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Archive for the ‘Spotlight: State Lotteries’ Category

California Gov. Arnold Schwarzenegger (R) has proposed borrowing against future earnings in the state lottery to solve the state’s budget deficit, currently estimated at $17 billion.

Schwarzenegger’s office says the borrowing decision avoids cutting funds for education, state parks, beaches, and California prisons. But success in the plan would require a several-billion-dollar growth in the “underperforming” lottery, according to analysts, and could cost at least $23 billion in interest over 30 years to repay $15 billion in borrowed money.
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Has the day arrived for states to “cash in” on private payoffs from lotteries, leaving this business to the pros? Policy analysts are asking the question as lottery revenues in many states are coming in below expectations, leaving less for state coffers without tricks or gimmicks.

In an article last year for the Gambling Compliance Ltd. Web site (“US Lotteries Maturing, Looking to Counter Player Fatigue”), business reporter Scott Van Voorhis wrote, “State lotteries across the US are turning to ever-higher priced instant tickets, sometimes up to US$20 each, and innovative marketing tricks, in their bid to find new growth in an era of stagnating revenues.”
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The dominoes have yet to fall toward lottery privatization as a way to add more money to state government coffers, but several persevering governors continue to look closely at the idea.

“In nearly all the states where lottery privatization has been proposed the executive was the proponent,” said Arturo Perez, a fiscal analyst for the National Conference of State Legislatures (NCSL) who has been tracking the issue. “It’s possible that we will continue to see this as an option that states will consider for raising new revenue.”
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Lawrence McQuillan, director of business and economic studies at the San Francisco-based Pacific Research Institute, said California Gov. Arnold Schwarzenegger’s (R) plan to borrow money against the state lottery “is like a bridge to take us from where we are today to what we hope will be better economic times down the road.”

Schwarzenegger proposes borrowing $15 billion, using $5.1 billion next year and putting the rest into a “rainy day” fund. He hopes in three years the state will have recovered economically and the rainy day fund will no longer be needed.
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