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Fun with numbers

Wednesday, Jun 4, 2014

* AP

Illinois Senate President John Cullerton says he’s “extremely disappointed” with the private company that runs the state lottery.

Cullerton says lawmakers believed a private firm would operate the lottery better than the state. He says financial reports indicate Northstar Lottery Group “is unable to live up to its commitments.”

Reports filed with the Lottery Control Board show Northstar is projected to be $716 million short of its $3.5 billion required sales target this fiscal year. The company must make “shortfall payments” to the state when it misses targets.

* But this is also a state failure. Scroll way down in this Tribune story and you’ll see this

The firm became the nation’s first private manager of a state lottery in 2010. The selection process itself was not without controversy, prompting a scathing report from the state auditor general, which highlighted some irregularities and questionable practices. In one instance, a member of the evaluation team chosen by the governor to review and recommend a winner reportedly read nearly 2,000 pages of bid proposals in a single day. […]

Shortly after the company took over the lottery in July 2011, it began requesting that the state lower the net revenue promises set forth in the contract.

And scroll even further and you’ll see this

In an appearance last month before the Lottery Control Board, Northstar CEO Timothy Simonson defended the company’s performance. He said the lottery has brought in an additional $450 million to fund education and capital improvements and such charitable causes as breast cancer research and veteran support programs.

The increase shows the firm has grown sales at a rate of 12 percent annually, compared with the 3 percent growth the lottery experienced under state control, Simonson said.

By the state’s own estimate, it would have taken a decade to reach the net revenue figures that Northstar achieved in the first year after taking over day-to-day operations of the lottery, he said.

This bid was goofy from the start. Northstar obviously over-promised and a cash-starved state fell for it hook, line and sinker. Northstar should be punished for its behavior, but spare me the outrage because there’s also no doubt whatsoever that moving to a private manager has considerably increased state revenues.

- Posted by Rich Miller        


22 Comments
  1. - Walker - Wednesday, Jun 4, 14 @ 10:58 am:

    A private company over-promises, under-delivers — but still does better than what would have happened without their efforts.

    Everyone points fingers.

    Just like state government.


  2. - Langhorne - Wednesday, Jun 4, 14 @ 11:06 am:

    As my dad taught me at arlington park, “bettin’ on em dont make em win.” Just bec you really really want or need a particular outcome, doesnt make that a reality. Northstar over promised and the state bought it.


  3. - VanillaMan - Wednesday, Jun 4, 14 @ 11:08 am:

    CUT!

    OK - now John, pretend or act, (you can do this!), that you are an Illinois taxpayer. Use that same emotion you are displaying towards Northstar, but instead of Northstar, substitute Illinois State Government.

    Show the scowl! We want to see that face of utter disappointment! YOU ARE A TAXPAYER!

    Take Two!


  4. - Anon. - Wednesday, Jun 4, 14 @ 11:12 am:

    ==Northstar should be punished for its behavior, but spare me the outrage because there’s also no doubt whatsoever that moving to a private manager has considerably increased state revenues.==

    That is sort of like saying that there shouldn’t be outrage when a contractor builds a 2-lane bridge when the contract was for 6 lanes, because there wouldn’t be any bridge if the contractor hadn’t done the work. Anyway, if you look on the shortfall payments as being equivalent failing to qualify for a bonus for performance over and above an acceptable level, rather than as a punishment for not delivering at all, you get the same result without resorting to outrage. We can save the outrage for giving them the bonus even if they don’t earn it.


  5. - Decatur Dan - Wednesday, Jun 4, 14 @ 11:23 am:

    There should be more outrage and certainly is a lot of doubt…

    No one can say how well the State would have done without Northstar. Media reports have indicated that most other lottery States have done better than Norhtstar.


  6. - Mittuns - Wednesday, Jun 4, 14 @ 11:24 am:

    Surprised the sky has not fallen yet in the world of our resident Gloomy Gus.


  7. - MrJM (@MisterJayEm) - Wednesday, Jun 4, 14 @ 11:41 am:

    So the state entered into a project with a company who’s business model is fleecing math-challenged chumps… and then what happened?

    – MrJM


  8. - The Prince - Wednesday, Jun 4, 14 @ 11:56 am:

    Somewhat OT on a big WGN day: WGN may lose Illinois State Lottery drawings as well.


  9. - Mokenavince - Wednesday, Jun 4, 14 @ 12:15 pm:

    Cullerton just can’t realize you can’t squeeze blood out of a turnip. Oh I forgot he is a lawyer.


  10. - John Culpepper - Wednesday, Jun 4, 14 @ 12:22 pm:

    I like the observation Mokenavince makes. Funny!


  11. - Anonymous - Wednesday, Jun 4, 14 @ 12:42 pm:

    ==Somewhat OT on a big WGN day: WGN may lose Illinois State Lottery drawings as well.==

    People still watch that?


  12. - The Prince - Wednesday, Jun 4, 14 @ 12:52 pm:

    Just for Linda Kollmeyer.


  13. - Oneman - Wednesday, Jun 4, 14 @ 12:58 pm:

    Also surprised they didn’t negotiate something that reduced their targets if the state implemented expanded gaming… Like video poker.


  14. - DuPage - Wednesday, Jun 4, 14 @ 1:09 pm:

    Typical results when things are privatized. They will inflate the savings to get the contract. They don’t guarantee the results, and the state would have a hard time replacing them. A lot of former state employees who used to run it have left and are working for other state’s lotteries.
    Northstar won’t be going anywhere, they have the state by the short hairs.


  15. - Dirty Red - Wednesday, Jun 4, 14 @ 5:18 pm:

    I was at a meeting that discussed this very issue a couple years ago. NorthStar has yet to hit ANY of their annual projections. As a result they have paid the penalty every year of that contract. Is it at all possible this was a case of some horribly flawed projections? The group I was with was under that impression.


  16. - Tarden - Wednesday, Jun 4, 14 @ 5:28 pm:

    Doesn’t Northstar have to make up any shortfall
    in their projections? I believe they did last year.
    I assume that means they’ll do it again. How is the State harmed? Anyway you look at it seems they’ve made more $ than the state run system….


  17. - steve schnorf - Wednesday, Jun 4, 14 @ 6:47 pm:

    the big gripe I have is that they significantly overpromised, apparently at least partially in order to win the contract, which means there is some other company out there who didn’t overpromise, who then perhaps should have won the bid, and might be bringing in even more today. Unfortunately, do I recall that the other bid- der(s) were disqualified?


  18. - Oneman - Wednesday, Jun 4, 14 @ 8:30 pm:

    Doesn’t Northstar have to make up any shortfall

    Think they have to pay a penalty, not make up the entire shortfall.


  19. - A guy... - Thursday, Jun 5, 14 @ 10:04 am:

    Just out of principle the Lottery should be run privately. The problem with this or any other gambling scheme is that it’s only marketable and capable of growing when the numbers get into new astronomical levels. The people who play, play. The ones who don’t, don’t. Except to buy a ticket or two when it’s the topic of the day or week. They’ve expanded to so many games, that strategy is less effective now. Video poker is available to the same demo. Not much there to work with anymore.


  20. - Mouthy - Thursday, Jun 5, 14 @ 1:42 pm:

    What they are saying is that we are making more while taking in less in sales. How do you do that? By sticking it to the lottery ticket buyer even more. I used to buy a couple of tickets a week but don’t any longer. When the odds are 1 in almost the population of the U.S then it gets a little silly…


  21. - Commonsense in Illinois - Thursday, Jun 5, 14 @ 4:14 pm:

    When the bids came in in 2010 did no one say…jeepers these are awfully fantastic numbers you’re promising here…but it is 2010, and there is an election, and…well what the heck, the public will buy this…hell they bought Blagojevich - TWICE!


  22. - Jacob S - Thursday, Jun 5, 14 @ 8:22 pm:

    Sad


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