N.J. Lottery Sales Fall Short Following Privatization

Source: SNJ Today, April 18, 2017

Those hoping to win big in the New Jersey State lottery are spending less on their dreams.  State lottery sales are down for the third year since being privatized.  Lottery operations management firm Northstar New Jersey promised a return of more than $1.4 billion over 15 years when New Jersey Governor Chris Christie moved the games to privatization in 2013.  Since then, Northstar has missed its income projections and spent $20 million in allowance funds to cover financial shortfalls. …

Related:

Privatizing lottery isn’t lucrative deal for New Jersey
Source: Michael Catalini, Associated Press, January 9, 2016

New Jersey might get $1 billion less out of its state lottery as part of an amended 15-year deal with the private company that runs part of it, according to an Associated Press analysis. The deal, unveiled by Gov. Chris Christie’s administration on New Year’s Eve, also reduces the amount the company must generate to avoid penalties. The revenue targets that Northstar New Jersey has to meet have been lowered by about $76 million per year over the contract, which was struck in 2013. The total revenue projection was decreased from nearly $16 billion to about $15 billion. … The underperformance — including a $5 million drop in revenue in 2015 — has raised questions from Democrats about the privatization strategy championed by Christie, a 2016 Republican presidential candidate who promoted lottery outsourcing as a way to shrink the government’s payroll and bring in more cash. The lottery brought in $960 million in fiscal year 2015, down from initial expectations of a little more than $1 billion.

New Jersey Having Second Thoughts After Privatizing Lottery
Source: John Reitmeyer, NBC Philadelphia, October 8, 2015
Two years after New Jersey turned over some state lottery functions to a private venture under a controversial long-term deal, lawmakers are questioning why revenues have not met expectations and whether the privatization contract is worth it. The Senate Legislative Oversight Committee announced yesterday that it will hold a hearing on October 19 to review New Jersey’s deal with Northstar New Jersey to address concerns raised in recent weeks about fees Northstar is collecting even as it has failed to meet net-revenue targets. An Assembly committee is also scheduling a hearing on the deal. … Gordon, the Senate committee chairman, said the hearing on October 19 will also review the broader privatization issue, and whether the state is up to the task of monitoring such large contracts. He cited problems the state has had with private companies handling some of the recovery efforts in the wake of Superstorm Sandy in 2012 as another reason to broaden the scope of the hearing.


NJ Legislators look askance at private contractor’s lottery revenue shortfalls
Source: John Reitmeyer, NJ Spotlight, October 8, 2015

The Senate Legislative Oversight Committee announced yesterday that it will hold a hearing on October 19 to review New Jersey’s deal with Northstar New Jersey to address concerns raised in recent weeks about fees Northstar is collecting even as it has failed to meet net-revenue targets. An Assembly committee is also scheduling a hearing on the deal. The New Jersey Lottery reported record revenues during the 2015 fiscal year, which ended June 30, but also disclosed it could be distributing less money to state programs – including funding for colleges, aid to college students and funds for psychiatric hospitals — than required by law. … Because the deal went through the Department of Treasury in the executive branch, lawmakers had no say at all and were powerless to block the deal. Christie later vetoed legislation that would have placed tighter controls on big state privatization contracts.

N.J. legislative hearings planned on lottery contract
Source: Dustin Racioppi, NorthJersey.com, September 22, 2015

The state Assembly’s budget chairman announced Tuesday that he intends to hold a hearing later this fall into the contract that privatized the state lottery and was supposed to increase revenues for New Jersey but has fallen short more than $150 million its first two years under an independent group. That group, Northstar New Jersey, won the lottery sales and marketing contract in 2013 and promised to maximize revenues back to the state for social service programs by at least $1.42 billion over the life of the 15-year contract. But the group has not yet hit the income targets outlined in the contract despite hitting record ticket sales. As The Record reported last week, Northstar was budgeted to deliver $930 million back to the state on $3 billion in sales in the 2015 fiscal year that ended June 30, the lowest rate of return in four decades.

Editorial: Christie’s gamble on privatizing the lottery goes bust
Source: The Star-Ledger, September 21, 2015

Once again, Northstar New Jersey has failed to deliver what it promised, which means less money in the 2015 fiscal budget for education, veterans, nutrition, and other social programs. The private lottery company was $107 million shy of its revenue projections for 2015, following a $55 million shortfall in its first year of operations the year before. … But problems arise when these contractors fall short in performance and accountability – when they can’t build a better widget, can’t provide more bang for the buck, and essentially become a symbol of government for sale. That’s when they need to be sacked. Especially when the state pays it $100 million in fees and reimbursements for poor results, which is what New Jersey pays Northstar, according to The Record. …

EDITORIAL: N.J. lottery privatization a disaster
Source: Asbury Park Press, September 15, 2015

Gov. Chris Christie’s idea to privatize the state lottery has turned into a massive, money-losing flop. We shouldn’t be surprised. There were reasons for skepticism from the start that were magnified when the governor directed the lottery contract to a politically connected company with ties to Christie allies. Put another way, Christie gave a sweetheart deal to some pals, and it is hurting taxpayers. … What made all of this worse was the state’s choice of Northstar. We’d need a flow chart to fully describe the links between the three entities within Northstar and Christie cronies, but suffice it to say that at least two close advisers benefited from conducting lobbying efforts on behalf of Northstar — Michael DuHaime, Christie’s former chief strategist and a senior adviser in the governor’s presidential campaign, and David Samson, former chairman of the Port Authority of New York and New Jersey now under fire as part of the expanded scope of the Bridgegate investigation.

Why New Jersey’s Lottery Ticket Isn’t Winning
Source: Joseph Capriglione, Associated Press, September 15, 2015

Two years after New Jersey Gov. Chris Christie privatized much of the state’s lottery operations, a big payoff remains out of sight. Christie promised streamlined costs and bigger cash haul for New Jersey’s perennially cash-strapped government when the system was privatized in 2012. But in spite of record ticket sales, the system posted its worst return in 40 years. Higher costs associated with the private company that Christie hired, Northstar New Jersey, have cut the state’s income for the second straight year, leading to a $136 million shortfall in the state’s 2015 budget.

Lottery Privatized Under Christie Falls $136 Million Short
Source: Jeff Horwitz, Associated Press, September 14, 2015

Higher costs associated with the private company that Christie hired, Northstar New Jersey, have cut the state’s income for the second straight year, creating a $136 million shortfall in the state’s 2015 budget, according to internal documents obtained by The Associated Press. … Christie’s office directed questions to the state’s Treasury Department, which praised the company’s “proactive and creative efforts” as the reason losses weren’t even higher. … But New Jersey’s sales of Powerball have fared even worse than the national average, falling 29 percent from already-disappointing 2014 results. Sales of instant games, such as scratch-off tickets, performed better than traditional lottery games last year— but not by enough to offset the damage. The lottery brought in just $900 million for the state, its worst showing since 2009. … Before hiring Northstar, New Jersey’s lottery enjoyed unmatched efficiency compared to other states, keeping 34 cents in profit from every $1 in ticket sales. Under Northstar, expenses rose, sending profit margins down to 30 cents on the dollar for the 2015 fiscal year’s $3 billion in revenue. Even continued sales growth won’t guarantee that the state will hit the contractually set profit targets.

Chris Christie’s Lottery Privatization Is Costing N.J. Millions
Source: Dan McQuade, PhillyMag, April 6, 2015

When New Jersey privatized its lottery in 2013, some were celebrating. For Gov. Chris Christie, the upfront $120 million payment from the lottery’s new operators allowed him to close a budget gap; he said the move would save the state millions. …. The early results were not good: Northstar New Jersey Lottery Group — a joint venture of GTECH Corporation, Scientific Games and, yes, the Ontario Municipal Employees Retirement System — missed its revenue target by $24 million its first year. And this year, the Associated Press reported earlier last week, Northstar is trailing revenue projections by $64 million though seven months of the fiscal year.

After Christie’s privatization, NJ lottery missing targets
Source: Jeff Horwitz, Associated Press, March 31, 2015

When Chris Christie privatized New Jersey’s lottery two years ago, he said its new overseers would “modernize and maximize” the games. Instead, a lottery once ranked among the nation’s top performers is now lagging for the second straight year, trailing its state income targets by $64 million seven months into the current fiscal year. Meanwhile, the company running it has spent hundreds of thousands of dollars to hire lobbyists and a public relations firm with close ties to the governor. New Jersey lawmakers anticipated receiving nearly $1.04 billion in income from the lottery this year, a number reduced to just $955 million in a revised budget released this month. Having collected an estimated $510 million seven months into this fiscal year, the lottery is not on track to meet even its lowered expectations. The shortfalls could mean budget cuts to programs directly funded by the lottery system – such as after-school care, programs for veterans and education for the deaf – should the lottery’s fortunes not improve…..

NJ signs deal to privatize parts of state lottery
Source: Record, June 21, 2013

New Jersey has signed a contract to outsource part of the state lottery operation and collect $120 million from the vendor as part of the deal. The deal was announced Friday. A consortium called Northstar New Jersey Lottery Group will handles sales and marketing of the lottery.

N.J. rejects union protest of lottery privatization, allowing contract to advance
Source: Michael Linhorst, Northjersey.com, May 21, 2013

New Jersey rejected a formal protest filed against its decision to privatize part of the state lottery, officials said Tuesday. The decision removes the final barrier that had prevented Northstar New Jersey — the joint venture trying to operate the lottery — from signing a 15-year contract with the state….

Christie vetoes bill to give N.J. Legislature a say in lottery privatization plan
Source: Brent Johnson, Star-Ledger, May 6, 2013

As expected, Gov. Chris Christie today vetoed a bill that would have required his administration to get the state Legislature’s approval to go ahead with a plan to privatize parts of the New Jersey Lottery. Both the state Senate and Assembly passed the bill (A3614) earlier this year amid concerns from Democratic lawmakers that the plan has been cloaked in secrecy. …

N.J. treasurer grilled on lottery privatization
Source: Matt Katz, Inquirer, April 27, 2013

Democrats finally had an opportunity Thursday to question – and criticize – Republican Gov. Christie’s treasurer about the partial privatization of the state lottery. But it appears there is little Democrats can do to stop it. Barring the plan being struck down by a judge or deemed illegal by U.S. Attorney General Eric Holder, a private consortium known as Northstar New Jersey will take over marketing and sales of the $2.8 billion lottery….But back at the Statehouse, in his first testimony about the privatization after months of Democratic requests to appear, Treasurer Andrew Sidamon-Eristoff said concerns were unfounded. He said lottery employees can apply for jobs with the new company and small stores won’t be affected….

Privatization of NJ Lotto has enemies
Source: Sherrina V. Navani, Trentonian, April 25, 2013

The state is taking a huge gamble outsourcing the sales and marketing responsibilities of the lottery commission to a private company, according to opponents of the legislation… “If something isn’t broken, don’t try to fix it,” said Democratic State Senator for the 15th District Shirley Turner. The legislator joins several state elected officials and the Communications Workers of America Union which represents state lottery employees who are outraged at Gov. Chris Christie’s decision to outsource the lottery commission’s sales and marketing division to Northstar NJ until June 30, 2029. The CWA filed a protest to stop the execution of the contract, an act which has held up the enforcement of the agreement which should have begun today.

New Jersey lottery workers protest privatization plan
Source: Michael Linhorst, northjersey.com, April 22, 2013

As the state considers a formal protest of its decision to outsource part of the New Jersey Lottery to private companies, lottery workers rallied against the deal outside the State House on Monday. About two dozen unionized employees marched next to a large inflated pig dressed in a top hat, arguing the state’s proposed contract is a give-away to politically connected companies. They said the contracting process was conducted in secret.

Six members of Congress want attorney general to review NJ lottery privatization
Source: Michael Linhorst, Record, April 17, 2013

The upfront $120 million payment from a group planning to run the state’s lottery may violate a Justice Department opinion, New Jersey’s Democratic congressmen said Wednesday in a letter to the U.S. attorney general. The six members of Congress asked Attorney General Eric Holder to examine the contract New Jersey announced last week. That request comes during the 10-day waiting period before that for-profit group can sign the contract to operate the state lottery. The Christie administration announced last week it will award a joint venture called Northstar New Jersey a 15-year contract to take over sales and marketing for the $2.7 billion lottery.

Lottery privatization, privacy bills pass N.J. Senate
Source: Michael Linhorst And Anthony Campisi, northjersey.com, Last updated: March 18, 2013

The New Jersey Senate tried Monday to expand its influence over Governor Christie’s plan to hire a private operator for the state lottery. It passed a bill that would allow the Legislature to approve or disapprove any contract with a company seeking to operate the lottery. Christie, who generally supports privatization, would have to sign the measure into law.

Bill would put privatizing N.J. lottery under Legislature’s oversight
Source: Matt Friedman, Star-Ledger, March 11, 2013

A state Senate panel today approved a bill that would require Gov. Chris Christie to get the Legislature’s permission for his plan to privatize the state lottery. The Senate state government committee approved the bill (A3614) by a vote of 3-1 with one abstention. The bill has advanced quickly in the Legislature since its introduction in December. It passed the full Assembly in January. …
The only bid for the contract comes from a consortium of three entities: The Italian-owned GTECH, a Canadian pension fund and the Georgia-based Scientific Games….

Christie’s plan to privatize lottery comes under fire from Democrats
Source: Salvador Rizzo, NJ.com, December 05, 2012

Democratic lawmakers took aim at Gov. Chris Christie’s plan for the private sector to run the New Jersey Lottery, saying the 15-year contract currently on the table benefits the winning company more than New Jerseyans.

Retail group hopes to open dialogue with state over lottery privatization
Source: Katie Eder, NJBIZ, December 04. 2012

…While New Jersey grossed $2.8 billion in lottery revenue last year, the administration believes contracting lottery sales and marketing operations to a private company could bring in more revenue and launch an Internet lottery business — which Poondi said would shift lottery sales away from small retailers and block new retailers from entering the market…..

PolitiFact N.J.: Group says state lottery sent $930 million to New Jersey classrooms in 2011
Source: Erin O’Neill, The Star-Ledger, November 19, 2012

NJ placing bet on profitability of privatizing Lottery
Source: Angela Delli Santi, Associated Press, September 06, 2012

Companies interested in running the New Jersey Lottery showed up for a mandatory pre-privatization meeting in Trenton on Thursday. … The operator will be required to pay $120 million up front and sign a 15-year contract.

Payout or gamble? Christie plan to privatize N.J. Lottery could bring in cash but cost jobs
Source: Salvador Rizzo, NJ.com, August 15, 2012

New Jersey joins a list of states considering privatizing their lotteries
Source: Matt Katz, Philadelphia Inquirer, April 29, 2012

…The next piece of New Jersey government that may hit the market could provide the biggest windfall – and the biggest controversy. The Treasury Department has sought information from vendors about privatizing the $2.6 billion state lottery….Other states are considering offering long-term leases on their lotteries. Such a move would bring an immediate infusion into New Jersey’s coffers, expand gaming opportunities, and allow the state to tax profits….

…One of the world’s biggest players in lottery, GTech, responded with information about its experience running the Illinois lottery in a consortium with another company, Scientific Games. GTech is a subsidiary of an Italian firm and operates in 26 states – including New Jersey, where it has a contract to operate electronic lottery terminals….A British firm, Camelot, also is interested…Companies that get state lottery contracts are notorious for their campaign contributions….

What’s for Sale in N.J.? The lottery…Tolls…Highway maintenance…Vehicle maintenance…Child-support payment processing…Prison food services ….Schools….Public TV…Racetracks….State parks….Housing for the developmentally disabled….NJ Transit parking….