Indiana lottery seeking ideas from private firms

The Indiana State Lottery Commission endorsed a plan Wednesday to seek out private companies to take over some operations of the Hoosier Lottery, a state agency whose income has shrunk in recent years.

Hoosier Lottery spokesman Al Larsen said the effort's goal isn't to privatize the lottery, but to see if companies have ideas for improving some of its operations — functions they could potentially take over if the state likes their ideas and eventually awards them contracts.

Larsen said the primary goal is to boost the lottery's net income, which dropped from $218 million in fiscal year 2006 to $188 million during fiscal year 2011 — a 14 percent decline.

"The whole point is to try to increase the amount of net income that the lottery produces on an annual basis. That's what's ultimately given to the state and flows back to taxpayers," Larsen said. "That's what's driven this overall — a desire to produce more net income."

The proposal was quickly criticized by House Democratic Minority Leader Patrick Bauer, who said Republican Gov. Mitch Daniels' administration had not learned from a failed privatization of Indiana's welfare-intake operations that has the state and IBM embroiled in countersuits.

"Haven't we learned from the past?" Bauer, D-South Bend, said in a statement.

A resolution unanimously approved Wednesday by the Lottery Commission's chairman and two other commission members authorizes the state to issue a request soliciting interested companies to submit proposals for improving a broad scope of services handled by the state agency.

That request issued Wednesday remains open until June 1.

The commission's resolution states that the lottery "should function as much as possible as an entrepreneurial enterprise." It also says the Hoosier Lottery's mission "is to return maximum net income to the state in a socially responsible manner."

By mid-June, the lottery hopes to identify an initial list of firms interested in bidding on handling some lottery operations. And by September, the lottery will begin accepting business plans and formal, binding offers from firms.

A Hoosier Lottery statement says the commission "will be in a position by October to determine if an award is in the best interest of the State."

Larsen said he couldn't speculate on what the operations the lottery could turn to a private company, adding that that will "be determined based on the proposed that are submitted."

"The bidders will know that the goal is to improve net income, that part of our performance, and it will be up to those bidders to let us know how they would plan to make that happen," he said.

Larsen said that regardless of the effort's outcome the lottery will remain a state agency controlled by the state.

In 2007, Daniels proposed leasing the state lottery to a private company to pay for a proposed program that would provide college scholarships to students whose families earn less than $60,000. He dropped the idea in October 2008 after the U.S. Department of Justice said such a move would not comply with federal law.

In 2006, the Daniels administration awarded a privatization contract to IBM that additionally grew to $1.37 billion to automate the state's welfare-intake system. Daniels canceled that contract in 2009 amid complaints about long wait times on calls, lost documents and improper rejections from clients and federal officials.

Indiana and IBM are now suing each other over that failed effort.

Bauer said in his statement that the welfare privatization effort "turned into a disaster so bad even the governor had to admit he made a mistake."

Daniels, who cannot seek a third term under Indiana law, will leave office in January.

"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.