Leader Blues

Tuesday, June 16, 2009

EDITORIAL >> Lottery chief a big gamble

Did the state Lottery Commission swing a good deal for the taxpayers when it hired Ernie Passailaigue away from the South Carolina Lottery for a cool $324,000 a year plus perquisites? The commissioners were proud of themselves, and a legislative oversight committee put its stamp on the deal.

Still, there were querulous sorts who wondered why the state would hire a fellow to run a lottery at a salary five times that of the governor and for much more than people earn for running government programs many times bigger, more complicated and more important than the lottery, which may bring in as much as $100 million a year for scholarships. That is less than the cigarette tax produces.

The huge salary — huge by government pay standards — would be a terrible reflection of priorities unless there is something peculiar about the lottery that demands a premium for the man in charge. One defense over the weekend was that $324,000 for a man who will run an operation that will bring in $100 million a year is chickenfeed. But the director of the state Finance and Administration Department supervises the collection and distribution of some $7 billion in revenue for vital state services like education, colleges, prisons, highways and health and social services. Richard Weiss doesn’t get anything like $324,000, and he’s been doing this work very well for two decades.

Forty-two other state lotteries, including South Carolina’s, got up and running without the special expertise that Arkansas felt it had to have. It is not rocket science. Nearly all the expertise is exercised by the giant lottery vendors. Passailaigue will not himself develop the menu of gambling products. He will put out requests for proposals for a company to produce the instant lottery, or scratch-off, tickets and maybe another for an online lottery system, just like he did in South Carolina and the lottery directors did in the other states.

Scientific Games Corp. almost surely will get one of the contracts, for that matter maybe contracts for all the gambling products. It has contracts to print scratch-off tickets in 34 of the 42 lottery states. Gtech Holdings may get in on the business. It has 26 of the state contracts to operate computer programs for games like Pick 6 and Powerball. There are a few small gambling vendors but they rarely get in on the business, often because state lottery laws or the bid specifications freeze them out. Scientific Games and/or Gtech Holdings will run the Arkansas lottery.

It may be important to scrutinize the process closely to be sure that bribery and bid-rigging do not occur. Lotteries are famous for that. Maybe Passailaigue is a good one to have in charge of that. He has had some experience with it. In September 2001 as South Carolina was about to award contracts for the games, memos passed back and forth between Scientific Games and its exponents.

“We have both sides of the business in South Carolina at our feet,” an associate of a South Carolina lottery lobbyist wrote the CEO of Scientific Games, according to court records. “We must continue to be covertly aggressive in our approach.”

He suggested that the CEO throw a fundraiser for the South Carolina governor in New York and make a payment to the lottery campaign organization in South Carolina. Two days after Scientific Games won the contract from Passailaigue and his lottery commission to provide scratch-off tickets and three weeks before winning the other major contract to provide online games, the CEO sent a check for $35,000 to South Carolinians for an Effective Lottery. Then he threw a fundraiser in New York for Gov. Jim Hodges’ unsuccessful 2002 re-election campaign. He raised $50,000, much of it from the gaming company’s officials.

With firsthand knowledge of that sort of thing, maybe Passailaigue can save Arkansas from any such embarrassment. Would it be worth $324,000? You be the judge.