Illinois ends contract with private manager of lottery

Illinois is dumping its private lottery manager three years into a 10-year contract for failing to meet financial goals, Crain’s Chicago Business reported Friday.

The manager, Northstar Lottery Group LLC, is 80-percent owned by Rhode Island-based Gtech Corp., the parent company of Gtech Indiana, which manages the Hoosier Lottery.

"The governor's office has directed the lottery to end its relationship with Northstar," Grant Klinzman, a spokesman for Illinois Gov. Pat Quinn, told Crain’s in an email. "The administration has had serious concerns with Northstar's performance. The governor demands every state contractor be held accountable for their performance."

Quinn's office would not tell Crain's whether the state planned to operate the lottery itself or hire a new manager.

Hoosier Lottery spokeswoman Courtney Arango did not immediately return a phone message Friday afternoon seeking comment on Illinois’ decision.

Northstar and Illinois disagree on the exact numbers, but the state said the company has fallen short of its projections in all three years it has managed the lottery. It was $716 million short of its revenue target through the first nine months of fiscal 2014, the state said earlier this year.

Northstar’s problems have created potential political problems for Quinn, a Democrat, who is running for reelection this year and trailing Republican Bruce Rauner in the polls.
 
Gtech signed a 15-year contract to manage Indiana’s lottery in 2012 and promised to bring in $1.76 billion in the first five years.

Indiana was only the second state, following Illinois, to outsource most of its lottery operations. New Jersey became the third state in 2013.

IBJ reported May 20 that Gtech was not on pace to reach financial goals in Indiana for the 2014 fiscal year, which ended June 30. Its revenue from lottery products through April 30 was $852.4 million and it needed to reach $1.06 billion by June 30 in order to reach its goal of $256 million in net income.

Full figures for the fiscal year haven’t yet been made public by the Hoosier Lottery.

Under its contract, Gtech is responsible for making up any shortfalls.

Indiana pulled in an estimated $224.6 million under its own management in fiscal 2013, according to the lottery commission.

Gtech outlined its long-term plan for meeting its lofty goals in Indiana in a May 30 IBJ story.