Who Really Wins in Privatization?

Who was the biggest lottery winner in NJ in 2016? Not Joe Schmoe. Not the people in that office pool. Not even that kid in Newark trying to get into that charter school. Nope, it was the lottery company itself. Today's Star Ledger ran this story about Northstar New Jersey, the private company that Gov. Christie handed the once state-run lottery operation over to in 2012:

The private gaming joint venture that operates New Jersey's lottery received a more than $30 million bonus despite having originally over-promised a billion dollars in revenue at the start of its contract, its latest annual report shows. 

Northstar New Jersey, which oversees Powerball, MegaMillions as well as various scratch off games, was paid a $30.6 million incentive for reaching contractual obligations that were renegotiated downward in February to more easily attainable goals. 

At the urging of Gov. Chris Christie in 2012, the state entered into a 15-year contract with Northstar under which the gaming venture committed to sending "at least" $1.42 billion in additional income back to New Jersey in exchange for its making an upfront payment of $120 million in 2013. Northstar was the only bidder on the contract. 

That agreement was short-lived, however. 

After Northstar fell short of its promised income targets two years in a row, it renegotiated its contract with the state. In Feb. 2016, the company's financial targets were lowered by $1 billion through 2029, about $76 million less a year.
In 2013, Northstar had been forced to tap into a $20 million reserve established at the outset of its contract with New Jersey to pay for its shortage penalties. 

But because 2016 produced an unexpected surge in ticket sales -- more than $3.29 billion through June -- the conglomerate was able to finally reach its renegotiated contractual obligations, according to its 2016 annual report, which runs through New Jersey's fiscal year ending June 30, 2016. 

New Jersey lottery officials faced questions from state lawmakers Tuesday on a private lottery contractor's failure to live up to its promises to increase sales and payments into the state treasury. 

Northstar, a joint venture made up of lottery operators GTECH and Scientific Games along with the Ontario Municipal Employees Retirement System, was also paid $104 million for "management and system fees" as well as advertising and marketing costs, the report said. 

The state gets back $987 million, or 30 percent of the $3.29 billion in 2016 ticket sales, the absolute minimum required by law.  

"Record-breaking sales enabled the Lottery to make a record-breaking contribution to its beneficiaries," Carole Hedinger, the lottery's executive director, said in a statement released to media. 

"The Lottery could not have achieved those goals without investments made by Northstar New Jersey in technology, marketing, personnel, retailer expansion and capital equipment," said Will Rijksen, director of communications with the state's Treasury. 

Rijksen also noted that after Northstar's contract was renegotiated, its bonus shrank to 3 percent of net income, down from 5 percent. Doing so, Rijksen said, ensured "that Northstar would not receive a windfall if (ticket) sales turned up dramatically." 

Much of the 2016 windfall was the result of greater public interest in Powerball, which had its first billion-dollar jackpot this year, resulting in $93 million more in tickets sold that had been budgeted, according to the annual report. 

But William Weld, the two-time governor of Massachusetts who's previously served as national co-chairman of the U.S. Privatization Council wrote a recent op-ed in Forbes that "even as a long-time proponent of private management, I am constrained to say that the results obtained by private managers in Illinois and New Jersey have been a disappointment." 

An email to Northstar officials requesting comment was not immediately returned, and there was no answer at the telephone number for its Princeton headquarters. (emphasis mine)

Whether it's privately run prisons, lotteries or charter schools, the number one goal, like any private industry, is to make a profit, not service the people. So, it's no surprise that today, Carol Burris posted this:

Read the article here. When there's no fiscal oversight, no public input, no local control, but many lobbyists and political influences, charters are free to do whatever they want with taxpayer money.

And, if Betsy DeVos is appointed the next Secretary of State, we will see privatization of public education in this country explode, and benefit mainly Christian religious schools. 

What to do? Call your US Senator and tell him or her to vote No on DeVos on January 11.