Arnold wants to privatize lottery

May 15, 2007 5:54 AM

California Gov. Arnold Schwarzenegger is poised to call for privatizing the state lottery, a move that would bring California a cash infusion of as much as $37 billion to help solve the budget deficit, but also could sacrifice a major revenue source for decades to come.

In the proposal expected to be delivered to the state legislature this week, the lottery would be leased to a private company for up to 40 years in exchange for a lump-sum payment or series of payments, according to documents from the governor’s budget office.

If lawmakers were to sign off on such a plan, California could become the first state to privatize its lottery.

Adam Mendelsohn, Schwarzenegger’s communications director, said private companies could do a better job of running the lottery than the state, resulting in more Californians playing and the largest possible cash infusion.

"California has one of the lowest-performing lotteries in the country," he said. "Taxpayers could see two to three times more money go into state coffers."

California’s lottery was created in 1984 after 58% of voters approved an initiative drafted and bankrolled by the company Scientific Games, which soon after won the initial, $40-million state contract to provide the tickets. The ballot measure mandated that 34% of revenue created by the lottery go to public schools. Lottery sales last year totaled more than $3.5 billion.

Legislative leaders said they would not comment on the proposal until after it had been made public.

The proposal comes at a time when the state is facing only a modest budget deficit for the coming fiscal year ”” about $1 billion. But billions more in bond payments will be due soon after.

Moreover, the weakened housing market, an unexpected decline in income taxes earlier this year and an uncertain economic outlook are adding to budget pressures.