Democratic Gov. Pat Quinn’s administration announced Tuesday an agreement to prematurely end a contract with Northstar Lottery Group — the private company that for three years has run the Illinois Lottery with lackluster results.
“The Governor demands every state contractor be held accountable for their performance – and [that’s] why we directed the Lottery to end its relationship with Northstar,” Quinn spokesman Grant Klinzman said. “Today’s formal contract termination concludes that process and will allow the Lottery to improve profits and increase funding for education and economic development across Illinois.”
But while Quinn’s administration presented the agreement as a good way out of a bad contract, a spokesman for Republican Gov.-elect Bruce Rauner trashed the deal as yet another giveaway of taxpayer dollars that lacks transparency.
More specifically, Rauner’s team thinks the severance agreement — signed by Quinn — will award millions a year to two Northstar subcontractors, Gtech and Scientific Games.
“Despite our repeated requests, the Quinn administration has executed another 11th-hour deal. We were not consulted or even informed. This looks like a bad deal that creates a new binding contract that will cost taxpayers tens of millions of dollars,” Rauner spokesman Mike Schrimpf said.
Under the separation agreement, both companies will run lottery operations for a reduced amount of money until a new vendor is selected, according to a release from the Illinois Lottery. The state also has the option of keeping both vendors for the intended duration of the now-canceled contract.
“The termination agreement includes language that provides for annual payments of over $138 million through June 30, 2021,” Schrimpf said.
State lottery director Michael Jones called Rauner’s “fears” unfounded.
“I’d be happy to walk through the termination deal with anybody from the Rauner camp as early as tomorrow,” Jones said.
Jones said Northstar didn’t live up to expectations, And anyway, he added, the two subcontractors run only the automated lottery terminals — not the lottery promotion end.
“You would still be paying that to somebody, and there’s only two big companies in the world” that do the same work, Jones said.
That the state ended the contract should not come as a surprise. In August, Quinn made the first formal move to sever ties with the company. Since then, the Quinn administration has negotiated with Northstar, reaching the termination agreement to “avoid protracted litigation,” state officials said in a statement.
Northstar is running $238 million short in the projected earnings it had promised the state this fiscal year. And the company has underperformed by roughly $480 million since the contract was granted in 2011. That prompted calls from some lawmakers for Quinn to pull out of what had been a 10-year contract with the company to run the day-to-day operations of the state’s lottery, which now tallies about $2.8 billion in annual sales.
Northstar representatives could not be reached for comment after business hours on Tuesday. The company could collect up to $12.6 million for expenses related to shuttering operations and facilities, state officials said.
“We have learned from the Northstar experience, and believe a private management model can be designed and implemented in Illinois that encourages competition, new ideas and products, and maximizes the potential of the Lottery in a responsible manner,” Jones said in a statement.