Christie privatizes big chunk of New Jersey Lottery

TRENTON - Gov. Christie is privatizing much of the $2.8 billion New Jersey Lottery, outsourcing marketing and sales to a joint venture in a 15-year deal that immediately puts $120 million into state coffers.

Unlike in Pennsylvania, where fellow Republican Gov. Corbett's plan to privatize the lottery was blocked by Democratic Attorney General Kathleen Kane, New Jersey's governor can act unilaterally despite opposition from the Democrats who control the Legislature. They passed a bill that would require legislative approval to award such a contract, but Christie ignored it.

The Treasury Department said the contract guarantees that the company - a conglomerate called Northstar New Jersey Lottery Group - would bring in between $1.42 billion and $6.88 billion more than the state would have over the next 15 years. State law requires that at least 30 percent of lottery revenue go to public schools and state institutions.

The state put out a request for proposals to take over the lottery, and Northstar was the only bidder. Christie already has budgeted the one-time $120 million payment from Northstar for fiscal 2014.

Because of the privatization, nearly half the lottery's 135 public jobs are in jeopardy, a Treasury spokesman said, but all workers can interview with the company or find employment elsewhere in state government.

The privatization plan has long been in the works, but Christie has rarely spoken about it and his treasurer has refused to testify before the Legislature on the issue. Negotiations with Northstar were behind closed doors. The announcement about the privatization was released late Friday afternoon.

The contract itself was not released. The Treasury spokesman said that after a 10-day period in which the public can "protest" the process, the contract will be formally entered into and become a public document.

The employees' union, Communications Workers of America, had campaigned against the proposal, putting up a website and paying for TV ads. It vowed to sue.

"At every turn, the Christie administration has steadfastly refused to answer questions and been secretive in trying to slip through their risky, unpopular lottery privatization scheme," said Seth Hahn, the union's state political director.

"True to form, they've decided to release their decision to award a 15-year contract at 4 p.m. on a Friday in the hopes that no one will notice. This shortsighted, illegal, politically connected deal needs to be examined in the light of day."

Democrats slammed Christie both for the deal and the way he chose to release the information.

"Giving the lottery to a private vendor is like killing the goose that laid the golden egg," said Assemblyman Patrick Diegnan (D., Middlesex), referring to the nearly $1 billion annually that the lottery generates for education and senior programs. "The way the administration made public this farce, on a Friday afternoon, speaks volumes about this scheme to endanger our state's most profitable program."

Privatization was opposed by some convenience store owners who rely on lottery sales for foot traffic and other sales. State documents indicated the vendor may expand to chain stores and the Internet, which could hurt small stores.

While the sales and marketing will be under the control of the private operator, other functions will remain with the state, including licensing, auditing, payment of prizes, and security. A state lottery commission of gubernatorial appointees will oversee the contract.

Northstar is a joint venture of two companies that have smaller lottery contracts with the state: Rhode Island-based GTECH, a subsidiary of Lottomatica in Italy, and Georgia-based Scientific Games. The venture is backed by the Ontario public employee pension fund.

"With GTECH and Scientific Games' world-class resources and expertise available to us, we'll be able to respond quickly to our customers' preferences and apply new technology and more individualized support to help our retailers boost their profitability and efficiency," said Carole Hedinger, executive director of the lottery.

Northstar also recently took over the Illinois lottery. The company increased revenue in its first year but fell short of projections and accused the state of interference, according to published reports. Illinois went to court to get its money.