Under the plan being pushed by the Christie administration, the state would still own the lottery, but a private company would be responsible for sales and marketing. The company would keep a portion of the profits and would be penalized if revenue falls below expectations.
The winning bidder would have to pay the state $120 million up front and sign a 15-year contract.
Several Democrats who sit on the Budget Committee questioned why the state was interested in making a switch, saying "more transparency" was needed on the proposal and possible ramifications.
"Privatization should be reserved for when the government cannot perform that function well on its own," said Chairman Vincent Prieto, D-Hudson. "In the case of our award-winning lottery system, we have one of the most efficient operations in the world ... It appears that the only one that stands to benefit from this proposal is the company chosen to take over this asset."
Republicans, though, see the privatization plan as a way to help boost lottery sales and raise more revenue.
"It is incumbent upon government to look for new ways to do things better and this administration has done that time and time again," said Assemblyman Anthony Bucco, R-Morris. "This proposal is strictly performance-based. If the winning bidder doesn't put up increased revenues, the state will always have the ability to terminate the contract."
Small business owners who sell lottery tickets told committee members that the change could cost them money, since they use the sales to draw in customers who often buy other products.
"We welcome any move by the state that's going to help us promote our lottery products and increase sales, but we're opposed to anyone taking the playing field and manipulating it to a competitors' advantage," said Satish Poondi, director of legislative affairs for Green Brook-based Asian-American Retailers Association.
Some committee members and business owners also raised concerns that a private company could offer online sales, which could sharply reduce the number of people who buy tickets at convenience stores and gas stations. And lawmakers on both sides raised concerns about whether offering more lottery options, such as Internet sales, could be harmful for those with gambling problems. They also questioned how the age of online purchasers would be verified.
Seth Hahn of the Communications Workers of America, whose membership includes many lottery employees, told the committee that privatization would be a "step in the wrong direction." He said roughly 60 to 65 lottery employees who work in sales and marketing could face layoffs if privatization occurs.
Some Democrats on the committee said they were displeased that officials from the lottery and the state treasurer's office declined invitations to attend the hearing. That occurred because the officials from those departments felt it would be inappropriate for them to comment on the proposal while the matter is still pending.
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