Bill would require Legislature approval of lottery privatization

Small businesses are fiercely battling the privatization proposal, with retailers warning they’ll see big drops in sales if a private company runs the games.“The proposal to privatize, without public explanation, one of our most profitable and well-run assets is troubling,” said Assembly Budget Chair Vincent Prieto (D-Secaucus), who introduced the legislation, in a statement. “The Christie administration appears ready to forfeit substantial long-term revenue for a one-shot payment that will also hurt small-business owners and risk vital programs for our students, veterans and the disabled. More oversight is clearly needed.”
A spokesman for Gov. Chris Christie did not return a request for comment on deadline.
At an Assembly Budget committee hearing on the proposal last week, members of a Main Street retail group opposed to the lottery RFP warned legislators of a potential shift in lottery sales from small retailers to big-box wholesalers and online platforms if those operations are put into the hands of a private contractor.
“Part of a small retailer’s business model is the direct sale of lottery tickets, and attached to that are secondary sales from a person buying a soda or something else. Opening up the retailers to increased competition from big boxes and Internet sales will take away those profits and impact jobs that rely on them,” said Satish V. Poondi, director of legislative affairs for Green Brook-based Asian-American Retailers Association, which formed the Big Gamble NJ coalition with the Communications Workers of America.
Prieto said Legislative oversight of the bidding process is “clearly warranted” because “privatization should be reserved for when the government cannot perform that function well on its own” — and the New Jersey Lottery generated a record $2.8 billion in sales last year.
But the Christie administration believes contracting the lottery’s sales and marketing operations to a private company could bring in even more revenue by attracting a younger base of players through Internet lottery games and new retail outlets.
Still, Prieto said “it appears that the only one that stands to benefit from this proposal is the company chosen to take over this asset,” as the state could pay up to 5 percent of the lottery’s net income in incentives to the winning bidder if it meets the revenue targets outlined in its proposal. The administration has estimated that the private contractor could net approximately $1 billion over the contract’s 15-year span.
Though state Sen. Barbara Buono (D-Edison) also has raised concerns about the proposal’s impact on small businesses, no hearings on the issue have been held by a Senate committee yet, and legislation similar to Prieto’s Assembly bill has not yet been introduced in the Senate.
If the bill becomes law, the Legislature would potentially review bids from the four companies currently in the running for the contract: Providence, R.I.-based Lottomatica subsidiary GTECH, which jointly operates Illinois’ lottery with another contender, New York-based Scientific Games Corp.; United Kingdom-based Camelot Group, which operates the UK National Lottery; and Greece-based Intralot.