New Lottery Lease Wrinkle

Republican legislative leaders say, fine, lease out the lottery. But instead of dealing with private interests, why not lease it to the Iowa Public Employee Retirement System, or IPERS?

From Senate Minority Leader Paul McKinley, R-Chariton:

An option that should be explored, McKinley said, would be to lease the lottery to the Iowa Public Employees' Retirement System or IPERS. The lottery sale would produce a 17 ½ percent rate of return, which is much better than the current rate that IPERS receives through many of their investments.

"Leasing the lottery to IPERS would continue to help ease our budget crunch and yet also provide necessary support to many of our state's retirees," said McKinley. "The main point here is that we should not make any hasty decisions and we must slow down this entire process."

 Intriguing.

Republicans are calling Democrats' bluff on Gov. Chet Culver's developing plan to lease the lottery for $200 million or more  in upfront cash from business interests, who would also make  annual tax payments to the state.

The Des Moines Register reports that the tax payment would be about $22.4 million, compared to the $57 million the lottery now pours into the state budget annually.

 Democratic legislative leaders see a lottery lease as one way out of a budget mess. Republicans are calling it a "backroom deal." 

The IPERS idea, on the surface, would allow the state to benefit on both sides of the arrangement. But Republicans haven't checked with IPERS officials to see if it would work.

The governor's office tells Radio Iowa that the lease plan would be subject t0 legislative approval and that the bidding process will be competitive and open. No cronyism here.

Here's McKinley's entire news release:

Sale of Lottery an Act of Desperation by Governor, Democrats

Deal appears to be in the works to some of the Governor's biggest campaign contributors

DES MOINES - Governor Culver and legislative Democrats appear to be on the verge of cutting a deal to sell off one of Iowa's biggest revenue generators at a time when Iowa's budget is already burdened by budget shortfalls as a result of considerable overspending and irresponsible budgeting during the past two years.

"Media reports this morning, make it appear some backroom deals may have been made and the ‘fix is in' for the Governor and legislative Democrats to sell Iowa's lottery. I am against this proposed plan because it is wrong to giveaway this kind of revenue generating asset during these tough economic times," said Senate Republican Leader Paul McKinley (R-Chariton). "Republicans are all for privatization where it is useful in saving taxpayers money, but this reported plan does not accomplish that goal."

If the sale were to go through, Iowa would reportedly receive $200 million up front and then less than a quarter of the profits annually over a 49 year period. However, the state already receives nearly $60 million a year in revenue from the Lottery. Thus, over time, taxpayers would be surrendering millions of dollars a year in lost revenue that could pay for important priorities like education, infrastructure and economic development.

"This is truly an act of desperation by the Governor and Democrats in the Legislature because they know they are responsible for this budget problem. This proposed scheme amounts to a very short term gain at the expense of long term pain," added McKinley.

The deal appears to have been cut behind closed doors in the Capitol with some of Governor Culver's biggest campaign contributors getting privileged and preferential treatment.

"Iowans should be concerned by this kind of cronyism. If they are going to make this sale, Iowans expect that it will be done in an honest, open and transparent fashion," added McKinley. "Governor Culver's mega donors appear to be getting a sweetheart deal at the expense of hardworking Iowa taxpayers."

An option that should be explored, McKinley said, would be to lease the lottery to the Iowa Public Employees' Retirement System or IPERS. The lottery sale would produce a 17 ½ percent rate of return, which is much better than the current rate that IPERS receives through many of their investments.

"Leasing the lottery to IPERS would continue to help ease our budget crunch and yet also provide necessary support to many of our state's retirees," said McKinley. "The main point here is that we should not make any hasty decisions and we must slow down this entire process."