Two years into the privatization of New Jersey’s lottery by Governor Chris Christie, declines in revenue are creating shortfalls in the state budget.
According to an Associated Press investigation of internal lottery documents, higher costs associated with the private company that Christie hired, Northstar New Jersey, have cut the state’s income for the second straight year, creating a $136 million shortfall in the state’s 2015 budget.
The results are bad enough that the state is entitled to fire the company if its performance doesn’t improve in the current fiscal year, the news service reported.
Christie has not commented on the report, but officials for the state’s treasury department said. NorthStar’s “proactive and creative efforts” kept lottery losses from being even higher.
Christie touted the privatization as a way to lower government spending, yet bring in more revenue. But the move was also seen as benefitting some key Christie’s allies.
Northstar New Jersey hired the communications firm of Christie campaign strategist Mike DuHaime and the law and lobbying firm of former Port Authority chairman David Samson received $460,000 for lobbying on behalf of Northstar between 2012 and the end of last year, according to the AP.
Northstar is a partnership that includes GTECH S.p.A, the largest global lottery business, and Scientific Gaming.
The Record of Bergen County first reported New Jersey’s shortfalls. According to the paper’s analysis of Northstar’s contracts, New Jersey will likely pay the company around $100 million for its services in the year that ended in June.
The lottery has seen disappointing ticket sales for the multi-state games Powerball and Mega Millions. Sales for these multi-state games are down nationally, but are down even more so in New Jersey, falling 29 percent since last year, according to the AP.
The lottery brought in just $900 million for the state this fiscal year, its worst showing since 2009.
The AP review found the lottery struggling with higher expenses under NorthStar. Before privatization, the state kept 34 cents in profit from every $1 in ticket sales. Under Northstar, expenses rose, sending profit margins down to 30 cents on the dollar for the 2015 fiscal year’s $3 billion in revenue.
Northstar must pay a penalty each year it underperforms, which this year would be about $14 million, but the state is still absorbing a $136 million shortfall, the review found.
