State considers private firm to help run Hoosier Lottery

By Lesley Weidenbener
The Statehouse File

INDIANAPOLIS – The state will take steps to hire a private company to help run the Hoosier Lottery in an effort to make more money from the games – a step already taken by Illinois and under consideration in Pennsylvania, New Jersey and other states as well.

Hoosier Lottery facts

  • The Hoosier Lottery generated $791 million in revenue and $188 million in profits during Fiscal Year 2011.
  • There are 177 full-time employees working for the Hoosier Lottery.
  • The Hoosier Lottery’s per capita sales are below the average for lotteries nationwide.
  • Since its incorporation in 1989, the lottery has contributed more than $2.9 billion to the Build
  • Indiana Fund. Lottery revenue contributions currently account for approximately 30 percent of
  • the state’s annual contribution to the Build Indiana Fund. The lottery is also contributing to Police Officers’ and Firefighters’ Pension and Disability Fund and Teacher’s Retirement Fund.
  • The lottery sells both instant games – scratch cards and pull-tabs – and online games – traditional number matching games where player tickets are produced on a terminal connected to a central computer. The sales split between these two major product categories was 66 percent for instant games and 34 percent for online ticket games in 2011.
  • The Hoosier Lottery began in 1989.

Source: Hoosier Lottery

The Indiana State Lottery Commission voted 3-0 Wednesday to seek information from companies that would be willing to “perform a broad scope of services” for the lottery. Then in September, the state plans to accept actual bids.

“Gov. Mitch Daniels has consistently challenged all of us to identify and implement changes that promote more effective and more efficient state government,” said Hoosier Lottery Executive Director Karl Browning in a statement the agency issued Wednesday afternoon.

“The goal is to become more strategic in our business approach in an effort to increase revenue for the state of Indiana,” he said.

Through a spokeswoman, Daniels said Wednesday he supports the lottery commission’s efforts to “review of its business practices to determine if there are ways to improve operations and revenue.”

Indiana created its lottery in 1989 and the games – which include scratch-off tickets and number draws – have netted $4 billion for the state since then. During the last fiscal year, the state earned $188 million from the lottery, and in 2010 it earned $183 million, according to the National Conference of State Legislatures.

In 2010, Indiana’s per-capita take – at $28 – was far below the $57 national average. And while that national average hasn’t changed, the state’s profits have dropped.

In 2006, the state netted $218 million from the lottery. The per-capita profits were $35 per person.

The lottery commission’s new proposal comes as several states have launched efforts to put gambling online. Late last year, the U.S. Department of Justice reversed its position on such efforts.

It’s also about six months after Kathryn Densborn – then the executive director of the Hoosier Lottery – resigned the post amid accusations that the agency overspent on new offices and lavish furniture as it moved from one downtown Indianapolis location to another.

And it’s nearly four years after Daniels proposed leasing the state’s lottery to a private firm in exchange for an upfront cash payment that he wanted to use for college scholarships. That plan failed to gain much traction in the General Assembly and the U.S. Department of Justice also said then that the privatization would conflict with federal law.

However, the newest proposal would not likely run afoul of justice department regulations because the state would maintain control of lottery operations.

“This would continue to be a state agency,” said lottery spokesman Al Larsen. “There would be an executive director appointed by the governor.”

Senate Appropriations Chairman Luke Kenley, R-Noblesville, said Wednesday he had not been briefed on the Hoosier Lottery’s proposal. But he said that if the commission is “going to retain all control over the thing and just do a management contract, that wouldn’t be any different than the prison system hiring a company to handle the kitchens or health care.”

But House Minority Leader Pat Bauer, D-South Bend, said the move a mistake.

“Those of us who have steadfastly fought against the move to privatize public services have been vindicated by the shoddy record of this administration’s efforts in this area, but that doesn’t appear to mean a thing to this governor as he lurches his way out of office,” Bauer said in a statement. “There will be vigilance over the attempted implementation of this proposal. We will make every effort to protect the public’s interests, a concern I am not sure is shared by this administration.”

With the General Assembly’s approval, Daniels leased the Indiana Toll Road to a private firm for 75 years and an upfront payment of $3.8 billion. Democrats generally opposed the move, which Daniels used to pay for road and bridge projects that were part of a 10-year transportation plan.

The Daniels administration has also privatized other state functions, including the eligibility system for welfare programs. That move – also roundly criticized by Democrats – hit problems that forced the state to redo the contract and then landed it in court.

“This governor and his administration will be long gone at the end of this year,” Bauer said. “They may claim the benefits from pursuing this course, but they won’t be around to pay the price for their decision-making when it goes wrong.”

But Christy Denault, a spokeswoman for Republican gubernatorial candidate Mike Pence, did not oppose the idea. “We should always listen to those who have ideas for making government operate more efficiently,” she said.

Democrat John Gregg’s campaign did not return a call seeking comment about the issue.

Already, a private manager has taken over lottery operations in Illinois. Northstar Lottery Group started running the Illinois games nearly one year ago under a 10-year contract and has made significant changes since then, including the launch of online ticket sales.

The Hoosier Lottery released what it called a “Request for Expression of Interest” on Wednesday, which lists areas of potential growth opportunities:

•             Reconfiguring the current retail and distribution network, potentially increasing its scope and reach;

•             Optimizing commission structure for retailers and other distributors;

•             Optimizing the gaming experience within the legal parameters of the United States and the State of Indiana;

•             Enhancing marketing activities;

•             Marketing the Lottery to new, infrequent and lapsed players to increase the breadth of its customer base

•             Implementing new technology platforms to enable more effective and efficient operations; and

•             Making improvements to the supply-chain.

Efforts to boost lottery sales – and therefore profits – could cause problems for the proposal at the legislature, Kenley said. Four years ago, several lawmakers objected to Daniels’ plan to privatize the lottery because it would likely have involved expanding its operations.

“This effort would probably be to market more sales of lottery tickets,” Kenley said. “About one third of the legislators (would oppose that) and so that’s going to be one issue that will pop up.”

Lesley Weidenbener is managing editor of, a news website powered by Franklin College journalism students. Reporter Samm Quinn contributed to this report.


Correction: This is a corrected version of the story. The original version misstated the Hoosier Lottery’s 2010 profits. The Statehouse File regrets the error.

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