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Illinois Lottery Goes Private

Gov. Pat Quinn awards contract to Northstar Lottery Group, which promises to generate $4.8 billion in first five years

Published September 15, 2010 • Updated on September 15, 2010 at 10:30 pm

Gov. Pat Quinn on Wednesday awarded a lucrative, first-of-its-kind contract to manage the Illinois Lottery to a private company with strong ties to the state, handing over daily control of the games for 10 years to some of the most powerful players in the business.

Northstar Lottery Group — a partnership between lottery giants GTECH, which holds the state contract for lottery machines, and Scientific Games, which provides Illinois’ instant tickets — promised to generate $4.8 billion in net income over the first five years of the contract.

That is $1.1 billion more than the state projected it could generate on its own, said state Revenue Director Brian A. Hamer, who made the recommendation to Quinn.

If Northstar meets its projections, it could earn $331 million over five years through a combination of set management fees and incentives, state officials said. But there are penalties for not reaching the goal.

“Hiring a private manager to run the day-to-day operations of the Illinois Lottery is a creative way to increase revenues for critical programs that will aid Illinois’ economic recovery,” Quinn said.

Two companies that lost out on the contract said they’re reserving the option to protest.

Illinois will be the first state to entirely privatize the management and marketing of its lottery, a move mandated by legislators as a way to help boost revenue and attract new players.

The state will retain ownership and regulatory oversight.

Critics say Illinois’ lottery relies disproportionately on older and poorer players, and research by companies bidding for the contract showed that there are more lottery machines per-capita in lower-income areas.

Northstar has said it will attract younger and more affluent players through aggressive marketing, expanding the number of retail outlets selling tickets, introducing new games and perhaps by selling tickets online. States currently are prohibited from Internet lottery sales, but a bill working its way through Congress could legalize it.

Gov. Pat Quinn awards contract to Northstar Lottery Group, which promises to generate $4.8 billion in first five years.

EYE ON ILLINOIS: Lottery debacle a reminder of the importance of government transparency

How long has Mike Madigan been in the Illinois House of Representatives? He predates the Illinois Lottery.

Madigan, House speaker for all but two years since 1983, first became a House member in January 1971. Legislation authorizing a lottery passed three years later, and the first tickets were sold in Chicago on this day in 1974.

Customers bought 100 million tickets by the end of that year. The first instant game was released in October 1975, the Pick 3 launched in 1981 and the Pick 4 in 1982. There have been plenty of changes since, but the basic framework was established before Madigan first had the gavel.

In 2008, still in the Gov. Rod Blagojevich era, Madigan introduced legislation that led to Illinois becoming the first state to privatize its lottery, a debacle from the start. Northstar Lottery Group, which won the initial lease contract after a questionable bidding process and took over in 2011, came up roughly $480 million short on revenue projections over the first three years of a 10-year deal.

Gov. Pat Quinn terminated Northstar’s contract in August 2014 but since there was no alternative in place, the company kept running the lottery. Gov. Bruce Rauner took over in 2015 and inherited termination proceedings. It took more than two years into Rauner’s term before Northstar officially got the boot, but not before taxpayers contributed about $2 million in retention bonuses to Northstar employees.

Camelot Illinois took over in 2018. A division of the Camelot Group, which runs the lottery in Great Britain and other worldwide locations, the company has so far avoided the problems that plagued Northstar’s tenure. The company sought the original contract, which makes the lack of transparency surrounding the initial bidding process that much more frustrating. Could all of this madness have been avoided?

The Northstar debacle isn’t the worst thing to happen on Madigan’s watch, and a deal that spanned three gubernatorial administrations can’t be pinned on lawmakers alone. Still, it’s a cautionary tale about the dangers of shady deals that line private pockets at public expense.

Reader Mail: In response to Saturday’s column about the Illinois Department of Employment Security, former McHenry County Board member Tina Hill shared her story. Hill is a substitute teacher to supplement two small state pensions.

“When COVID hit, I applied for unemployment,” she wrote. “It took a month to hear back on my application.”

After the initial success, Hill said, she’s been consistently told her retirement records don’t match the state’s, which could stop benefits. Repeated phone calls didn’t clear the issue, and she’s waited more than two weeks for her last message to be returned.

These excessive waits are inexcusable. State officials must fix IDES.

How long has Mike Madigan been in the Illinois House of Representatives? He predates the Illinois Lottery.