By Matthew Walberg
– For the third consecutive year, the private firm hired run the Illinois Lottery has failed to bring in the profits it promised to raise for the state, even as its parent companies continue to be paid more each year to provide games and services.
According to a Tribune review of preliminary year-end data, Northstar Lottery Group posted a net profit of $738 million – nearly a quarter billion less than it pledged to bring in for the 2014 fiscal year, which ended June 30.
The figure is less than the company raised for the state in the 2012 and 2013 fiscal years after it became the first private company in the nation to take over day-to-day operations of a state lottery.
After three years, Northstar is about $480 million behind what it committed to bring into the state’s coffers, prompting one of the company’s harshest critics to renew questions about why Gov. Pat Quinn has not fired the company.
“This is an epic fail by the governor,” said State Rep. Jack Franks, D-Marengo. “He personally signed this contract, so this is all his baby…If he needs to clean house, that’s what he should do. That’s what other executives do in the real world.”
In 2010, Gov. Pat Quinn chose Northstar Lottery Group to manage the lottery in hopes that the firm would boost flagging lottery revenues, a major source of funding for education and infrastructure.
The company was formed by a consortium of two lottery industry giants: Scientific Games, headquartered in New York, and GTECH, a subsidiary of the Italy-based Lottomatica.
Quinn has said little about the performance of the private manager, even as one of the key architects of legislation that enabled the state to hire an outside firm to run the games has expressed his disappointment with Northstar.
In June, State Senate President John Cullerton, D-Chicago, told the Tribune he was “extremely disappointed” by Northstar’s performance and urged Quinn “to hold the firm accountable and take whatever steps are necessary.”
On Monday, Cullerton spokesman John Patterson said the senator declined comment on the firm’s latest shortfall.
“He’s going let his previous statement and the numbers speak for themselves at this point,” Patterson said.
A spokeswoman for Quinn said that his administration expects Northstar to meet the revenue targets outlined in its winning bid.
“Protecting taxpayers is our foremost priority and our office continues to closely monitor the situation,” spokeswoman Katie Hickey said earlier this week. “Through the duration of the contract, we have expected Northstar to follow the private management agreement and meet the targets in its bid.”
Northstar spokeswoman Avis LaVelle said the company would not have any response until the 2014 results have been audited, something that has yet to be completed for the two prior years.
The company previously defended its performance, noting that it has brought in more money as private manager than the state was able to when it handled day-to-day operations. Company officials have also pointed out that the firm has paid the state $60 million in penalties for missing its previous revenue targets.
Meanwhile, records show Northstar paid GTECH and Scientific Games nearly $85 million collectively last year, up from about $84 million and $70 million in the previous two years.
“I met with the governor and his staff on this back in May,” Franks said. “They said, ‘We’re looking at it.’ It’s now August.”
Source: http://www.chicagotribune.com/news/local/breaking/chi-firm-hired-to-run-illinois-lottery-has-failed-to-hit-profit-goals-for-3rd-straight-year-20140812-story.html
Brief PhillyLabor Editorial: Take Notice Governor Corbett. Privatization is not the answer!
