CHICAGO - The Illinois House will convene on Wednesday to vote on a proposed long-term lease of the Illinois Lottery that could generate billions for a new capital spending program that has been stalled in a feud between Gov. Rod Blagojevich and the House leader.

The session will continue through Thursday, according to Steve Brown, a spokesman for House Speaker Michael Madigan, D-Chicago. House leaders were still working on the bill yesterday, but it is expected to mirror the governor's proposal with some added provisions and safeguards.

"We are still talking through how to make this lottery lease a workable plan," Brown said.

Under the governor's lottery lease, proposed in his fiscal 2009 budget, the state would seek bidders to operate the lottery system for a minimum 50-year term with the hope of raising at least $10 billion. The state would retain a 20% ownership stake in the lottery over the lease term.

About $7 billion from a lottery lease would be earmarked for the capital budget known as Illinois Works, while the remaining funds would go into a trust. The state would also funnel nearly $300 million it would expect to collect from its remaining 20% ownership share into the trust with the goal of generating the $600 million needed to replace current annual lottery profits that fund education.

Legislative concerns over how the state would replace that education money helped kill a lottery lease proposal last year. A proposed $34 billion capital budget had also relied on $7.8 billion of new borrowing, local and federal matching funds, and an expansion of gaming, but legislative opposition killed the gambling measures.

The latest version of the capital budget calls for $25 billion to be spent in the coming years on transportation, transit, school construction, bridges, and the environment. It is unclear at this point how large of a capital budget the lottery lease would support or how much borrowing will eventually be authorized, Brown said.

The state has lacked a major infusion of capital dollars since the $12 billion Illinois Works program, which was approved in 1999, and officials have warned that without new funding the state risks the loss of $9 billion in federal matching dollars for capital projects. While support is strong, an ongoing feud between the governor and Madigan had remained an obstacle.

Madigan and Blagojevich reportedly talked and even embraced when urged to at a recent meeting of the Illinois delegation at the Democratic National Convention last week in Denver. Brown, the spokesman, suggested that Madigan is still not a fan of leasing a state asset, but added that "this is about the last option to support a capital plan," given legislative opposition to expanded gaming.

Lawmakers have pushed for measures in the capital bill that would limit the governor's discretionary power to award funds. The measures are sought due to concerns that Blagojevich would withhold state grants to punish critics.

Brown said any legislation would include additional oversight and safeguards. It is expected that any lease would require the approval of the state comptroller and treasurer. Any legislation would also likely include fee disclosure requirements and possibly fee caps. Lawmakers were caught off-guard after it was disclosed following Illinois' $10 billion pension bond sale in June 2003 that Robert Kjellander of Springfield Consulting Group earned nearly $1 million as book-runner Bear, Stearns & Co.'s consultant.

The Democratic-controlled House will need some Republican votes to achieve the three-fifths majority needed for any lottery lease bill to take effect immediately. A simple majority would delay the bill's effective date until next July. Any plan would also then need Senate approval, but that chamber has already passed versions of a capital bill and lottery lease.

During the legislative session, it is also expected that the House will approve the transfer of several hundred million dollars from various non-general fund accounts, a move that could help restore some of the $1.4 billion of budget cuts made by Blagojevich using his veto powers earlier this year.

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