February 09, 2007
Pretty much all you need to know about the Lottery selloff plan

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.

There's a lot more in this article, but I think it pretty much boils down to those last three paragraphs. Who are you going to trust for this sort of thing, the chief economist for Standard & Poor's, or one of Rick Perry's paid flacks? And if Susan Combs really has signed off on this, then that's as clear a demonstration as you could want that she's exactly the rubber stamp I figured that she'd be, and that we deserved a much better alternative on the ballot last November than what we got. Alas.

Posted by Charles Kuffner on February 09, 2007 to Jackpot!

OK, if we can sell the Lottery, why can't someone else come in and start a competing lottery? It's one thing to pay someone to operate a state monopoly, it's quite another to create and enforce a monopoly for a private company. Hell, we don't even have power or phone monopolies anymore.

Posted by: Michael Croft on February 9, 2007 6:57 AM

ALL you need to know? Nah. There's plenty more that's worth knowing. :)

It's actually interesting watching Perry springboard off some of the ideas of the greatest Third Way Democratic politician in the country, Richard M. Daley.

Frankly, there's a lot both parties could learn from Mr. Daley, but especially his own party.

Posted by: kevin whited on February 9, 2007 8:05 AM

Never would have pegged you as someone who'd look to Chicago as a model for governance, Kevin. You continue to amaze me. And as for what I've learned from Mr. Daley, it's that a bad idea is a bad idea regardless of who proposes it.

Posted by: Charles Kuffner on February 9, 2007 9:26 AM

Just look at the return on the Permanent School Fund, the largest endowment the State of Texas currently runs:

5 year total return (thru 8/05): 2.63%

return in 2001: -12.57%
return in 2002: -6.65%

Posted by: David Siegel on February 9, 2007 10:33 AM