Illinois Lottery officials recently announced Camelot Illinois will take over lottery management from Northstar Lottery Group on January 2, 2018. Camelot is expected to increase annual sales to billion, generating more than billion per year for schools and construction projects by the end of the 10-year contract. Sales reached .85 billion for the most recent fiscal year–the second consecutive year total sales essentially were flat, according to state numbers.
A subsidiary of Camelot Group, which runs the Great Britain national lottery, Camelot Illinois said it will invest $15 million in new retail sales equipment and signage, plus enhanced marketing and technology, including a mobile app to boost online sales.
Camelot’s management fee will be an estimated $25 million in the first year; Northstar’s first-year fee was $15 million. Camelot’s management fee will be reviewed annually to reflect actual costs, which was not included in Northstar’s initial agreement, Acting Lottery Director Greg Smith said.
In addition, according to the contract, Camelot will receive “incentive compensation” only if net lottery income (sales minus expenses and payouts) exceeds a minimum target amount of $731 million in the first full year and $859 million in the final year, to be deposited into the schools fund. However, Camelot projects the target amount could reach $1 billion within the last half of the contract. In the fiscal year ending June 30, 2016, $691 million was deposited into the schools fund.
Camelot’s incentive bonuses would be a percentage of profits, ranging from 17 to 27 percent. Camelot Managing Director Neil Brocklehurst said, “The more we grow, the more we sell, the more state benefits and so do we.” Camelot projects it will payout $23 billion in prizes over the life of the contract. The state has the right to terminate the agreement if specific performance benchmarks are not met.
The Illinois legislature in 2009 approved making the state the first to privatize lottery management. Supporters said an outside company could help deliver higher revenues and increasing annual contributions to the state schools fund.
Northstar took over management of the Illinois Lottery in 2011. At first it reported record sales. Then Northstar went to arbitration with the state over how goals are set, and later a Chicago Tribune investigation discovered the lottery did not award many of the largest prizes in certain instant games. Sales began to miss set goals. Then-Governor Pat Quinn tried to fire Northstar in 2014 but Attorney General Lisa Madigan blocked that action, calling it a bad deal for taxpayers. Governor Bruce Rauner announced a new termination agreement in 2015, calling for Northstar to be replaced by January 1, 2017. Northstar’s contract was extended after the state missed that deadline.
Also, due to Illinois’ budget crisis, the state could not pay out some prizes and lottery winners sued to get their payments. Powerball and Mega Millions sales temporarily ceased this summer. Then lawmakers approved a state budget for the first time in more than two years.
