Chris Christie's lottery bet not paying off

Gov. Chris Christie's big bet — that New Jersey would reap outsize rewards by putting the lottery into private hands — isn't paying off.

Lottery revenue is off 7.9 percent over the last six months, compared to the same period the previous year, according to new state figures. Lottery support for schools and people with disabilities amounted to $965 million in the last fiscal year, but that was $28 million under what was projected in the state budget.

Northstar New Jersey has a 15-year contract to run New Jersey Lottery's sales and marketing operation, giving the company the potential to top $1 billion in earnings if sales goals were met. But in the fiscal year that ended last June 30, the company missed the net income target in its state contract by $55 million, or 7.3 percent, triggering a $14.1 million penalty. No payments are due to the state until $20 million in penalties accrue.

"The figures are certainly very troubling,'' said state Assembly Budget Committee Chairman Gary Schaer, a Democrat from Passaic County. "It's difficult to put meaning into what those numbers are — because they're just numbers, right? — but the meaning beyond the numbers is that there are programs run by the state that depend on lottery revenue and there can be ramifications when those revenue sources do not meet the expectations.''

INVESTIGATION:

The New Jersey Lottery is the state's fourth-largest revenue producer — behind the gross income tax, the sales tax, and the corporation business tax.

The state-run lottery had lower administrative costs. Sales totaled $2.9 billion last year with Northstar taking $29 million for management, advertising and marketing fees and expenses. In 2013, the last full year under state control, the lottery's sales were $2.8 billion.

A spending analysis by the Christie administration last year showed that the amount the lottery under state control spent to generate one government dollar was 35.9 cents, a figure that increased to 53 cents under Northstar. At the same time, the ratio of government revenue over total sales was 34.2 percent, falling to 32.8 percent under Northstar.

CAMPAIGN CASH:

Since its inception in 1970, the lottery has distributed $22 billion to colleges, the Department of Human Services, the Department of Military and Veterans Affairs, the School Nutrition Program, the Marie Katzenbach School for the Deaf and other organizations and programs.

The Christie administration expects a $1.04 billion lottery contribution for state programs in this year's budget.

Northstar went to work in October 2013. It won the contract with promises to grow ticket sales and boost net income by an additional $1.4 billion over 15 years.

The Republican governor's administration said the deal would energize and modernize the program in ways a state-operated lottery couldn't.

In previous interviews, company officials said first-year lottery ticket sales were hurt by the aftermath of Superstorm Sandy.

Northstar spokeswoman Angela Wiczek, asked about the latest figures, in an email said, "There's actually been a lot of industry discussion about the unprecedented decline (nationally) in both Powerball and Mega Millions sales recently.''

Wiczek declined to comment specifically on New Jersey sales and state officials did not respond to a request for comment.

Powerball, which is played in 44 states, saw a 40 percent drop in ticket sales in the second half of 2014.

New Jersey was the third state to privatize its lottery, but that group was reduced to two when Illinois fired Northstar in 2014, after revenue targets were missed for three straight years. Indiana also has a privately managed lottery.