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Friday, October 24, 2008

Ind. Go'vt. - May the state privatize/lease its lottery and still comply with federal law? [Updated]

The Governor's Office issued a press release today about a 13-page opinion issued Oct. 16th by the U.S. DOJ, Criminal Division, addressing the question of:

whether a lottery operating under such a long-term private management arrangement would qualify as a lottery “conducted by a State acting under the authority of State law” within the meaning of the federal lottery statutes.
The Governor's statement today concludes:
The Office of Legal Counsel in the U.S. Department of Justice issued the opinion on the question of whether a long-term lease of a state lottery to a private operator would conform to federal law that generally prohibits the promotion and advertising of lotteries in interstate commerce (federal law makes an exception for lotteries “conducted” by a state). The OLC opinion addresses whether leases to private operators would fall within the exception and thus be permissible. It concludes that states may contract with private management firms to operate their lotteries, but that the state must maintain control over significant business decisions made by the lottery. In addition, the opinion says that the management firm may not receive more than “a de minimus interest in the profits and losses of the business”.

The opinion was issued because a number of states, including California, New Jersey, Illinois, Colorado, Florida, Michigan, Texas, New York, and Indiana, have proposed the long-term lease of their state lotteries in order to fund investments ranging from infrastructure to education.

Miore from the Governor's statement:
As one of a number of states considering the possible lease of their lotteries to private operators, we were surprised by the recent Office of Legal Counsel decision. The best legal advice available to us had suggested that the OLC would not interpret federal lottery statutes as preventing the long-term lease of state lotteries.

Although the OLC opinion is not binding, rather than challenging it in federal court it seems wiser to look to other options we’ve been exploring to fund the Hoosier College Promise proposal. The goal of the plan is to guarantee a college scholarship to every low and middle income Hoosier high school graduate. A lottery lease would have been one means to that end, but there can be other financing options available and we will shift our attention to them.

Governor Daniels had proposed the Hoosier College Promise program, a plan that would provide $6,000 over two years to recent Indiana high school graduates to pursue postsecondary education in the state. The governor had suggested several possible methods for funding the scholarship program, including leasing the Hoosier Lottery to a private operator, or issuing bonds backed by future growth in lottery profits.

[Updated 8:30 PM] "US Justice Dept tells states not to privatize lotteries" is the headline to a Reuters story, here.

[Update 10/25/08] Here are today's stories from the LCJ and the Indy Star.

Posted by Marcia Oddi on October 24, 2008 05:34 PM
Posted to Indiana Government