Illinois Fires Northstar After 2014 Losses

For the first time since 2009, the Illinois Lottery lost money last year and private lottery manager Northstar Lottery Group was to blame, said a legislative report. Northstar consistently failed to meet profit targets, among other issues, since it was hired in 2010. A new private operator will take over by January 1, 2017.

Following a legislative report that the Illinois Lottery lost money in 2014 for the first time since 2009, Governor Bruce Rauner announced the state has terminated its contract with Northstar Lottery Group, the first private company to manage a state lottery. Northstar was hired by the Illinois Lottery in July 2011. Governor Bruce Rauner’s General Counsel Jason Barclay said Northstar and the state reached an agreement that will remove the firm as private manager by January 1, 2017, or until a replacement is chosen. Due to last year’s lottery losses, money generated for state programming was reduced by 5 million.

Lottery Acting Director B.R. Lane said, “This is a new day for the Illinois Lottery. This agreement will save the taxpayers hundreds of millions of dollars while allowing the Lottery to select a new partner that will help the agency grow and better serve its customers.”

Barclay said the move immediately will save taxpayers $22 million through $10 million in penalties Northstar will pay for not reaching stated revenue goals, plus a decrease in the fees the state must pay to the company for terminating the contract early, according to an exit deal negotiated last year by former Governor Pat Quinn’s administration. Attorney General Lisa Madigan rejected that deal. Barclay noted under the new agreement, the private manager will select its own suppliers. The Quinn administration’s deal would have forced Northstar to give option rights to its parent companies, GTECH and Scientific Games.

The legislative report leading to the termination of the Northstar contract said, “The future of the lottery is expected to be turbulent in the coming months.” The report noted Northstar consistently failed to meet profit targets, entered into arbitration with the state several times, paid numerous penalties for not meeting targets and failed to increase lottery retail outlets.

Last month lottery winners of jackpots of $25,000 or more were told they would not be paid until legislators could pass a state budget. Under state law, prizes larger than $25,000 must be paid by the Illinois comptroller, who is not authorized to issue the checks without authorization from the legislature.

Currently lottery winners of jackpots of $25,000 or more are not being paid because of the state’s budget crisis. Winners filed a federal lawsuit demanding the state stop selling lottery tickets until they are paid.