Illinois Lottery Revenues Fall as Governor Pat Quinn Fires Northstar Lottery GroupWednesday August 20th 2014
Illinois Governor Pat Quinn has fired the Northstar Lottery Group after the Illinois Lottery reported a significant drop in revenue. The group had been overseeing the operations of the Lottery since it won a ten-year government contract in 2010 and became the country’s first private company to manage a state lottery. According to the Chicago Tribune, the private lottery company was $401 million behind its projected revenue for the last fiscal year.
A recent financial report from the Illinois Lottery revealed that the estimated net income for the 2014 fiscal year was woefully behind the net income target of $980 million. The Lottery achieved $2.12 billion in sales but only raised $579 million in net income during that time, resulting in Northstar posting the lowest revenues since it took over the Lottery in July 2011.
Northstar Lottery Group won the contract under a cloud of controversy. An independent report by the state’s Auditor General noted that the company’s operations were full of irregularities and questionable activities. However, the company’s revenue commitments were too good to pass up as the state of Illinois was facing severe budget deficits and Governor Quinn gave them the green light to start managing the Illinois Lottery in 2010. Northstar then asked the state to lower these same revenue commitments, which caused a storm of litigation just as the contract took effect.
The group has paid $60 million to the state of Illinois for missing previous targets and may be responsible for paying another $37 million for this year’s shortfall. However, Northstar has paid $239 million to its parent company since it started managing the Illinois Lottery.
John Patterson, a spokesman for Democratic Senate President John Cullerton, remarked that “it had become obvious that the private manager couldn’t live up to its promises” and that the governor was making the right choice for the people of Illinois.
Katie Hickey, a spokeswoman for Governor Quinn’s office, released a statement saying “The administration has had serious concerns with Northstar’s performance. The Governor demands every state contractor be held accountable for their performance.”
The recent controversy has even affected Governor Quinn’s campaign for re-election in November. Republican opponent Bruce Rauner has held up the Lottery crisis as an example of Quinn’s poor record of leadership since taking over the office from disgraced politician Rod Blagojevich in 2009. A spokesperson for Rauner’s campaign released an email stating that “It’s a shame that it takes another election for him [Quinn] to take accountability. The people of Illinois should always go ahead of politics.”
Quinn’s office has hit back at these claims, accusing Rauner of mismanaging his own businesses and taking profits without any concern for sound operational policies.
The Illinois Lottery uses revenue to fund a number of special initiatives, including valuable research for breast cancer, veteran’s affairs and HIV/AIDS research and prevention. These groups have seen significant cuts to their budgets in the past three years as sales of Ticket for the Cure, Veteran’s Cash and Red Ribbon Cash have dropped.
Lottery officials have stated that they will seek out a new private management company by starting a new bidding process for a government contract. The Northstar Lottery Group could not be reached for comment.
The loss of valuable revenue may have a damning effect on lottery sales, not only in Illinois, but across the country. If the general public comes to view draw games and scratch-offs as money sinks as opposed to vital sources of funding, then revenues will continue to drop and services will begin to suffer as less money is allocated to their budgets.