Chris Christie’s Lottery Privatization Is Costing N.J. Millions

But, on the plus side, New Jersey's lottery is taking in a lot less money — which means people are losing less!

Chris Christie | David Shankbone [CC BY 3.0] via Wikimedia Commons

Chris Christie | David Shankbone [CC BY 3.0] via Wikimedia Commons

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.

Unions sued to block the deal (and failed), state lawmakers attempted to strip Christie’s right to privatize the lottery (he vetoed the bill) and people pointed out Christie backers had been hired by the winning lottery vendor. Paul Davies, a University of Delaware professor, wrote on this website in 2012 that potential private lottery operators in New Jersey — and Pennsylvania, where Tom Corbett was attempting a failed bid to privatize the lottery — would target poor communities.

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.

“Missing the mark so badly with all of these proven methods for generating lottery revenues is like spitting and missing the floor,” John Kindt, a professor emeritus at the University of Illinois who studies gambling policy, told the AP.

Why the major miss? Bidding for lottery services is not competitive — only Northstar bid for New Jersey’s lottery. Bloomberg reported Northstar charged $50.4 million more for lottery management the last fiscal year; the state spent $34.7 million the year before. (Some lottery functions remain with the state.) And it’s not like Northstar is doing a great job:

“The lottery believes Northstar is managing its expenses properly,” said Joseph Perone, a spokesman for the state’s Treasury Department. Though Northstar fell short of its contractually set targets for income to the state by $55 million in the last fiscal year, the Christie administration unilaterally agreed to lower them — saving the company millions of dollars in penalties.

Perone said the state reduced the targets out of fairness, because the lottery was still recovering from Hurricane Sandy. The storm struck New Jersey in 2012, eight months before the Northstar contract was signed.

But, on the other hand, there may be an upside to this! If Northstar is so much worse at running the lottery than the state was, fewer people are throwing their money away at the lottery! When he runs for president, maybe Christie can position himself as a champion of the poor this way.