Illinois governor Rod Blagojevich has unveiled a controversial plan to raise $10 billion dollars by selling or leasing the Illinois Lottery:
Firms are already interested in leasing or buying Illinois’ lottery, but whether it can fetch the $10 billion Gov. Blagojevich expects for education is a far more nebulous question, financial and gambling experts said Wednesday.
Just 24 hours after the governor unveiled his lottery plan, his office said a few unnamed firms already had inquired about a possible deal. Deputy Gov. Bradley Tusk wouldn’t provide details, noting “you have to separate out who’s real and who’s not real, and there’s going to be a long vetting process for that.”
Illinois wants to be the first state to fully privatize its lottery. The governor’s office — backed by numbers from a pro-bono analysis by the Goldman Sachs investment banking firm — says it can raise up to $12 billion by leasing the lottery for 40 years or more.
Not everyone is quite so sanguine about the deal:
“No one will give them $10 billion,” said Kip Peterson, president of Transnational Market Development, a Georgia consulting firm that has helped start 16 lotteries worldwide.
Because the lottery only generates $500 to $600 million in profits annually, it would take nearly 20 years to earn back the initial investment, he said. “It just doesn’t make sense financially.”
Blagojevich is receiving opposition to the plan from educators, too:
A day after Gov. Rod Blagojevich unveiled his $10 billion school financing and education reform plan, lawmakers, local school officials and teachers union representatives raised serious reservations, suggesting that key portions of the proposal will face a rocky path.
Virtually every aspect of the agenda–from state takeover of failing schools to merit pay for teachers to mandated after-school tutoring–has its skeptics and detractors.
Overall, educators applauded Blagojevich for laying out an agenda that jolts the debate about improving public schools and would infuse money into the system. The money would come from the sale or lease of the state lottery.
But when the plan is taken apart on the merits of educational changes, critics start jabbing.
I’m still mulling the idea over and I’ve got to admit to mixed feelings about it. Clearly, if the state can realize more money by selling or leasing the lottery than it could make by operating it, it’s a good deal. But should the state take less than it would otherwise receive so it can get the money now?
I have reservations about both the economics of that and about the state of mind that it reflects. Illinois has a problem with its educational system: it consistently ranks below average in national ratings although there have been improvements in recent years (we used to be in the cellar). Despite non-binding referenda urging a greater contribution from the state to education, the percent of the state’s contribution to the public schools is among the lowest in the nation. That results in inequities and distortions in the public schools that I think are pretty hard to justify.
There’s an “eating the seed corn†aspect to this that I find disturbing. Unless the plan generates more money than would otherwise be realized at best it moves money in the future to money now. That’s been a pattern in the Blagojevich administration’s approach to finance: balancing the budget by delaying contributions to the state employee pension plans under the peculiar conditions that prevail in Illinois is merely trading tax increases now for tax increases in the future. That means that future Illinois taxpayers and, presumably, future Illinois politicians will be bearing the burden for our and the current crop of politicians’ unwillingness to make hard decisions now.
