Regional News

In Illinois, Action on Lottery, Not Capital Plan

CHICAGO - Illinois Gov. Rod Blagojevich yesterday praised the House's passage of legislation that would allow the state to pursue a lease of the Illinois Lottery to raise at least $7 billion to fund new capital spending, but criticized the chamber's failure to also approve an actual capital works program.

"The governor believes that with a 7.3% statewide unemployment rate in Illinois, we should be moving now to pass a jobs plan that would put hundreds of thousands of people to work," read a statement from Blagojevich's office. "Although the governor is pleased that the House is finally moving forward with his lottery lease proposal, they have yet again delayed passing the jobs plan."

The legislation, approved on a 75-to-38 vote, would allow the state to put the lottery out to bid for private operators for a term of at least 50 years and no more than 60 if at least $10 billion could be raised with $7 billion earmarked for construction projects. Any transaction would need approval of the state comptroller and treasurer, and fees for financial firms that work on the deal would be capped.

The state would retain a 20% ownership stake in the lottery, using its ongoing annual profits, along with interest from an endowment set up with the remaining $3 billion from a $10 billion lease payment, to fund education-related spending that is now covered by the $600 million or more in profits the lottery generates annually.

Blagojevich originally pushed for a lottery lease last year to create a one-time windfall of education funding, but lawmakers rejected it over concerns that the proposal did not include a plan to replace the long-term $600 million annually. The governor resurrected the idea this year as a means - along with expanded gaming - to finance a long-sought capital program for transportation, transit, school, and other construction projects.

The Illinois Senate signed off on one version of the lease, but the House rejected it earlier this year as tensions escalated between the governor and House Speaker Michael Madigan, D-Chicago.

Madigan withdrew his opposition, saying stiff opposition to expanding gaming in the state left lawmakers with few other options to raise new revenue. During the special session yesterday, support for the lease remained tepid and many lawmakers voiced their hesitancy to endorse it before casting a vote in its favor.

Some also were angered by the lack of an accompanying capital bill.

"The audacity of anyone calling this a capital bill is insulting," Minority Leader Tom Cross, R-Oswego, said before voting for the lease.

The bill's sponsor, Majority Leader Barbara Flynn Currie, D-Chicago, countered that the actual lease process must be further along before Illinois can commit to spending levels for actual projects.

While a handful of states are considering leases of their lotteries, none has completed such a transaction to date. A lottery lease would mark a first for Illinois, which has not previously moved to securitize existing revenue streams or privatize assets with the exception of the sale of a chunk of the state's student loan portfolio.

The measure received three-fifths majority approval, with the support of some Republicans, so it would take effect immediately if the Senate signs off on the revised version. A simple majority's approval in the House would have delayed the legislation's effective date until next July.

The original $34 billion capital program supported by the governor relied on $7 billion from the lottery lease, $800 million from the issuance of new casino licenses, $7.8 billion of new borrowing, and local and federal matching dollars. Federal lawmakers have warned the state that it risks losing up to $9 billion in federal matching dollars without new authorized capital spending. Illinois has lacked a major capital program since 1999.

Also yesterday, the House overwhelmingly voted, 110 to 3, to override changes Blagojevich recently made to ethics legislation using his amendatory veto powers. Under the original legislation, individuals or businesses with contracts worth at least $50,000 with the state would be barred from donating to the campaigns of the state officeholder with power to award those contracts.

The governor signed that ban into law by executive order and rewrote the legislation to ban lawmakers from holding jobs with other local governments, tightening how pay raises are approved, and requiring more stringent lobbyist disclosures.

The House also voted to capture about $220 million from various special funds to restore a series of budget cuts made by the governor earlier this summer as he slashed about $1.4 billion in spending to close a deficit.



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