Northstar Lottery Group, the private firm hired by Illinois to run its lottery, posted a net profit of 8 million, about 0 million less than it pledged to deliver for the 2014 fiscal year which ended June 30. That number is less than Northstar raised for Illinois in both the 2012 and 2013 fiscal years, according to a Chicago Tribune review. In all, in the three years after taking over daily operations of the state lottery, Northstar is about $480 million behind what it committed to generate for Illinois.
In the meantime, Northstar paid GTECH and Scientific Games nearly $85 million collectively last year, up from about $84 million and $70 million in the previous two years. Northstar was formed by a consortium of GTECH and Scientific Games.
Northstar spokeswoman Avis LaVelle said the company would not have any response until the 2014 results have been audited. The audits for the prior two years have not been completed. Previously, company officials defended Northstar’s performance, pointing out it has brought in more money as private manager than the state did. In addition, the officials said Northstar has paid Illinois $60 million in penalties for falling short of previous revenue targets.
State Rep. Jack Franks said, “This is an epic fail by the governor. He personally signed this contract, so this is all his baby. If he needs to clean house, that’s what he should do. That’s what other executives do in the real world.” Franks noted, “I met with the governor and his staff on this back in May. They said, ‘We’re looking at it.’ It’s now August.”
Quinn selected Northstar in 2010 to manage the Illinois Lottery and boost declining revenues, which provide a major source of funding for education and infrastructure. Quinn has not commented on Northstar’s performance, but his spokeswoman Katie Hickey said, “Protecting taxpayers is our foremost priority and our office continues to closely monitor the situation. Through the duration of the contract, we have expected Northstar to follow the private management agreement and meet the targets in its bid.”
State Senate President John Cullerton, one of the sponsors of the legislation that allowed the state to hire an outside firm to run the lottery, said in June he was “extremely disappointed” by Northstar’s performance and urged Quinn “to hold the firm accountable and take whatever steps are necessary. “Recently, his spokesman John Patterson said the Senator declined comment on the firm’s latest numbers. “He’s going let his previous statement and the numbers speak for themselves at this point,” Patterson said.
Meanwhile, Quinn also is taking heat from the state’s horseracing industry. Horse racetracks in Ohio, Indiana, New York and Pennsylvania allow slot machines and other forms of gambling, but not Illinois. Quinn has vetoed two measures passed by the state legislature, which would have increased the number of casinos in the state and allowed slots at racetracks. Quinn was concerned with oversight, mainly at Chicago casinos. Opponents included anti-expanded-gambling groups as well as riverboat casino operators who claimed racinos would take business away from them.
Horse trainer Dave McCaffrey counts himself among people who believe the time has come to offer casino-style gambling at Illinois racetracks. McCaffrey stables 25 standardbred horses at Maywood Park in the Chicago suburb of Melrose Park. The racetrack offers live harness racing and simulcast wagering. McCaffrey, whose career started in 1991, said, “We don’t want a subsidy. We just want to be competitive with other states that allow this form of gambling.”
He noted annual purses have dropped from $40 million in 1990 to about $14 million today. In addition, stables nationwide have been hard hit by rising costs. For example, McCaffrey said, a bale of hay that used to cost now costs $9, and a bag of grain that once cost $6 now costs $18. “There are people here who are in their 30s, 40s, 50s and 60s who have done nothing other than this,” he said.
