With the New Jersey Lottery missing its revenue target by over $100 million last year, the second time in as many years that revenue targets have not been met since a private operator took over, Assembly Budget Committee Chair Gary S. Schaer announced on Tuesday that he intends to hold a hearing into the matter when the Assembly Budget Committee reconvenes this fall.
Schaer noted that Northstar, the private company that was awarded a no-bid contract by the Christie administration to take over operations of the lottery, has failed to meet contractually stated revenue projections – producing a $107 million shortfall for FY 2015 and $55 million for FY 2014 when it took over operations in the second half of the fiscal year.
Schaer also pointed out that Northstar charged the state $29 million in fees and expenses last year, for a total of $45 million in administrative costs, the highest since at least 2008, which further diminishes the lottery’s profits.
“Government privatization is nothing new. In some cases it has proved successful and in others it has amounted to nothing short of a boondoggle. We saw that with the privatization of motor vehicle inspections in the late 90’s, in which case the state quickly realized the error of its ways and took action to correct the problem.
“In the case of Northstar’s takeover of the lottery, the administration failed to take any action to protect taxpayer. It has aided and abetted Northstar’s failure by continuously lowering revenue targets. Making excuses does nothing to protect our bottom line.
“We need a thorough and in depth examination of Northstar’s operations to determine why they are not living up to their end of the bargain and what, if anything, can be done to improve performance. These are just some of the many issues that will be examined closely when the Assembly Budget Committee reconvenes this fall.
“Rather than find ourselves next year in a similarly precarious position for a third time and let history repeat itself, we must take action now to better understand the clear and obvious failings of the Northstar contract. The taxpayers of this state deserve nothing less,” said Schaer (D-Bergen/Passaic).