Gov. Eliot Spitzer on Wednesday proposed radical changes for the New York State Lottery, turning over its major functions to a private company in return for an upfront payment of at least $4 billion.
The governor told The Gazette this will make “no difference” to employees located at the Lottery headquarters in downtown Schenectady. In fact, he said, “It’s going to be good for the Lottery for a hundred different reasons.”
Paul Francis, Spitzer’s director of state operations, said, “The 350 existing employees of the Lottery will be totally protected.” However, while Lottery Director Gordon Medenica said he expects current Lottery workers will remain state employees, he did not guarantee that, saying their status could change depending on what proposals the state receives from investment bankers and potential gaming operators. Their jobs, however, would be protected.
Francis said the upfront payment to the state could be as much as $50 billion. In his State of the State address, Spitzer said he wants to use the funding to establish a $4 billion endowment for the state and New York City university systems, which would generate an annual $200 million in revenue. Any additional upfront money, said Budget Division spokesman Jeff Gordon, would establish a separate endowment to fund K-12 education, where Lottery revenues are currently directed.
That could help Spitzer fulfill his past pledges for multiyear increases in education spending even though the state is facing a $4.3 billion budget gap.
The Lottery now generates an annual $2.1 billion for K-12 education. Francis said that revenue stream, adjusted upward for inflation, would continue under any deal. The private operator would expect to derive a profit by increasing Lottery revenues. Medenica said that could involve developing new games.
Francis said the state would in effect be leasing the Lottery operations, possibly for several decades, in the same way that it has granted a racing franchise. But the video lottery terminals at racetracks would not fall under a private operator of the Lottery.
In his speech, Spitzer said: “We should unlock some of the value of the New York State Lottery, either by taking in private investment or looking at other financing alternatives. As we do this, we will assure that the state continues to regulate all Lottery games and that we continue to receive the more than $2 billion annually for K-to-12 education that the Lottery now provides.”
The Civil Service Employees Association represents most Lottery workers. Its spokesman, Steve Madarasz, said the union has not yet been consulted about the plan but would expect to be. CSEA could still represent the workers if they ceased to be state employees, he said.
Republicans were critical of the Democratic governor’s proposal. “That’s a huge one-shot,” said Sen. Hugh Farley, R-Niskayuna.
Assistant Majority Leader Sen. Dean Skelos, R-Rockville Centre, called it “an absolutely horrible one-shot,” which would be “mortgaging the future.” Senate Majority Leader Joseph Bruno, R-Brunswick, did not attend the State of the State because of the death on Monday of his wife, Barbara.
Assembly Minority Leader James Tedisco, R-Schenectady, made the same point and said if Lottery revenues can be increased, the money should go to K-12 education, as per current law.
Assembly Speaker Sheldon Silver, D-Manhattan, said he supports the proposal to create an endowment for the public university systems, but reserved judgment on the Lottery plan until he has seen the details of what Spitzer proposes.
“I’m always concerned by the social ills that an expansion of gambling brings,” Silver said in response to a question.
Medenica said 59 percent of the Lottery’s current $7 billion in revenue is paid out in prizes. He said 31 percent goes to fund K-12 education.
About 150 of the Lottery’s 350 employees work in Schenectady. Many of the rest are part of the sales force based throughout the state.
Spitzer said the funding he seeks from the Lottery to finance higher education is in response to the recent findings of a state commission. “Higher education funding should no longer be a budgetary pawn or a yearly battle,” he said. “It must be a permanent priority.”
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