AP Article Rips Christie’s Privatization of NJ’s Lottery

AP Article Rips Christie's Privatization of NJ's Lottery

The following article by the Associated Press's Jeff Horwitz, with contributions from AP's Julie Walker and Michael Catalini, cites another example of Gov. Chris Christie's political favoritism and poor judgment, in this case, involving New Jersey's lottery.  

The article says, in part, that NJ's lottery was once ranked among the nation's top performers, but after Christie privatized it two years ago it is now lagging for the second year and trailing its state income targets by $64 million seven months into the current fiscal year. Meanwhile, the company running it has spent hundreds of thousands of dollars to hire lobbyists and a public relations firm with close ties to the governor. 

In 2011, New Jersey paid Macquarie Capital Group, an arm of an Australian investment bank, $1.8 million to study its lottery and recommend improvements. Macquarie, which counted lottery privatization specialists like Gtech S.p.A among its past clients, found that New Jersey's lottery was one of the nation's top performers — it had growing sales and the highest profit margins of any in the country. Macquarie recommended privatization anyway and then advised the state on setting up the bidding for the work.

The same year, Gtech hired Wolff & Samson, the law firm of David Samson, one of Christie's longtime friends, whom the governor appointed to lead the powerful Port Authority of New York and New Jersey. It also hired Mercury Public Affairs, a firm at which Christie's political strategist Mike Duhaime is a partner, to handle communications.

Northstar New Jersey, a joint venture led by Gtech, was the only bidder in late 2012 when the state sought a private company to take over the lottery. It won a 15-year contract to run the vast majority of the lottery's operations, including ticket sales and marketing. A few functions remain with the state, which oversees Northstar via a lottery commission whose members serve at Christie's discretion.

The state's Democratic legislature passed a law in May 2013 prohibiting Christie from privatizing the lottery without its consent, but the governor vetoed the bill and went ahead with the project. Between 2012 and the end of 2014, Gtech paid Wolff & Samson $460,000 to represent its interests. The law firm reported meeting regularly with state officials in charge of the lottery, but the state's Treasury Department said no emails or records of such meetings existed in response to public information requests. That department later acknowledged the existence of a handful of emails, but refused to produce them.

Christie's push to privatize the lottery was billed as a way to make it run more like a business, but Norrthstar today spends more and employs more people than when the lottery was run by the state. During the state's last fiscal year, which included nine months of Northstar's management, the lottery reported $45 million in expenses and fees — or $10 million more than the state's administrative costs in the year before.

Though Northstar fell short of its contractually set targets for income to the state by $55 million in the last fiscal year, the Christie administration unilaterally agreed to lower them, thus saving the company millions of dollars in penalties. 

If the lottery's fortunes do not improve, the shortfalls could mean budget cuts to programs directly funded by the lottery system, such as after-school care, programs for veterans and education for the deaf. The lottery is still missing its goals despite expanding its marketing budget and the number of stores at which tickets are sold.

Northstar's performance in New Jersey echoed results in two other states in which Northstar runs lottery systems. It fell short of its targets in Indiana last year, and missed its targets in Illinois for three straight years before that state terminated the arrangement last year.

And lest we forget, this is the man, Chris Christie, who thinks he has the ability and record to be the next president of the United States.