Vermont Senate Puts an End to Governor’s Lottery Lease Proposal

March 5, 2008

In January the Tax Foundation testified before the Vermont Legislature’s Ways and Means Committee on a proposal to lease the state lottery. We stated, as we have before, that a state-run lottery is a regressive, non-neutral, hidden tax, and any plan that gets the state entirely out of the lottery business is a good one.

However, a lease would not remove the state from the lottery business entirely, since the state would retain a certain degree of control over the lottery and grant monopoly status to the company that bought the lottery. In addition, at the end of the lease, complete control would revert to the state.

Selling the lottery outright would be a much better option, but so far the states that have looked into lottery privatization have been reluctant to give up control of what is perceived as a lucrative state asset, and no state has proceeded with a lease or sale. Last week the Vermont senate effectively killed the lease proposal, although it appears that Vermont lawmakers are not finished trying to squeeze as much money as possible out to the lottery.

From Lottery Post

Some called it the final nail in the coffin. Some called it a eulogy. Whatever they called it, members of the state Senate said a bill they passed Tuesday will likely stand as a tombstone over Gov. James Douglas’ proposed lease of the state lottery.

The bill seems fairly mundane in itself. It requires lawmakers’ approval before the lottery could be leased—something that might well have been required by law already. And the administration was already planning on obtaining Legislative acceptance before entering into a long-term lease of the lottery for an up-front payment anyway, Secretary of Administration Michael Smith said.

. . .

But state senators said the bill was important because it showed how little support the idea has in the Senate. The bill passed on a roll call vote of 29-0.

And it gave them a chance to point out recent testimony by a Wall Street analyst that given the financial shape of the stock market, Vermont was quite unlikely to get a $50 million up-front payment for the lease as Douglas had hoped.

. . .

The governor would use half the up-front money from the lease to pay down what the state owes towns for school construction obligations, and the other half to lower the statewide property tax rate.

Members of the Senate have talked about finding other ways of gaining extra money from the lottery, perhaps bonds backed by lottery proceeds, perhaps increasing the kind of games and marketing done.

“From the state’s perspective the only reason the lottery exists is for revenue,” Smith said. “We presented what we thought was a solid idea.”

Lawmakers said the lottery proposal was set up by the governor to allow him to say he was presenting a plan but based on an idea that was never going to move in the Statehouse.

“The governor will continue to use this as a political ploy. But we are not going to play that game,” said Majority Leader Sen. John Campbell, D-Windsor.

Read Options for the Future of Vermont’s Lottery (Testimony Before the Ways and Means Committee of the Vermont Legislature) here. Click here for more on implicit lottery taxes.

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