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Filan explains why he wants to lease out the state lottery.
The governor’s idea to lease the Illinois lottery didn’t generate much enthusiasm from state lawmakers last year, but the state’s chief operating officer pushed the idea anew Tuesday, arguing that Illinois must relieve itself of the risk posed by the lottery.
“I think revenue is at risk,” said the state’s new chief operating officer, John Filan, during an appearance before the Union League Club of Chicago. “I’m concerned lottery revenues will go down, not up, over time. I want to pass that risk on to the private market.”
Gov. Rod Blagojevich has suggested that a long-term lease of the lottery could generate new money for schools, but lawmakers are skeptical.
“I think they’re grasping at straws to come up with some plausible explanation as to why they want to sell a state asset, use the money now and not worry about it down the road,” said Rep. Jack Franks (D-Woodstock) who said he has requested hearings on the lottery proposal when lawmakers return to Springfield early next month.
Rep. Brent Hassert (R-Romeoville) questioned why private companies would give a “whole boatload of money for the lottery” if they’re looking at the same risky market.
Filan and the administration claim that current state law ties the state’s hands in expanding the lottery’s revenues. For instance, they’re limited on how much money they can spend on advertising and they can’t pay incentive sales bonuses to vendors or sales people.
The governor’s proposal, as far as we’ve seen, assumes that the General Assembly will remove those restrictions from a private company. I wouldn’t bet on that. As Rep. John Fritchey has noted, the plan also seeks to reduce the number of payouts, another not so popular idea.
Speaking of betting, Rep. Lou Lang unveiled yet another gaming plan yesterday.
Gov. Rod Blagojevich has agreed not to interfere with a new gambling-expansion bill if it advances in the legislature this spring, the measure’s sponsor said Tuesday.
Rep. Lou Lang, a Skokie Democrat who previously pushed for additional Illinois casinos, said Blagojevich recently told him he would decide the merits of Lang’s latest proposal if and when it reaches his desk.
Blagojevich, a Chicago Democrat, in the past has publicly discouraged lawmakers from even sending him such legislation, by threatening a veto.
“The governor assured me that he was not going to say or do anything that would get in the way of my attempting to move this legislation,” Lang, chairman of the House Gaming Committee, said at a Chicago news conference. “That is what he told me, and that is what I expect will happen.”
Wanna take odds on the governor keeping his word?
*** UPDATE *** Mayor Daley’s response, via Chicago Public Radio.
posted by Rich Miller
Wednesday, Jan 31, 07 @ 9:09 am
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Filan have any evidence from other states that Lotery revenues go down over time?
Lang get an MOU?
Comment by zatoichi Wednesday, Jan 31, 07 @ 9:37 am
Open up gambling and become the “Vegas of the Midwest.”
Selling the lottery produces a one-time money pot that helps balance the budget now but depletes the revenue stream. The state needs more revenue streams and/or fewer expenses.
Comment by Fan of the Game Wednesday, Jan 31, 07 @ 10:29 am
My bet is that Blago would be hard pressed to say no to a casino bill that creates new revenue without raising taxes. But does Lang’s bill have any chance to make it to his desk?
Comment by Bluefish Wednesday, Jan 31, 07 @ 10:32 am
It seems like a heck of a way to try to sell something — announce that the future for the game is bleak before accepting any bids. If what Filan says is true, not many companies would be willing to pay a premium for the game. Oh wait, the governor says they are willing to. Could it be that the state is trying to sell a valuable resource for a onetime infusion of cash? Of course not. Blago and Filan say its not so. And we all know their numbers are believable…
Comment by Political insider Wednesday, Jan 31, 07 @ 10:51 am
We don’t have to take odds on whether or not the Gov will keep his word. From Crain’s:
But Gov. Blagojevich has no plans to expand gaming, according to a spokeswoman in his office.
“We’re putting our budget proposal together now and we aren’t proposing more gaming, but we’ll look at lawmakers’ ideas,†the spokeswoman said.
Lest we forget, the Illinois House voted last year to abolish casinos. I have great respect for Lou Lang’s legislative finesse, and Emil Jones’ desire to see a casino can’t be underestimated. But the fact remains that Lang’s proposal wouldn’t even make a dent in the state’s structural budget deficit, the gap in school funding, our pension debt, or our obligation to provide property tax relief.
That means that gambling expansion would still require some sort of tax hike to fill the budget void. You can’t pass the tax hike without rural Democrats and Republicans on board, and while most of them will vote for a modest tax hike to provide property tax relief and more money for schools, it is unlikely in the extreme that they would support gambling expansion.
Comment by Yellow Dog Democrat Wednesday, Jan 31, 07 @ 11:07 am
There sure must be a lot more potential gamblers out there, not to mention current gamblers willing to spend even more money.
Otherwise, how are all these additional gambling venues going to make money. Or are Blago/Filan a little too optimistic in their assumption
that the ever-pluckable Illinois taxpayers will pour into those additional gambling places and spend ever more money.
Maybe not.
Comment by Cassandra Wednesday, Jan 31, 07 @ 11:12 am
Cassandra. All one needs to do is go to the northwest Indiana riverboat parking lots and take a look at the license plates. Last time I went to the Hammond boat I saw 48 Illinois plates out 50 that I counted. There obviously a pent up demand helping out Indiana’s budget.
Comment by anon Wednesday, Jan 31, 07 @ 11:19 am
Political insider is correct.
Bidders will discount the range of future earnings to come up to the price. Prospective buyers are not risk takers.
Let us not forget as well the discount rate will include both the taxable cost of funds and the required return on equity investment. With capital assets, some benefit is obtained by using depreciation as a tax shelter.
On the other side of the equation, the State would discount the future flows at some tax exempt rate. (If the state needed the money it could borrow iut at that rate and secure it with future revenues.
This is a current money play, pure and simple. Filan is being disengenuous.
Comment by Truthful James Wednesday, Jan 31, 07 @ 11:33 am
Not only is Filan being disengenious, his own revenue numbers don’t support his claim. Illinois Lottery revenues have been growing at a steady clip, and unless he’s suggestion that global warming or a meteor impact are somehow going to have an impact on the lottery, we have to expect that they will continue to grow.
Comment by Yellow Dog Democrat Wednesday, Jan 31, 07 @ 11:56 am
Exactly! Their own bid documents talk about how much MORE growth the lottery could be realizing with additional advertising and some other tweaks. They are shamelessly trying to have it both ways.
Comment by Anonymous Wednesday, Jan 31, 07 @ 12:07 pm
Lang, my rep, is in bed with casiso interests.
Comment by John Ruberry Wednesday, Jan 31, 07 @ 12:27 pm
lottery = football
Lang = Charlie Brown
Blago = Lucy Van Pelt
We’ve seen how this turns out
Comment by Pinkie Ring Wednesday, Jan 31, 07 @ 12:43 pm
Duh, I just transposed this wrong, it was supposed to be inthe Casino thread, but you get the idea.
Comment by Pinkie Ring Wednesday, Jan 31, 07 @ 12:45 pm
So, let’s see now. 1. John Filan says the reason the state wants to sell the lottery is because the revenues are suspect and he wants somebody else to get left holding the bag. What a great sales pitch that’ll be. 2. The Governor has promised Rep. Lang he’ll stay out of a gambling expansion debate. Well we all know that the governor is a man of his word and would never double cross a legislator in the name of self promo…never mind. 3. Additional casino revenues will not address the state’s debt situation…good point, but I agree for a different reason. For this administration, there is no state debt OR revenue deficit, so any additional money is “found” and can be used for nifty new programs. Is this a great state or what!?
Comment by Commonsense in Illinois Wednesday, Jan 31, 07 @ 12:53 pm
So can we look forward to a border gambling war with various casinos in Illinois and border states
trying to develop even better, glitzier casinos to attract a floating population of gamblers.
But what if Illiois loses the war?
Comment by Cassandra Wednesday, Jan 31, 07 @ 1:00 pm
Cassandra–Illinois cannot “lose” a casino war to Indiana based on population alone. Chicago gamers will simply stay in Chicago and that’s more than 1 million customers. What it does affect, though, is the idea that casino gaming will draw tourists. The reality is that gaming is so wide spread that it’s really a local market industry now (Las Vegas and to some extent Atlantic City still being exceptions). Bigger, glitzier…okay, but the real question is payout to customers on the basic games…slot machines, video poker, keno, etc. The odds on table games stay the same, and if Lang’s efforts are for boats in Cook/Lake counties, don’t look for large poker rooms…you need a lot of space and tables to make it profitable for the casino. Long and short; Illinois loses because of the tourism angle and increases to the number of problem gamblers because the state is offering additional venues for addicts to feed their gambling habit. (It’s not a large number, usually about 3%, but they are there.)
Comment by Commonsense in Illinois Wednesday, Jan 31, 07 @ 1:10 pm
Ruberry, you got it wrong on Lang. If you disagree with what Lang is proposing with the casinos, fine, disagree all ya want. But don’t sling any mud toward Lang–it’s uncalled for. He’s not in bed with any interests, as you stated. Lang is simply concerned with generating revenue for education and other worthy causes. He’s a kind, decent legislator and deserves more respect.
Comment by Tzedek Wednesday, Jan 31, 07 @ 7:43 pm