Lottery fever

July 28, 2008

The governor and his allies are still pushing lottery privatization, which — given the election season and the still-lingering anger over leasing the toll road — might not be the best idea in the world. Now, they’re really pushing the idea that it’s the a way to improve higher education in the state and stop “brain drain”:

SB 577 would allow private companies to bid for the opportunity to operate the lottery, replacing politics with professional retail management. The lease would have earned Indiana $200 million annually — as much as the Hoosier Lottery has ever made in any given year — and provide a $1 billion minimum upfront payment to be used to fund the Life Sciences Fund and Hoosier Hope Scholarships.

Senate colleagues supported this legislation. Unfortunately, the House of Representatives did not take action, and the bill died.

Proceeds from the lease would provide funding for the state’s universities to attract renowned researchers and scholars to Indiana. With more academic leaders and more educated students, the state would become a more desirable place for business. Funds also would be used to continue support of the Teacher’s Retirement Fund and the Pension Relief Fund, both of which have unfunded liabilities that could be addressed with this legislation.

Additional funds would be used to support the Hoosier Hope Scholarship Fund for college bound students, the Indiana Life Sciences Fund to support research and business applications in the life sciences industry, and the Critical Employments Needs Scholarship Program for areas such as math and science teachers. All programs would run simultaneously with the term of the lease to ensure a steady stream of funding.

The proposal to be funded is based on some dubious assumptions: that more funding for universities will lead to an influx of “renowned” teachers and scholars, which will lead to better-educated students, which will make more businesses want to locate here, which will stop brain drain. Whew! It’s tiring just to think about it. This strikes me as one of those big-fix ideas periodically trotted out as a substitute for the day-to-day grind of making the state attractive to business with things like low tax rates and reasonable regulations.

But even if we accept that the idea has a lot of merit, funding it with leasing the lottery is an awful idea. It is disingenuous to tout, as this piece does, what “cleaner hands” the state will have by getting out of operating the lottery and also claim that, in addition to $1 billion up front the state will $200 million a year. No one who leases the lottery is going to put out that kind of money without making a concerted effort to increase the number of Hoosier gamblers and how much they bet. The state will thus be in the position of adding to vice and its attendant evils, then claiming the moral high ground because it has washed its hands of the whole sordid enterprise.

How many ways can one proposal be so wrong?

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