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Prieto, Watson Coleman, Benson, Diegnan & DeAngelo Bill to Require Legislative OK for Lottery Privatization Approved by Assembly

Assembly Also Approves Diegnan, Prieto & Connors Resolution Urging Christie Administration to Seek Legal Advice from Feds on Lottery Privatization

(TRENTON) — Legislation Assembly Democrats Vincent Prieto, Bonnie Watson Coleman, Daniel R. Benson, Patrick J. Diegnan Jr. and Wayne DeAngelo introduced to require any bid to privatize the state lottery be subject to approval of the state Legislature was approved Monday by the Assembly.

The Assembly also voted to approve a resolution (AR-130) urging the governor to seek legal advice from the U.S. Department of Justice before contracting with private sector manager to operate the state Lottery.

The bill (A-3614) comes as the Christie administration moves to privatize lottery services, despite numerous questions about the plan and the administration’s refusal to explain the plan to the public at recent Assembly Budget Committee hearings on the issue, including Monday.

The administration only received one bid for the lottery privatization.

“The proposal to privatize without public explanation one of our most profitable and well-run assets is troubling,” said Prieto (D-Hudson/Bergen), the Assembly budget chairman. “The Christie administration appears ready to forfeit substantial long-term revenue for a one-shot payment that will also hurt small business owners and risk vital programs for our students, veterans and the disabled. More oversight is clearly needed.”

“Privatization should be reserved for when the government cannot perform that function well on its own,” said Watson Coleman (D-Mercer/Hunterdon). “Yet in this case, it appears that the only one that stands to benefit from this proposal is the company chosen to take over this asset. Legislative oversight is clearly warranted.”

“This plan raises many concerns when it comes to businesses, state oversight and even access to children and teen-agers to online lottery playing,” said Benson (D-Mercer/Middlesex). “As long as we don’t have these answers, then strict oversight is required. More checks and balances is the smart thing to do for taxpayers and economy.”

“Giving the lottery to a private vendor is like killing the goose that laid the golden egg,” said Diegnan (D-Middlesex). “The Lottery generates nearly $1 billion a year to fund education and senior programs. Also, thousands of small business owners in the state rely on lottery sales as an essential element of costumer sales. It’s difficult to rationalize privatization under any circumstances, but it would be irresponsible to go forward with an award when only was bid was submitted.”

“The administration’s plan raises serious questions and requires checks and balances,” said DeAngelo (D-Mercer/Middlesex). “Privatization wasn’t envisioned when the current system was set up, so oversight to protect this valued program and its benefits is paramount. We cannot put the Lottery and its benefits at risk.”

The state established a lottery in 1970 to be operated by the state, with the entire net proceeds dedicated to state institutions and state aid for education. Under current law, the state Lottery Commission and the Division of State Lottery in the Department of the Treasury administer the lottery in accordance with its constitutional and statutory mission.

The bill would require that a contract between the state and a private entity that provides for the operation of the state Lottery by the private entity must be subject to the approval of the members of the Senate and the General Assembly, by a majority vote of such members in the form of a concurrent resolution.

Under the bill, such a contract would not be operative unless thusly approved.
The resolution urges the governor to seek legal advice from the federal Department of Justice before contracting with a private sector manager to operate the state Lottery to ensure that the contract is not inconsistent with federal law.

Federal law prohibits the promotion and advertisement of lotteries in interstate commerce, other than lotteries conducted by a state acting under the authority of state law. A 2008 memorandum from the federal Justice Department advised that for a lottery to come within the exception for state lotteries, a state must exercise actual control over all significant business decisions of the lottery and retain all but a de minimis share of the equity interest in the profits and losses as well as rights to trademarks and other unique intellectual property or essential assets of the lottery.

“The failure to comply with federal law could have severe consequences for this State and for the constitutionally dedicated funding that the state Lottery provides for state institutions and state aid for education,” said Connors (D-Hudson). “Because of the importance of the state Lottery to the continued wellbeing of the citizens of this state and the magnitude of the potential consequences of a failure to continue to meet all federal requirements, it would be imprudent to proceed with the awarding of the lottery manager contract without first obtaining legal advice from the United States Department of Justice as to whether the proposal complies with federal law.”

The measures now go to the Senate for more consideration.