What If the Raid's on the Lottery?
On Friday, the Chicago Tribune dropped the suggestion that the Lottery may be the source of the money with which Governor Rod Blagojevich bought off the Rev. and State Senator James Meeks.
But, you say, money from the Lottery already goes to education.
Yes, it does. So the question arises of what accelerating Lottery revenues by selling it to a private gambling firm would do…in the long run.
One could get big money up front, the same way many states did by selling future Tobacco Settlement collections. But those states needed to accept less upftont in order clinch the deal.
A similar discount would undoubtedly be necessary if the Lottery were sold to private interests.
State Rep. Zeke Giorgi pre-sold the Lottery as being for education, but it was not passed until it became the source of money for the General Fund’s subsidy of the Regional Transportation Authority. (Reviews of the Lottery’s history usually forget this fact.)
In the 1980’s Zeke’s pitch was finally made law when legislators got tired of explaining why Lottery proceeds didn’t go to education. Of course, that got no additional money for schools, because an equal amount of previously General Fund receipts was spent elsewhere.
So, what happens if the Democrats sell this stream of revenue for the current benefit of getting re-elected?
Put simply, it means that Governor Rod Blagojevich will have put another cliff in the path of future politicians in order to obtain a short-term political benefit for himself.
This year’s windfall would turn into some future year’s budgetary free fall.
More musings on McHenry County Blog.
15 comments:
It's still the same game. Sell an asset for a get rich quick infusion of cash, which won't last past Election Day.
But can the lottery bring in that much money. Aren't we talking about billions here?
Whatever money it brings in, you need to subtract the value of whatever income the asset is producing now. If a state asset is sold, it will be sold to, effectively, provide money to ensure Blago's relection by allowing him to shower government cash on various social programs.
So if the lottery is currently providing x amount a year for education, that x amount won't be there once the lottery is sold.
The buyers won't be buying as a charitable act. They'll be buying to make money.
Anon 2:58 is correct. I think the Lottery currently provides $800 million to $1 billion per year in GRF. Selling the lottery to get basically 8 years worth of new cash in the door makes zero financial sense.
It's like trading your cow for a gallon of milk.
There is no way this plan could get legislative approval. Too many Democrats would be cornered into oppsing it during the campaign season to ever get the 60 votes in the House or the 30 in the Senate. But Blago can bluff it for a while, since the General Assembly won't meet again until after the election.
Fortunately, I suspect the voters won't go along with this shell game.
The concept is pretty much the same as the tollway lease. If the tollway lease is good, why not a 10 year lottery licence? Remember, the state can get a better return on investments than they get on paying general obligation bonded debt.
The real question is how the capital is to be used? The bond rating agencies will look more favorably at using it for deficit reduction like paying for $1.2 billion in backlogged Medicaid debt or, of course, pension funding. If it's used for capital projects, like school construction, that too will get a more favorable review.
Let's see what the deal is first. I think it could be intriguing.
This is typical M.O. for the gov full of testicular virility. Too afraid to enact long-term revenue enhancements so he puts it off for another generation.
This is similar to the ISAC loan sale. The loans provided revenue for financial aid services to college students but the gov is going to privatize part of it to get short term cash infusion to make election aid for this year with possible long term consquences.
Well should this be a surprise?It's not clear where the money for the lottery is going.
YDD:
The Lottery only transferred $614 million to the Common School Fund (one of the General Funds) in FY 2005, according to the Annual Report on the Comptroller's web site. The transfer is supposedly what's left after the Lottery pays all its bills (staff, advertising, payouts, etc.). It's never transferred that much money into the General Funds. In fact, the Governor's Office of Management and Budget can direct Revenue/Lottery to transfer enough money to make projections; sometimes, there's money left over in Fund 711. Check the Comptroller's site and past Annual Reports for transfers, etc.
Anon 8:10 -
I knew the exact number was out there somewhere.
So, we're trading the cow for two gallons of milk.
Great.
Why would Meeks go along with a dumb plan like that? Why would a reverend promote gambling? THis is only speculation, right?
So I say it's wrong.
Especially the Lottery, which has a reputation, whether deserved or not, of being an especially onerous government program in low income neighborhoods?
According to Daley Show sources, the Blagovernor is leaning towards a combination of these proposals:
Lottery: There has been speculation that Blagojevich is looking to privatize the state-run lottery, which currently has a $990 million advertising budget and generates about $90,000 for schools. In fact, he recently won a $300 million Powerball jackpot, and is considering donating the entire sum to the schools. Either that or spend the sum on anti-Topinka campaign commercials. Either way he figures he'll get re-elected.
Dice games in the hallways: Blagojevich is thinking about legalizing gambling in the schools. "I bet they're all betting on something anyway," the Blagovernor said, still irked that his keno plan was shot down in January. Under this proposal, schools would get a cut of all hallway dice, card, and raffle winnings. Students selling illegally downloaded music would also pay a tax on their earnings.
SchoolWise sales by laid off teachers: Using the successful StreetWise model for homeless people, 1,000+ former teachers would get their jobs back following two years of badgering pedestrians in front of every Walgreens and Osco. The newspaper would consist mostly of CPS CEO Arne Duncan's press releases on the openings of more charter schools.
Affy Tapple sales: School clubs have made a mint by having members sell all sorts of sugary goodness during passing periods. The ban on vending machine junk food has opened the door to millions of dollars in revenue. Schools would have the option of selling M&M/Mars products or Krispy Kremes instead of the apples, which some consider too bulky and/or too nutritious.
Corporate naming of schools: "Chicago showed us the light in selling off the naming rights to the Skyway and every single public space and place," the Blagovernor said. "It's time to get rid of old-fashioned school names like Roosevelt and Von Steuben--names that students know and care little about--and replace them with names that bring warmth and comfort to our children, like Old Navy and Mountain Dew." Under this plan, school teams would wear jerseys resembling those of the European soccer leagues with any corporate logo that's deemed wholesome.
All city and state schools would potentially undergo a name change. Walter Payton would become Harry Caray's High School and Lane Tech would change to Lane Bryant--Fashionable plus-size apparel, sizes 14-28--College Prep.
How about reintroducing soft drinks into the schools and imposing a tax on them to go to the schools?
Could we tax air? The most anyone can go at one stretch without paying is 9 minutes assuming that air tax dodger David Blaine doesn't show up.
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