Indiana Lottery Commission to vote next week on privatizing some Hoosier Lottery operations

2 companies have submitted bids

INDIANAPOLIS - The Hoosier Lottery Commission will decide next week whether to farm out marketing and ticket distribution to a private company.

Lottery director Karl Browning declined to give specifics until next week's vote, but said that the commission could accept one of the offers from New York-based Scientific Games -- which currently prints the Hoosier Lottery tickets -- or Italy's G-Tech or reject both and continue to operate the lottery itself.

Browning said the lottery's analysis of other states suggests Indiana could be bringing in 40 to 60 percent more money without expanding gaming.

He said the lottery has grown only a third as fast as the other state lotteries and has earned just two-thirds the profits of other states on a per capita basis.

"The biggest limiting factor to state government being able to accomplish this (growth) is that we have no continuity of management," Browning said. "And unless you have continuity of management, you can't accomplish this kind of stuff with these kind of escalators that we're anticipating."

The lottery asked would-be private operators to show how they would produce a 20 percent improvement.

The lottery expects to post a $225 million profit this fiscal year, a 5 percent improvement over last year.

If that pace continues, the lottery would earn $3.5 billion over the proposed 15-year life of an outsourcing deal. A 20 percent improvement would represent an additional $700 million, or $47 million a year.

The federal government has ruled states must retain ultimate control of lottery business, even if they privatize some of the operations.

 

The plan is for the vendor to take over key functions like sales, marketing and distribution.  
 
The contract would set goals for increased revenue, and if the vendor exceeded the goal, it would keep the additional profits up to a set amount. But if it fell below the threshold, it would be penalized an equal amount.
 
Chairman William Zielke said commissioners will pore over secret details of the two proposals, then be prepared to vote next week.
 
"We'll have a much better and deeper understanding and give us a basis on which to make a solid judgment when that recommendation is brought to us next week," Zielke said.
 
The vendor would work on a 15-year contract, with limits in certain areas. The state does not want a general increase in gaming and would prohibit the vendor from doing anything that would lead to that.  
 
Its current vendor hopes to win the new, bigger job.
 
"I believe our bid is superior due to our knowledge of the Indiana market," said Pat Traub, with Scientific Games. "You know, we've been here 20 years providing services to the lottery."

 

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