironically, the only recourse Texas will have if the private Lottery operator fails to deliver or live up to the terms of its agreement will be to sue them in court.

    So the whole idea a) decreases accountability and b) increases the likelihood that trial lawyers will get more business.

  2. Charles Hixon says:

    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.

    Yea throw in the Astrodome as a sweetner.

  3. […] not the first time it’s been made. When Perry first proposed privatizing the Lottery, I speculated that might lead to expanded gambling. I wasn’t the only one to think along those lines. Now […]