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Illinois takes a chance on selling its lottery

Amy Scott Jan 23, 2007

KAI RYSSDAL: There were two ways to look at the foreign exchange markets today: either the British pound’s having quite a run, or the dollar’s really struggling.

The greenback hit a 14-year low against the pound today. Just a hair shy of 2 to 1. The prospect of higher interest rates over there makes it a more desirable place to park ones money.

Back home, the jackpot in the Illinois state lottery is just over $2 million. But the real winner could wind up shelling out $10 billion. Illinois is trying to sell its lottery to private investors.

Critics say the state is gambling with its future, as Marketplace’s Amy Scott reports.

AMY SCOTT: Illinois says it can no longer count on the lottery bringing in the mega-millions. Competition from online gaming and riverboat casinos is draining the purse. So it’s ready to cash in its ticket.

John Filan is the state’s chief operating officer. In spite of that corporate-sounding title, he says the state can’t compete with private industry.

JOHN FILAN: This is a very risky business because of all the new competition over the last seven or eight years. And we’d just as soon pass that risk on to those that are in the risk-taking business.

CHARLES CLOTFELTER: It really is a little bit like robbing the piggy bank.

Charles Clotfelter teaches economics at Duke University. He says Illinois is trading a long-term revenue source for a quick payoff. The state estimates proceeds from the sale could fund public education for 20 years.

But what then? Clotfelter says why not hire private companies to run the lottery, as states like California have done.

CLOTFELTER: The information about how to sell as many tickets as you can is there. You don’t have to actually sell the store to get the expertise.

Clotfelter says there’s an argument for not selling as many tickets as you can. Some view the lottery as a regressive tax on the poor. Low-income people are its biggest customers.

The state’s John Nilan says the new owners would be subject to existing laws and a new oversight authority.

And he calls the deal more of a lease than a sale. It would expire after 75 years or less. And if a private operator did manage to increase sales, the state would get a share.

I’m Amy Scott for Marketplace.

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