With Revenue Down, Lottery Overhauls Managment Contract

Jun 12, 2015

Credit Courtesy / Hoosier Lottery

A private company that manages Indiana’s lottery has failed to meet the state’s revenue goals for the two years it’s been in charge. In response, the State Lottery Commission Friday drastically lowered the targets the company has to meet.

As part of its contract to manage the lottery, management firm GTECH set revenue goals it had to meet or pay a penalty to the state.  It just missed the target its first year and this year it’s on track to fall short by nearly 80 million dollars, bringing in less money than last year. 

State Lottery officials say they’re disappointed, but add that lottery revenues are falling across the country. 

In order to deal with what it calls the “new market reality,” the Lottery Commission approved changes to the state’s contract with GTECH.  The minimum revenue goals are substantially decreased – over the life of the contract, the goals drop a total of more than a billion dollars, making them much easier for GTECH to meet. 

But as Lottery Commission Chairman William Zielke notes, there are other changes too – under the old contract, if the lottery brought in more than its target, GTECH got to keep one hundred percent of that overage, capped at five percent of total revenue. 

Now, Zielke says if GTECH exceeds its goals, it has to split the overage 50-50 with the state.

“It’s to our advantage that we share in the excess when they hit those minimum net income numbers so, again, this was a negotiation that satisfied both parties,” Zielke said.

The contract changes also make it easier for the state to terminate its contract with GTECH – if revenues fall at least five percent short next year, Indiana can immediately cancel the deal.