Daniels Touts Lottery Lease Plan

INDIANAPOLIS -- Gov. Mitch Daniels on Thursday announced his plan to privatize the Hoosier Lottery and use the profits to finance higher education initiatives that will attempt to keep the state's brightest students from going to other states.

Daniels proposed letting a private company run the Hoosier Lottery and take its profits. In exchange, the company would have to pay a $1 billion upfront sum to fund education programs, $200 million annually to the state and possibly a share of its profits that exceed a certain amount.

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Video: Daniels Announces Lottery Plan

Read: Details Of Plan

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Lottery revenue can fluctuate drastically, Daniels said, but by negotiating a share of proceeds, the state doesn't have to take that gamble.

"It would lock in for the state a very stable and modestly growing amount of revenue over time," Daniels said.

The plan must be approved by the General Assembly.

Sixty percent of the $1 billion upfront payment would be used to create a scholarship for the state's top students, Daniels said. Recipients of the Hoosier Hope Scholarship would have to remain in Indiana to work for three years after graduation, or else they would have to pay back the scholarship money. The program would give students $5,000 a year to attend four-year colleges in Indiana, either public or private.

The other 40 percent would be used to create the World-Class Scholars Fund to attract top researchers and scholars to Indiana's public colleges, the plan states. Grants could support salary for faculty but would have to be matched by the colleges or universities receiving them.

"I would say to those who have questions about it, 'What's your plan?' Daniels said. "What is your plan about the brain drain? What is your plan to lift us over the next 10 years to a position we really must have? We're really focusing on the marvelous opportunities here. Let us note ... that the cost of inaction would be tremendous."

Some legislators told 6News that they were told of the plan before Thursday's announcement. Residents 6News talked to Wednesday were skeptical of the plan, as were some lawmakers, including House Speaker Pat Bauer.

In the most recent fiscal year, the lottery brought in nearly $200 million in profits. Currently most lottery profits go toward lowering auto excise taxes and adding money to teacher, police and fire pensions, something the governor's plan protects.

"We would give it a hearing, but we'd certainly have to make sure that the tax cuts are preserved and the pension contributions are preserved," Bauer said.

"I'm always amazed at the innovative ideas the governor comes up with, and I think it's an idea worth considering," said Rep. Michael Murphy of Indianapolis.

Daniels called his plan "absolutely practical" and said he expected broad, bipartisan support in the Legislature once lawmakers understood the details. Franchising the lottery would not have to lead to an expansion of gambling because the state could tightly regulate the industry as it does riverboat casinos or horse racing tracks, he said.

"The lottery is an anomaly -- it is the only form of gambling that the state owns and operates," Daniels said. "I'm just proposing we do the very same thing with this particular form of gambling."

A similar proposal was made earlier this year by Illinois Gov. Rod Blagojevich.

Blagojevich, a Democrat, has said his state could get as much as $15 billion in such a deal. Of that money, $4 billion would be pumped into Illinois' schools over four years and the remainder would be invested to fund schools over the long-term. Those funds would replace annual lottery revenue going to schools that Illinois would be giving up.

Lawmakers would need to approve Blagojevich's plan, which has been met with criticism.