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Editorial criticizes N.J. Lottery privatization proposal

Feb 5, 2008, 1:27 am

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New Jersey Lottery

Privately run lottery faces long odds

Home News Tribune
Feb. 2, 2008

Give [New Jersey] state Senate President Richard J. Codey credit for trying.

Responding to the governor's assurance that he is open to ideas for solving the state's long-term budget woes, Codey, D-Essex, floated the notion of leasing the state's lucrative lottery. The way Codey figures it, the lottery might be worth billions upfront, and it might even produce some ongoing cash for the state if it is able to negotiate for a cut of the profits with whatever private entity takes over the lottery's operation.

The proposal was typical Codey: designed to appeal to voters but also seemingly intended to make the governor's own plans more palatable. Codey reasoned that the lottery income would not take the place of the governor's proposal for steep and rapid toll hikes, but it might make the hikes less drastic.

The devil, of course, is in the details.

For one thing, any proposal to privatize the lottery would have to be approved by voters, since the lottery's revenue is constitutionally dedicated to senior citizen and educational programs.

Far more serious is the fact that, while leasing the lottery might provide billions of dollars immediately, the state presumably would have to run without at least a portion of the nearly $1 billion the lottery pumps into its budget each year. Indeed, while Gov. Jon S. Corzine welcomed the idea, his office also cautioned that the lottery was efficiently run and that it seems unlikely a private company would be able to generate much more income than the state does, which means any money the state might get back would be reduced.

That doesn't mean the Legislature ought not take a look at the idea, especially given the governor's single-minded solution. But the Legislature needs to proceed cautiously and deliberately - and to consider the long-term costs as well as the short-term gains.

In the meantime, the history of the lottery suggests how dangerous government spending is. The lottery received voter approval on the promise that its proceeds would pay for all sorts of wonderful programs for children and senior citizens. The money may indeed have gone to those causes, but it also has become money crucial to the state's bottom line: what was sold as frosting is in fact the cake.

The lesson is that, in most cases, the government finds a way to spend all the money that is available to it; and, because legislators keep their jobs by providing things to voters, the tendency is to spend more and save less.

The error both the governor and the Senate president are making as they troll for ways to raise huge amounts of capital is in assuming that more money will get us out of this mess. More money may, in fact, be necessary. But more money, without some disciplined reassessment of how the state spends and saves the money it has, will eventually get us back to where we are now — only with fewer assets and fewer tricks up our sleeves.

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