Leader Blues

Tuesday, May 12, 2009

EDITORIAL >> Lottery commission gets down to work

The state lottery commission is off and running and at this happy stage it seems to be doing things right — make that, saying the right things.

Ray H. Thornton, the most prominent of the nine appointees to the commission, was elected chairman. The former attorney general, congressman, university president and Supreme Court justice said the commission was going to do everything — everything! — out in the open. That is, there will be no private promises of jobs, no closed-door bidding, no side deals, not even any private negotiations. The public will know everything they do and exactly why and how they do it.

That is good to hear and it is important that the commission live up to the standard. A lottery is not like creating just any new state agency. Lotteries are state-operated gambling and by their nature are ethically perilous undertakings. There is great wealth to be made, and we are not talking about the people who win the Lotto jackpot but the people who run the lottery.

The people who are chosen as the lottery director and internal auditor will receive huge salaries and benefits, compared at least with other state employees — three or four times what the governor earns and even more than what Lu Hardin got his board to pay him at the University of Central Arkansas.

The salary maximums that the legislature appropriated for the jobs are inexcusably high, but the sponsors said they wanted to get someone really good. We are unconvinced that the big bucks get that done, but we will see.

One of the commission’s early critical acts will be choosing the lottery vendor, or vendors. It will be the vendors’ lottery. Once chosen, and maybe even before, the vendors will have a role in nearly everything the lottery does.

The companies often are involved in writing the laws creating lotteries. The Arkansas law was written entirely behind closed doors, but the lawmakers assured us they did it independently of the big gaming companies.

American lotteries are an oligopoly. Two companies, Scientific Games Corp. and Gtech Holdings, now do nearly all the lottery business in the United States and in much of the world.

They have a hammerlock on the business. They are simultaneously ruthless competitors and shameless partners. There have been allegations in court of Gtech bribing its way into contracts with state lotteries, but the company says those were questionable practices by rogue employees — sort of like the rogue soldiers who tortured at Abu Ghraib — and at any rate the problems are past.

The companies have more or less divided the market with Gtech concentrating on making, selling and operating online lottery systems while Scientific Games specializes in creating and making instant lottery tickets. Arkansas may wind up contracting with both.

The commission will hire an advertising firm to drum up lottery sales, and the agencies are gearing up to win that lucrative contract. If the lottery is to produce the revenue for college scholarships that its sponsors and promoters claim, there will have to be a relentless commercial effort to create an unquenchable desire of people to play and find their fortunes. At least the contracting must be accomplished with a stern regard for efficiency and accountability.

There are other dangers. Oddly, the constitutional amendment authorizing the lottery specified that the money generated by the lottery would not go into the state treasury but into private accounts, which could mean the public will not have the transparency and safeguards associated with the treasury, where every dollar is audited before and after its expenditure. The lottery commission will need to see that the same scrutiny and accountability will follow the private banking.

Then there is the legislature. The lottery law authorized a committee of legislators to look over the shoulders of the commissioners. It has the appearance of extra accountability but it is more apt to mean the opposite.

A couple of legislators on the monitoring committee wanted to make every commission decision subject to approval by the legislators, which would violate the separation-of-powers doctrine. We worry that the lottery will become an employment agency for former legislators.

This lottery business will bear the public’s careful attention. There are inherent evils in any form of gambling, no less when it is controlled by the government than when it is a private enterprise, and we need to see that the good far outweighs them.

—Ernie Dumas