Is Perry playing the numbers with the state lottery?
by Rusty Rothenbuescher
Austin, March 30 - Gov. Rick Perry's announcement Feb. 8 to sell the Texas Lottery Commission to fund public education and cancer research has left many questions looming over the details of the proposal, especially when it comes to the numbers.
The governor's office estimates the lottery could be sold for between $14 and $28 billion based on financial advice provided by the firms Morgan Stanley, UBS Investment Bank, and Goldman Sachs. According to the governor's plan, proceeds from a $14 million sale would then be divvied into three endowments: a $3 billion fund for cancer research, $8.3 billion for public education, and a $2.7 billion endowment for the "Healthy Texas" program which would assist those less able to afford health insurance.
"They [the private sector] will make substantially more money out of it [the lottery]," said Perry. "I've got an idea there will be a lot of interest in the Texas lottery. And why in the world would we not want to use that asset?"
Some wonder if Perry is selling the cow even while the milk is free. He can take the credit for a quick influx of cash into the coffers, spending it on schools and cancer research while his successors deal with the fallout down the road.
Warren Chisum, chairman of the House Appropriations Committee, which writes the state budget, said Perry's enthusiasm for selling the state lottery is not shared among lawmakers. "I don't know anyone who's supporting it," said Chisum (R-Pampa).
A fact sheet on the Governor's website refers to the plan as a concession rather than a sale suggesting the lottery would be more of a lease than outright sale. If this is the case it is not likely the state would receive payment in full the first year, making the $1.3 billion in yearly interest earned improbable.
"It's fuzzy math," said freshman representative from Port Aransas, Juan Garcia. "Is it a one lump sum, or paid over 40 years?"
Garcia's query is one of many that call into question the calculations related to the $14 billion price tag to privatize the state entity. If the estimates from Perry's office ring true, from a one lump sum payment of $14 billion, Texas would see about $300 million more in revenue per year from investing the proceeds than it currently does from owning the agency, for a total $1.3 billion and assuming a 9 percent interest rate.
"If that's true, I'd like to know what they plan to invest in," said Rep. Mike Villarreal, D-San Antonio. "Every investment has a pattern of going up and down. What happens during those years when we're not earning that rate of return?"
Thanks to Rep. Dennis Bonnen, Gov. Perry's proposition will get its day on the House floor. Bonnen (R-Angleton) filed House Bill 3973 March 9, just before the 60-day filing deadline expired.