Tuesday, May 23, 2006

 

Will Illinois Privatize Its Lottery?

Governor Blagojevich wants to privatize the Illinois Lottery:
Gov. Rod Blagojevich Tuesday moved to sell or lease the Illinois Lottery, an action that he said would provide $10 billion in long-term funding for public schools.

But critics immediately ridiculed the plan as a phony, with a top Republican saying it “doesn’t insure there will be an increase of one dime” in how much the state spends to support elementary and secondary schools.

The governor’s plan, to be formally unveiled at a press conference this afternoon, will call for either leasing the Lottery to a private operator or selling it, perhaps by offering stock in an initial public offering (IPO). Sources familiar with the plan said that would pull in an estimated $10 billion, one-time payment.

The state would take about $4 billion of that money for extra school spending in the next four years. That $4 billion would be divided among school construction, pre-school education, more money for special education and a general increase in the “foundation level” that all public schools receive.

The remaining $6 billion would be saved, invested and generate a guaranteed $650 million a year for schools over the next two decades, according to sources familiar with the proposal.

The Lottery now generates about the same amount for the state, $650 million a year, but some of that money has been pulled off to pay for other state spending.
This strikes me as a stupendously bad idea. Perhaps it would lead to a short term increase in school funding. But borrowing from the future to pay for the present has been a hallmark of the Democrat controlled legislature and the Blagojevich administration. Does anyone seriously believe that they'll simply sit on $6 billion in cash, spending only the interest it generates?

ADDENDUM: I'm very interested in knowing how the state plans to earn an annual rate of return of close to 11% over ten years.

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