Illinois Lottery Goes Private

Gov. Pat Quinn on Wednesday awarded a lucrative, first-of-its-kind contract to manage the Illinois Lottery to a private company with strong ties to the state, handing over daily control of the games for 10 years to some of the most powerful players in the business.

Northstar Lottery Group -- a partnership between lottery giants GTECH, which holds the state contract for lottery machines, and Scientific Games, which provides Illinois' instant tickets -- promised to generate $4.8 billion in net income over the first five years of the contract.

That is $1.1 billion more than the state projected it could generate on its own, said state Revenue Director Brian A. Hamer, who made the recommendation to Quinn.

If Northstar meets its projections, it could earn $331 million over five years through a combination of set management fees and incentives, state officials said. But there are penalties for not reaching the goal.

"Hiring a private manager to run the day-to-day operations of the Illinois Lottery is a creative way to increase revenues for critical programs that will aid Illinois' economic recovery," Quinn said.

Two companies that lost out on the contract said they're reserving the option to protest.

Illinois will be the first state to entirely privatize the management and marketing of its lottery, a move mandated by legislators as a way to help boost revenue and attract new players.

The state will retain ownership and regulatory oversight.

Critics say Illinois' lottery relies disproportionately on older and poorer players, and research by companies bidding for the contract showed that there are more lottery machines per-capita in lower-income areas.

Northstar has said it will attract younger and more affluent players through aggressive marketing, expanding the number of retail outlets selling tickets, introducing new games and perhaps by selling tickets online. States currently are prohibited from Internet lottery sales, but a bill working its way through Congress could legalize it.