Illinois seeking new private manager for state’s lottery
Aiming to avoid past troubles, Gov. Bruce Rauner announced Thursday that the state is seeking bids for a new private manager to run the Illinois Lottery after moving to terminate Northstar Lottery Group’s contract last year.
State officials released a request for proposal on a new 10-year, $300 million contract with revamped terms geared at a wider swath of companies.
Under former Gov. Pat Quinn, Illinois became the first state to privatize management and marketing of its roughly $2 billion-a-year lottery games when it awarded a 2010 contract to Northstar. The Chicago-based group did initially report record sales, but fell far short of its goals and was criticized for its performance and marketing. Quinn first took steps to fire Northstar in 2014, but Rauner’s administration renegotiated the termination agreement the following year, a move they said immediately saved Illinois $22 million.
“Our Illinois Lottery has been very poorly run and failed to meet expectations for years,” Rauner said at a Chicago news conference.
Lottery officials said it took nearly a year to start the search for a new manager because of complexities in crafting the contract. New terms include a push to expand technology, paying up-front licensing fees, complying with the Freedom of Information Act and not allowing the private manager to act as both a manager and supplier. Northstar won’t be able to bid, under the termination agreement.
Lottery proceeds go to public schools and capital projects. Privatization, with the state retaining ownership and regulatory oversight, was pushed by state legislators as a way to help boost revenues. However, the 2010 selection process for a 10-year contract raised questions about transparency. Northstar was made up of two lottery vendors running machines and instant tickets.
Rauner said it would take around six months to hire a new manager following the process set in state law. But he said if a suitable replacement can’t be found through bids, he’d consider trying to change the management model. The Republican floated the potential of a “public benefit corporation” similar to how some states, including Georgia and Tennessee, run lotteries.
Any changes would require approval from the Democrat-controlled legislature.
Rauner’s general counsel Jason Barclay described the potential for a corporation set up within state government that wouldn’t be subject to all state requirements, like procurement rules. He said the ideas “intrigued” the governor, though no details had been decided. In 2003, Tennessee created a quasi-government entity to run games and generate money for schools.
Northstar will continue running the lottery until January 2017, but state lottery officials said that could be extended if the new company isn’t in place. Northstar officials, who have previously acknowledged some issues, claimed the state made some things harder, such as canceling games it wanted to launch.
The Illinois Lottery generated national headlines last year when the state temporarily stopped paying some winners, a casualty of the unprecedented budget gridlock between Rauner and legislative Democrats. After some of the winners sued and Illinois’ ticket sales dropped, lawmakers approved special legislation authorizing payouts.