your connection to The Boston Globe

Group pushes to privatize lottery

4 GOP senators to file bill today

As Governor Deval Patrick's casino bill is being debated on Beacon Hill, a group of Republican lawmakers is pushing another way for the state to reap a large gambling windfall: privatizing the Massachusetts lottery.

The state's four Republican senators will file a bill today that would empower the Massachusetts Gaming Control Authority, the new independent regulatory agency that would be created by the governor's casino plan, to lease the lucrative Massachusetts State Lottery to a private operator.

If the state received no acceptable proposals, the bill says, the authority would operate the lottery instead of the state treasury.

Senate minority leader Richard R. Tisei said the bill is designed to protect cities and towns from declining lottery revenues and help take the state out of the gambling business. The lottery, which currently distributes nearly $1 billion a year in local aid, could fetch between $10 billion and $20 billion on the open market, specialists say - less if casinos are approved.

"You can't have a discussion about casinos coming into the state without having a discussion about the future of the lottery, which will be competing against the casinos," said Tisei, who will seek additional cosponsors for the bill this week.

"The lottery has been successful. But you reach the point of diminishing returns and the growth rate won't be anything like it was," he said. "It is the right time to look at whether there's a way to guarantee that cities and towns will continue to receive proceeds from the lottery."

"We shouldn't be running casinos, and we certainly shouldn't be running a lottery," he went on. "It isn't a core mission of the government. The state should be licensing and regulating the lottery like the governor has proposed for the casinos."

It's an idea that could have broad appeal, even as an alternative to the casino plan, some lawmakers and state officials said. Similar proposals are being considered in several states, and Senate President Therese Murray last week said the idea is worth exploring.

"If you took the money and put it into an annuity, there is probably a way you could still give the cities and towns what they need and use the money for roads and bridges or whatever you wanted to use it for, depending on how much they offer us," she said. "We may decide it's not what we want to do, but why not look at it?"

Michael Widmer, president of the Massachusetts Taxpayers Foundation, agreed, though he warned that because cities and towns rely so heavily on lottery aid state officials would have to take extra care to make sure those payments are not jeopardized.

Aides to the governor declined comment on the proposal late last week.

The bill faces major opposition from at least one key state official - State Treasurer Timothy P. Cahill, who said he would fight any move to yield control of the lottery to a private company unless the state were offered "an extremely ridiculous amount of money."

"Why would you want to mess with the best-performing lottery in the country?" said Cahill. "It's been well run and successful through four treasurers now. If it's not broke, why should we fix it? I could see it if we were not maximizing revenue. But we're doing a damn good job - better than every other state and most countries in the world.

"Usually these ideas are quick fixes to generate upfront cash and to make enormous fees for investment banks," he said. "I don't think that's in the state's interest or the cities' and towns.' "

Though several states have debated lottery privatization, none has approved it. California and Texas would probably be the first to close a deal, according to investment bankers and others who have pitched proposals around the country.

How much Massachusetts would receive, if the bill were passed, depends on how the arrangement was structured. Tisei's bill calls for the lease - not the sale - of the lottery, but provides few details.

The state would solicit proposals from bidders, who would have to pay $1 million to have their proposal considered, the bill says. The winning bid would be the one that "provides the highest and best overall economic value to the commonwealth," the same criteria that the authority would apply in choosing casino operators.

According to Tisei, the authority would have broad power to determine how the state collects its money. It could receive a huge upfront payment, which it would invest in either an annuity or the state pension system, using the investment income to fund local aid. Or it could ask the private company to turn over the first $1 billion it earns each year to distribute to cities and towns.

A private company could wring more money out of the lottery, Tisei said, by increasing its advertising and selling tickets in big stores like Home Depot, WalMart, or Dunkin' Donuts. The lottery's current advertising budget is limited and it does no business with such companies.

"The government's role is to license and regulate, not promote," Tisei said.

Cahill said the lottery is "practically a privately run business now. We have 8,000 small businesses that sell our product. We have a $4.5 billion in revenue, and we oversee it with 400 some employees. We have a public-private partnership that is similar to what these guys are pitching."

One of those pitching privatization is former governor William Weld, now a corporate lawyer, who brought clients from the investment bank Lehman Brothers to the State House last summer to try to sell Cahill, the governor's staff, and House Speaker Salvatore F. DiMasi on the idea.

He wouldn't say last week how he was received. But DiMasi on Friday seemed unconvinced.

"I'm going to have to look at whether or not it's been done anywhere and what the result would be and whether we could guarantee communities would get their local aid," said DiMasi.

More from