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Belize Privatizes Management of National Lottery

Leonard Gilroy
November 11, 2009, 1:02pm

Belize has privatized the management of its state-run lottery:

Following several months of rumored privatization, the Government formally announced today that it has awarded a 10-year contract to Brads Gaming Company Ltd. [...] to take over the management of the public lottery.

"Presently, collections from the sale of lottery books and license approvals net only about $0.9 million annually," the Government said via press release. "Therefore, the key conditions that Government decided to include in the outsourcing of the lotteries' management were the guaranteed collection of $2 million, annually, by way of a license fee; a profit sharing arrangement and business tax that the private company would be required to pay."

GOB claims that "to ensure transparency in the selection process," Cabinet had appointed a tender selection panel, chaired by Auditor General Edmund Zuniga, to recommend a company that would be able to administer the lottery for the next 10-year period, in the first instance, starting April 1, 2010. The arrangement should be assessed every two years. [...]

The release added that, "...in the first year of private management of the lotteries programs, nothing essentially will change as far as the purchase of lottery tickets is concerned. At the end of the first year, the transition to electronic sales will commence."

Meanwhile, lottery privatization remains largely stalled in the U.S., though Illinois is moving towards a lottery management contract that sounds similar in concept to Belize's approach. According to Reason Foundation's Annual Privatization Report 2009:

As recently as the summer of 2008, at least a dozen states were actively considering privatizing their state-run lotteries. But an October 2008 advisory opinion from the U.S. Department of Justice effectively stopped those efforts in their tracks.

In response to a request from Indiana Governor Mitch Daniels for a legal opinion on his proposal to lease the Hoosier Lottery and use the proceeds to fund a new state college tuition program, the department's Office of Legal Counsel determined that states would not be in compliance with federal law if they enter into long-term lottery-system leases with private consortia. The ruling found that while states may contract with firms to operate their lotteries, federal law requires that states maintain control over significant business decisions. The opinion also found that private management firms may not receive more than “a de minimus interest in the profits and losses of the business.” According to the opinion, the exemption state lotteries currently have from criminal prosecution under federal lottery laws would no longer apply if those lotteries were managed by private firms rather than the states. [...]

However, one state may have solved the question of how to monetize its lottery without running afoul of federal law. In July 2009, Illinois Governor Pat Quinn signed into law a $29 billion public works bill (House Bill 2424) that includes a partial privatization of the Illinois Lottery as part of the funding source. The bill calls for outsourcing the management of the lottery to a private firm that would be repaid with a five percent share of the lottery profits and the term of the contract would not exceed 10 years. Industry experts believe that since this deal would be structured more as an outsourcing contract—already common in many state lotteries—then a sale should pass federal muster. The bill sets March 1, 2010 as the deadline to ink a deal, so Illinois policymakers will need to move quickly on the procurement.

» Reason Foundation's Privatization Research and Commentary


Leonard Gilroy is Director of Government Reform


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