A chance worth taking

AS MANY CRITICS predicted, the state lottery has proved to be an unreliable source of revenue for California’s cash-strapped schools. That’s why Gov. Arnold Schwarzenegger wants to negotiate a deal with private industry to take over the state-sanctioned betting operation for 40 years.

There is plenty to dislike about the lottery. Billed as a windfall for schools, it has instead been a drop in the education bucket -- and a dwindling one at that, when adjusted for inflation. It has shifted some of the funding burden for schools from taxpayers to Lotto players, many of whom can ill-afford to waste money on bets with little chance of payoff. And it has put the state government in the distasteful position of encouraging its own citizens to squander their money.

Nevertheless, it’s hard to argue with the view expressed by former state Treasurer Kathleen Brown, whom the Schwarzenegger administration trotted out Thursday in support of a lottery deal. Now an investment banker, Brown said a growing number of states are concluding that “lotteries are not necessarily the core competency of government.” That’s an understatement.

So it makes sense for the governor to see how much a gaming company, private equity firm or other bidder would pay for the right to operate the lottery -- and what changes in the law any of them would demand. The administration contends that the lottery has been hobbled both by the civil servants who oversee it and by legal restrictions on the payouts and games offered. In other words, to boost the sale of lottery tickets, the state may have to give a higher percentage to winners, as well as enable new, technology-driven games.

The governor appears ready to change the bargain that Proposition 37, the lottery initiative, struck with voters in 1984. The measure specified that at least 34% of lottery revenue would go to support public education. The administration would accept a lower percentage in exchange for a guarantee that schools get no less a year than the $1.3 billion they received from the lottery in 2006. And most attractively from Schwarzenegger’s point of view, the state may be able to extract a multibillion-dollar licensing fee, which could be used for paying down its precarious debt load.

Those goals are acceptable only if schools end up no worse, and potentially better, than they are today. There’s nothing magical about 34%, and the Legislature ought to be able to change those terms (by a two-thirds vote) if needed. Nor is there anything wrong with a private company making a profit off the lottery -- plenty of retailers with Lotto machines do so already. If the state must have a lottery, it should work as well as it can for taxpayers and public education. If private industry can do a better job than the California State Lottery Commission, it should have the chance.