State lotteries now managed outside state lines

State governments have been cashing in on the profit from lotteries for decades, but hopes of higher earnings have spurred recent changes.

Pennsylvania and Indiana have contracted private companies from Great Britain and Rhode Island respectively to manage their state lotteries. The companies were chosen based on their bids to take over management.

Now, New Jersey is considering hiring the same Rhode Island-based company to control its lottery.

“They’re just privatizing the management,” said Betty Kane, associate professor of business management. “The state is still ultimately responsible for the revenues and the expenses.”

States hope that hiring private companies to manage the lotteries will generate additional revenue by making operations more efficient and reaching more customers.

“Some functions of government can effectively be ‘privatized’ while others make the switch less easily,” said Professor of Economics Bob Williams in an email interview. “Operating a lottery is the type of operation that private business could do well.”

The changes have led to mixed feelings among those affected.

“This may be the easiest and most obvious decision the state has had to make,” Mitch Daniels, Indiana Governor at the time of the changes, told Bloomberg Businessweek. “With this contract, the only question is how much more money Indiana will receive than under the current system.”

Associate Professor of Mathematics Ben Marlin also thinks the changes will likely produce more revenue for the government.

“They’re pretty sure to win because of the fact that they’ve got deep pockets,” said Marlin. However, concerns have surfaced from the public sphere.

The labor union representing Pennsylvania lottery employees has criticized the government decision to outsource jobs to a company based in Great Britain. Specifically, the union fears for the 160 or more lottery workers who will lose their jobs if a private company takes control of management.

The union has filed a lawsuit that could potentially halt the privatization process in Pennsylvania based on the idea that Governor Tom Corbett would have to get legislative approval to privatize the lottery.

What could North Carolina expect if its lottery management were contracted to a private company?

Kevin Burns, a worker at Randy’s Fruits and Produce in Greensboro, said that he did not think such a change would have much impact on the store.

“Smaller places like this probably aren’t going to make a whole lot of money (from lottery sales),” said Burns to The Guilfordian.

In North Carolina, the lottery funds teachers’ salaries, school construction and other components of public education. However, more revenue would not necessarily mean more funding for education. Money originally set aside for education might be used elsewhere because the lottery revenues seem like such a benefit.

“They always talk about (the North Carolina lottery) as the education lottery, but lottery money can replace funding where it was intended to augment funding,” said Marlin. “In fact, it can do some small bits of damage.”

Still, the country seems to be moving towards privatization of both lottery management and other services like the U.S. Postal Service.

“(The government) thinks that by privatizing, it can generate more revenues,” said Kane. “Privatization is a trend in terms of a lot of state operations … they’re trying to find ways to save money.”

As privatization becomes more common in U.S. practice, consider those affected, and when the next privatization battle arises in North Carolina, weigh its potential impact with an educated understanding.